SENATE LABOR AND COMMERCE COMMITTEE March 28, 2000 2:04 p.m. MEMBERS PRESENT Senator Jerry Mackie, Chairman Senator Tim Kelly, Vice Chairman Senator Loren Leman Senator Lyman Hoffman MEMBERS ABSENT Senator Dave Donley COMMITTEE CALENDAR SENATE BILL NO. 289 "An Act establishing and relating to the Alaska Board of Technical and Vocational Education; and providing for an effective date." -MOVED CS FOR SB 289 (L&C) OUT OF COMMITTEE CS FOR SENATE BILL NO. 240(CRA) "An Act relating to the establishment of and accounting for an administrative cost charge for the state's role in the community development quota program and to the appropriation of receipts from the charge; and providing for an effective date." -MOVED CS FOR SB 240(L&C) OUT OF 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." -MOVED OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 289 - No previous Senate action. SB 240 - See Community & Regional Affairs minutes dated 3/6/00. SB 248 - See Community & Regional Affairs minutes dated 3/6/00. WITNESS REGISTER Mr. Jeff Bush Deputy Commissioner Department of Community & Economic Development P.O. Box 110800 Juneau, AK 99811-0800 POSITION STATEMENT: Commented on SB 240. Mr. Joe Kyle Aleutian Pribilof Island Group Address Not Provided POSITION STATEMENT: Supports SB 240. Mr. Pete Schaeffer P.O. Box 296 Kotzebue, AK 99752 POSITION STATEMENT: Supports SB 240. Mr. Gordon Ito P.O. Box 307 Kotzebue, AK 99752 POSITION STATEMENT: Commented on SB 240. Mr. Keith Laufer Financial Manager Alaska Industrial Development & Export Authority 480 West Tudor Road Anchorage, AK 99503 POSITION STATEMENT: Commented on SB 248. Ms. Mary Jackson Legislative Staff for Senator John Torgerson Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 289. Mr. Mike Andrews Executive Director Alaska Human Resource Investment Council Address Not Provided POSITION STATEMENT: Opposes SB 289, and CSSB 289. Ms. Barbara Thompson Deputy Director Division of Teaching & Learning Support Department of Education & Early Development 801 West 10th Street, Suite 200 Juneau, AK 99801-1894 POSITION STATEMENT: Commented on CSSB 289. Mr. Ruth Decampi Program Manager Municipality of Anchorage, Workforce Development Program 325 East 8th Avenue Anchorage, AK 99501 POSITION STATEMENT: Opposed to CSSB 289. ACTION NARRATIVE TAPE 00-11, SIDE A Number 001 CHAIRMAN MACKIE called the Senate Labor and Commerce Committee meeting to order at 2:04 p.m. Present were Senators Mackie, T. Kelly, Leman, and Hoffman. The first order of business to come before the committee was SB 240. SB 240-CHARGE FOR COMMUNITY DEVELOPMENT QUOTA MR. JEFF BUSH, Deputy Commissioner of the Department of Community & Economic Development, stated SB 240 creates a fee structure for the Community Development Quota (CDQ) groups to make them self- sufficient and displaces $250,000 of general funds with an equivalent amount from Native groups. CDQ is a federal program delegated to the Governor of Alaska, from there it is delegated to the Department of Community & Economic Development (DCED) and Department of Fish & Game (DFG). This has created over 1,000 jobs annually and $20-30 million in royalty income to the groups. DCED agreed that a program this profitable should become self- sufficient. DCED approached the groups about creating a self- sufficient plan. In some situations, State approval is required of investment decisions that the groups are making. They need to have DCED staffed and capable of responding to those requests for approval. The federal program requires the State to approve these investment decisions. Half of the fee is set at an equal rate for each CDQ group, and the other half is based upon the amount of the allocation the groups received. The actual allocation amount does not always reflect the same amount as the administrative cost associated with the program. If a group receives a larger allocated amount, that group is more likely to have more investment options and decisions that will require State oversight. Each group will require some administrative overhead, the larger groups may require more than the smaller groups. The federal government authorized a fee program of its own, part of the fee program is allocated to the State. It will be an additional two years before the fee structure is in place. If any fees are collected and received by the State, those become an offset directly against the fees charged under this program. The administration supports the proposed amendment relating to a neutral position of the State with the FCC creating new CDQ groups. Mr. Bush suggested adding to the amendment on page 3, line 6, the word "new" before "CDQ groups", and on page 3, line 8, insert "newly formed" before "CDQ group." Those changes have been adopted in the House, and Mr. Bush suggested the Senate make the same changes. SENATOR LEMAN moved amendment number one, making the changes Mr. Bush suggested. Without objection, the amendment was adopted. SENATOR HOFFMAN moved amendment number two (a conceptual amendment). Senator Leman objected. SENATOR HOFFMAN stated Mr. Robin Samuelson suggested a change in language so the State would not get into discussions, leaving the issues to the federal government of whether to support the expansion of the CDQ program. CHAIRMAN MACKIE asked if the groups were comfortable with the language in the amendment. SENATOR LEMAN stated he objected to hear the explanation of the amendment but will maintain the objection because he does not believe the amendment should be put forth for the State to maintain neutrality. The legislature should try to keep language as simple as possible, without inserting language where it does not serve a purpose. SENATOR HOFFMAN stated the CDQ groups he spoke with support the amendment. MR. BUSH stated federal legislation is required to expand the program. The existing CDQ groups would oppose expansion of the program because it might cause a reduction in their allocation of fish. Those groups can get federal authorization to do that and can receive an increase in allocation. CHAIRMAN MACKIE stated he supports Senator Hoffman because the legislature cannot take