MINUTES  SENATE FINANCE COMMITTEE  April 15, 2000  3:15 PM TAPES SFC-00 # 92, Side A and Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 3:15 PM PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Lyda Green, Senator Randy Phillips, Senator Gary Wilken, Senator Donley. Senator P. Kelly and Senator Loren Leman were not present for the meeting. Also Attending: JAMES BALDWIN, Assistant Attorney General, Department of Law; WENDY REDMAN, Vice President, Statewide Programs, University of Alaska-Fairbanks; DAVID GUTTENBERG, Staff, Representative John Davies; EDDIE GRASSER, Staff, Representative Beverly Masek; PETER FELLMAN, Staff, Representative John Harris; LORALI MEIER, Staff, Representative Beverly Masek; PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor and Workforce Development; ROBERT LOHR, Director, Division of Insurance, Department of Community & Economic Development. Attending via Teleconference: BILL WARD, Delta Junction. SUMMARY INFORMATION SB 310-G.O.BONDS: SCHOOLS & UNIVERSITY The Committee heard from the Department of Law and the University of Alaska with consideration given to Amendments #5 & #6. The bill was HELD in Committee for further consideration. SB 311-G.O.BONDS: TRANSPORTATION PROJECTS CS SB 311 (FIN) was reported out of Committee with a "no recommendation" and with a fiscal note by the Department of Revenue. HB 25-RIVER HABITAT PROTECTION TAX CREDIT HB 25 was reported out of Committee with "individual recommendations" and with fiscal notes by the Department of Fish and Game and the Department of Community & Economic Development. HB 114-REPEAL PROHIBITION ANTLERLESS MOOSE SCS HB 114 (RES) was reported out of Committee with a "do pass" recommendation and with two fiscal notes by the Department of Fish and Game. HB 204-ELK FARMING HB 204 was reported out of Committee with a "do pass" recommendation and with fiscal notes by Department of Natural Resources and Department of Fish and Game. HB 272-MUNICIPAL TAX: LOW INCOME HOUSING SCS HB 272 (FIN) was reported out of Committee with "individual recommendations" and with a fiscal note by the House C&RA Committee. HB 290-STRANDED GAS PIPELINE CARRIERS CS HB 290 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by Department of Revenue, Department of Natural Resources, and Department of Community & Economic Development. HB 378-FEES FOR WORKERS COMP AND WORKER SAFETY Co-Chair Torgerson noted that HB 378 would be HELD in Committee for further consideration. SENATE BILL NO. 310 "An Act providing for and relating to the issuance of general obligation bonds for the purpose of paying the state cost of school, University of Alaska, and port and harbor capital projects; and providing for an effective date." JAMES BALDWIN, Assistant Attorney General, Department of Law, advised that he had prepared a memo as requested by Senator Torgerson regarding concerns whether certain items contained in SB 310 would qualify as capital improvements for the purpose of issuing general obligation bond debt. [Copy on File]. Mr. Baldwin cited that the Alaska Supreme Court has made two decisions relative to the concern: Wright versus City of Palmer and City of Juneau versus Hixson. The Court has not provided a specific definition of capital improvement, but rather defined it by example. Generally, it refers to permanent betterment of permanent structures. The Department has concluded that major renovations designed to preserve the permanency of a building would qualify as a capital improvement. Expenditures for property which become a legal fixture would be a capital improvement. In certain circumstances, there can be expenditures associated with capital projects that might not otherwise become a capital item. Mr. Baldwin suggested consideration of, for the record, that the nature of any doubtful project be considered in order that it may be defended against a challenge brought when the bonds are sold. Senator Phillips referenced Page 3, Line 11. He asked if the allocated $11.7 million dollars would qualify. Mr. Baldwin understood that was to be the State's 70% contribution. The municipalities are under the same constitutional administration and must use their bonds for capital improvements. He assumed that those bonds were issued for capital improvements. Senator Phillips referenced Page 4, Line 12 & 13 requested allocation in the amount of $25.1 million dollars for the University of Alaska - Fairbanks in deferred maintenance. He asked if that would qualify under the capital improvement projects (CIP). Mr. Baldwin noted that he did not know and that he did not have access to all the required information to make that determination. Senator Phillips asked further clarification of the memo. Mr. Baldwin reiterated the contents of the memo, stating that if it were to be ordinary repair and maintenance, it would not qualify under the CIP guidelines; however, a major renovation, repair or maintenance necessary to maintain the permanency of the facility, could be a CIP. He noted that the current Court conclusions have not yet gone that far. Co-Chair Torgerson asked if the proposition proposal in Anchorage passes, would Anchorage then be restricted on major maintenance projects that met the criteria submitted by the Department. Mr. Baldwin responded that the information contained in the voters pamphlets becomes a "contract" with the voters and that it can not be parted from without violating the public trust. He presumed that the ballot materials would inform the voters what the project consists of. Senator Adams questioned the distinguishment between repairs and maintenance. He asked the judgement call needed to stay in "repaired maintenance". Senator Adams suggested that perhaps there should be an expenditure limitation on the capital projects over a certain amount. Mr. Baldwin replied that the total bond issue drives the "economics" because of the cost of issuance. He believed that a major upgrade would most likely fall under "capital improvement". Co-Chair Torgerson pointed out that there had not been a completed list submitted by the University, instead, submitted by building name only. He advised that he had prepared some amendments to the proposed legislation. Senator Donley MOVED to adopt Amendment #5. [Copy on File]. Co-Chair Torgerson explained that the amendment would remove all reference to issuing bonds for port and harbor projects in SB 310 they had been incorporated into SB 311. There being NO OBJECTION, Amendment #5 was adopted. Senator Donley MOVED to adopt Amendment #6. [Copy on File]. Co-Chair Torgerson clarified that the amendment would delete the "$943,565" dollars on Page 5, Lines 13-14 and would insert "an amount equal to one percent of the principle amount of the bonds, or as much of that amount as is found necessary". Senator Adams inquired what would occur if that amount were higher than 1% of the principle. Co-Chair Torgerson explained that the agency could then come back to the Committee to request an increase. There being NO OBJECTION, Amendment #6 was adopted. Senator Phillips requested a list of the general obligation (GO) bonds. He believed that there were items that should not be included in these bonds. He objected to the proposed methodology. Senator Adams recommended that a representative from the University of Alaska speak to the submitted requests. Co-Chair Torgerson emphasized that if the requests do not meet the criteria that they should be deducted from the bill. He requested greater detail regarding all three campuses for the University requests. WENDY REDMAN, Vice President, Statewide Programs, University of Alaska-Fairbanks, stated that the language used in the past for the statewide GO bonds in the Alaska Housing Finance Corporation (AHFC) bond issue was "deferred maintenance/renewal and replacement/code compliance". That phrase provides the most flexibility to the University. She requested that if possible, that would be the preferred language. Co-Chair Torgerson asked if there was a list indicating work to be done on each building. Ms. Redman commented that the list does provide specific types of projects for each facility. She inquired the level of detail needed. Co-Chair Torgerson interjected that the Committee wants a more thorough explanation of each project. He noted that the "rule" he follows is if it extends the "life of the building". Ms. Redman commented that no "on-going" maintenance had been included in the request. She noted that it were present problems to break it down to specific details of each project. Some projects are a "best guess" until the space is taken apart, making it difficult to determine the actual costs. Co-Chair Torgerson noted that SB 310 would be HELD in Committee for further consideration. SENATE BILL NO. 311 "An Act providing for and relating to the issuance of general obligation bonds for the purpose of paying the state cost of port and harbor capital projects; and providing for an effective date." Co-Chair Torgerson spoke to Amendment #1 & #2. [Copies on File]. Amendment #1 would remove the matching funds from the bond project list because the match for Kake was funded in SB 192. Amendment #2 would delete language on Page 3, Lines 9-10, "the amount equal to one percent of the principal amount of the bonds, or as much of that amount as is found necessary"; it would insert "an amount equal to one percent of the principal amount of the bonds, or as much of that amount as is found necessary". Senator Adams MOVED to adopt Amendment #1. There being NO OBJECTION, the amendment was adopted. Senator Adams MOVED to adopt Amendment #2. There being NO OBJECTION, the amendment was adopted. Senator Leman MOVED to adopt Amendment #3, which would "round the numbers off by eliminating the last three digits and adding zeros". There being NO OBJECTION, it was adopted. Senator Wilken MOVED to report CS SB 311 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS SB 311 (FIN) was reported out of Committee with "no recommendation" and with a fiscal note by the Department of Revenue. HOUSE BILL NO. 272 "An Act relating to the tax assessment by a home rule or general law municipality of housing that qualifies for the low-income housing credit under the Internal Revenue Code; and providing for an effective date." Senator Leman MOVED that the Committee adopt work draft 1- LS1148\B, Chenoweth, 4/14/00, as the version of the bill before the Committee. Senator Adams OBJECTED for the purpose of discussion. He pointed out that the "grandfather clause" had been removed in the work draft. Co-Chair Torgerson commented that a community could still be "grandfathered", however, the local assembly would also be responsible to take action. The language would give local governments the authority to pass an ordinance authorizing the resolution. Senator Adams WITHDREW his OBJECTION to adopt the "B" version. Senator Leman referenced Page 2, Line 1, "the value of the property and the actual income derived from the property". He asked if that was the correct standard. JONATHAN LACK, Staff, Representative Rick Halford, stated that the question of income derived had not yet come into discussion. The uniform property standard adopted by the property assessors now indicates that the income approach does not address what has been received. He clarified that the income approach is what could be received. Senator Leman explained given that understanding he no longer questioned that section. He inquired if this was a current accounting standard. Mr. Lack stated that it is and that the uniform assessors group uses it. He interjected that the assessor in Anchorage does not obey the established standard. Senator Leman countered that if that assessor does not obey the standard, what assurance does the State have that he will obey the proposed law. Mr. Lack replied that there are working drafts addressing the assessor establishing the standard. The work draft before the Committee, has the standard adopted by the local governing body. Senator Donley reinforced that point and the possibility of leaving it empty. The language references the maximum of what could be derived. Senator Leman recommended language indicating it could be from income derived from property at full occupancy. Senator Donley MOVED the changes recommended by Senator Leman, Page 2, Line 2, following "property" inserting "at full occupancy" as Amendment #1. Mr. Lack acknowledged that there are some questions that Senator Halford has about the proposed committee substitute. He was not confident to answer the question. There being NO OBJECTION, Amendment #1 was adopted. Senator Green asked if the amendment would apply on Line 14. She MOVED that language be added to Line 14 following "property". There being NO OBJECTION, the change was made. Senator Leman MOVED a text change to Page 2, Line 17, deleting "relating" and inserting "related". There being NO OBJECTION, it was adopted. Senator Leman MOVED to report SCS HB 272 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Senator Phillips OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Donley, Leman, Adams, Wilken, Green, Parnell, Torgerson OPPOSED: Phillips Senator P. Kelly was not present for the vote. The MOTION PASSED (7-1). SCS HB 272 (FIN) was reported out of Committee with "individual recommendations" and with a fiscal note by the House C&RA Committee. HOUSE BILL NO. 25 "An Act relating to a municipal river habitat protection tax credit." DAVID GUTTENBERG, Staff, Representative John Davies, offered to answer questions of the members. He explained that the bill is a land management tool that provides the option of protecting fish habitat along the rivers by offering a tax credit to property owners along those waterways. It would not be an unfunded mandate and would be entirely optional at the local government level. Senator Wilken spoke in support of the bill and encouraged the Committee's support. Senator Wilken MOVED to report HB 25 out of Committee with individual recommendation and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HB 25 was reported out of Committee with "individual recommendations" and with fiscal notes by the Department of Fish and Game and the Department of Community & Economic Development. Co-Chair Torgerson SENATE CS FOR HOUSE BILL NO. 114(RES) "An Act relating to the taking of antlerless moose." EDDIE GRASSER, Staff, Representative Beverly Masek, explained that the changes made in the Senate Resources Committee made sure that the Advisory Committee would continue to have a role in the process. The bill puts the anterless regulations on the same two-year cycle the Board now uses, saving the State time and money. He mentioned that HB 114 would benefit the State and the Board of Game by streamlining the regulatory process providing cost savings to the State in time and money. Senator Green MOVED to report SCS HB 114 (RES) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. SCS HB 114 (RES) was reported out of Committee with a "do pass" recommendation and with tow fiscal notes by Department of Fish and Game. CS FOR HOUSE BILL NO. 204(RES) "An Act relating to elk farming." PETER FELLMAN, Staff, Representative John Harris, clarified that the legislation was an attempt to move the oversight of elk farming out of the Department of Fish and Game to the Division of Agriculture, Department of Natural Resources. Currently, the regulations of domestic elk do not have statutory authority in the Department of Fish and Game. The Division of Agriculture are the experts at such concerns. BILL WARD, (Testified via Teleconference), Delta Junction, urged Committee members to support the legislation. A licensing fee would be paid every two years in the amount of $250 dollars. The fee would be used so that the Division of Agriculture could send staff to maintain fencing for elk farms. Senator Donley referenced to Section 3. He asked if the permit would be a particular "brand". Mr. Fellman replied that there is a brand permit in the State of Alaska. That brand must be registered before it can be used. Senator Green MOVED to report HB 204 out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HB 204 was reported out of Committee with a "do pass" recommendation and with fiscal notes by Department of Natural Resources and Department of Fish and Game. CS FOR HOUSE BILL NO. 290(RES) "An Act relating to pipeline carriers of natural gas produced from the North Slope of Alaska and to the intrastate regulation by the Regulatory Commission of Alaska of pipelines and pipeline facilities of that natural gas." LORALI MEIER, Staff, Representative Beverly Masek, testified that the purpose of HB 290 is to make changes to existing statute, which are needed to get the gas product to the regulatory market. Before any natural gas pipeline can succeed, certain amendments to the current State statute are necessary. HB 290 would amend the Pipeline Act to define a North Slope natural gas pipeline, clarify the Regulatory Commission of Alaska's (RCS's) authority in regulating a North Slope natural gas pipeline extends only to the intrastate transportation of gas through such a system, define a fair, predictable and timely process to identify and dedicate sufficient initial intrastate capacity in a North Slope natural gas pipeline and to establish the criteria for needed pipeline system expansions over the life of a North Slope natural gas pipeline system to accommodate increased demand for in-state gas supplies. Tape: SFC - 00 #92, Side B 4:08 PM Senator Adams MOVED to report CS HB 290 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 290 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by Department of Revenue, Department of Natural Resources, and Department of Community & Economic Development. CS FOR HOUSE BILL NO. 378(RLS) "An Act relating to the establishment of, assessment of, collection of, and accounting for service fees for state administration of workers' compensation and workers' safety programs; establishing civil penalties and sanctions for late payment or nonpayment of the service fee; and providing for an effective date." PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor and Workforce Development, clarified that the bill was designed to replace general funds that the Division of Workers' Compensation and worker safety programs within the Department have lost. The bill would create a dependable funding source paid equitably by all employers using the system. He reiterated that the purpose would be to provide a stable funding source to that Division. Mr. Grossi continued, the current system provides that employers that purchase workers' compensation insurance pay a tax or can become self-insured. The proposed legislation addresses that inequity. The new fee system would be designed to raise the same amount of money as the current tax. Because the new system would spread costs among more employers, those employers currently paying the premium tax would realize a decrease in their payments. He concluded that the bill would offer a fair, effective way of ensuring continued funding for vital worker protection programs. Co-Chair Torgerson noted that the bill would not be moved from Committee at this time, however, all testimony would be taken. ROBERT LOHR, Director, Division of Insurance, Department of Community & Economic Development, advised that the Division of Insurance recommends two technical amendments. The first change would revise the language so that the Division of Insurance would deposit a portion of the premium tax collected as opposed to the premium income reported. Otherwise, deposits may be required that would be greater than the amounts collected. Mr. Lohr continued, the bill does not contain the phrase "in lieu of all taxes…" as found on Page 2, Lines 25-28, of the previous version. He recommended that the provision amending AS 21.09.270 be removed. The change would maintain the long-standing statutory status quo regarding retaliatory fees. That would keep Alaska's retaliatory calculation in line with other states and would promote a level playing field between companies from this state and other states. Senator Phillips asked how it would differ from other states. Mr. Grossi replied that Alaska is one of the six states that actually funds the program through the general fund. The remaining states have some sort of "special" fund. Sixteen states have a fee-funding source. Senator Green asked if the excess money would be paying for the Occupational Safety and Health Administration (OSHA). Mr. Grossi replied that it would be used to fund the safety programs and OSHA. Senator Green pointed out that the legislation was not necessarily intended to be used to improve workers' compensation but rather for funding OSHA. Senator Leman commented that the money would still be available for appropriation. Co-Chair Torgerson agreed that the Legislature would have the authority to decide on how those funds were being spent. He reiterated that those funds would be subject to appropriation. Co-Chair Torgerson noted that HB 378 would be HELD in Committee for further consideration. ADJOURNED Senator Torgerson adjourned the meeting at 3:50 AM.