a position on this issue. The amendment does not hurt SB 240, the current language could make the State appear that it is advocating for the expansion of the CDQ program. Amendment number two was adopted with Senators Hoffman, T. Kelly, and Mackie voting "Yea", and Senator Leman voting "Nay." MR. JOE KYLE, Aleutian Pribilof Island Group, stated support for SB 240 and the amendments. MR. PETE SCHAEFFER, representing himself, stated all attempts at participating in the CDQ program are economically driven. Some fish have been completely wiped out and some groups do not qualify for federal or State aid to remedy that situation. The difference in Kotzebue is that the numbers of fish are somewhat biologically sound, it is the market that has disappeared. The marine animals do not pay attention to boundaries for the CDQ groups, and CDQ groups are being penalized because of boundaries. Mr. Schaeffer stated support for SB 240 and the amendments. MR. GORDON ITO, representing himself, stated he would like to be included in the CDQ program. The State should support expansion because it is getting harder to survive in Alaska. Mr. Ito stated he supports SB 240, but does not support Senator Hoffman's neutral position. CHAIRMAN MACKIE stated Senator Adams had requested the committee consider including language that would allow for the new approved CDQ groups not to pay fees for two years. Senator Hoffman offered that amendment on Northwestern Alaska's behalf. SB 240 would not be used as a vehicle of support for other CDQ groups. MR. ITO stated he understood when the CDQ program started many aspects were experimental. Adopting a neutral amendment portrays that the State does not support the CDQ program. SENATOR LEMAN moved CSSB 240 (L&C) with individual recommendations and accompanying fiscal notes. Without objection, the motion carried. SB 248-AIDEA: BONDS & RURAL DEVELOPMENT MR. KEITH LAUFER, Financial Manager for the Alaska Industrial Development & Export Authority (AIDEA), stated SB 248 has three main elements that extend AIDEA's general bonding authority: it transfers the Rural Development Initiative Fund Loan Program from the Department of Community & Economic Development (DCED) to AIDEA; and it makes technical changes to the provisions of existing laws dealing with tax exemption and payment in lieu of tax agreements related to AIDEA owned properties. The bonding sunset date is one of several periodic sunsets the legislature has put into AIDEA's bonding authority. The current sunset would become effective July 1, 2000, and would prevent AIDEA from issuing all bonds, other than refunding bonds, without specific legislative approval. The sunset would prevent AIDEA from issuing bonds under $10 million for developing finance projects. Bonds over $10 million require legislative approval, and will continue to do so. The sunset will also prevent AIDEA from issuing conduit revenue bonds, these bonds AIDEA can issue for specific private projects. They do not obligate the State's credit or AIDEA's credit; these projects can obtain tax exempt financing under the Internal Revenue Code. SB 248 would extend the sunset provision until July 1, 2003, and makes clear the conduit revenue bonds would not be subject to the future sunset. The transfer of the Rural Development Initiative Fund Loan Program to AIDEA was formerly with Department of Community & Regional Affairs (DCRA) and now falls under the control of DCED. This program makes loans available under $200,000 to businesses and communities of less than 5000 people. AIDEA has supported this program for many years in conjunction with AIDEA's loan guarantee program. In 1993 and 1996, the legislature authorized AIDEA to purchase loan portfolios from the State and use the proceeds from those purchases to recapitalize the program. SB 248 would transfer the program to AIDEA, and will allow the program to be self- sustaining without the need for periodic legislative appropriations. SB 248 makes some technical changes to the tax exemption provisions of existing law. Under existing law, local jurisdictions may exempt users of AIDEA owned development projects from property tax, or may enter into payment in lieu of tax agreements with the users of those projects. However, existing law is not clear about the mechanism that will be used to accomplish this. SENATOR KELLY asked if there were any changes to the language on page 4, section 9 regarding the Rural Development Initiative Fund. MR. LAUFER stated SB 248 changes the name of the old fund within the DCED and creates a new fund within AIDEA. An appropriation piece of legislation will allow AIDEA to purchase the existing portfolio from the State. SENATOR KELLY asked what the previous name was. MR. LAUFER replied the Rural Development Economic Initiative Fund. SENATOR KELLY asked if there are any changes to the language on the new Rural Development Initiative Fund from the old program. MR. LAUFER stated no. Slight changes have been made in AS 44.88.600 to clarify how it resides within AIDEA, but no changes have been made to the program. CHAIRMAN MACKIE asked Mr. Laufer if he knew of opposition to SB 248. MR. LAUFER stated no. SENATOR LEMAN moved SB 248 with individual recommendations and accompanying fiscal notes. Without objection, the motion carried. SB 289-TECH & VOC EDUC/EMPLOYMENT ASSISTANCE MS. MARY JACKSON, Legislative staff for Senator John Torgerson, stated SB 289 will focus the efforts of the State on technical and vocational education into one board, and SB 289 will provide additional funding for that effort. SB 289 will also become a vehicle within the new board for new federal funding. Senator Torgerson has a proposed committee substitute that makes technical corrections to SB 289. SENATOR KELLY moved to adopt the CS for SB 289 (L&C) (version H) as the working draft of the committee. Without objection, the motion carried. MS. JACKSON explained the differences between SB 289 and CSSB 289. On page 8, line 22, "75 percent", was replaced with ".75 percent". SENATOR LEMAN suggested using a zero before ".75 percent", to avoid confusion. MS. JACKSON stated on page 5, line 30, a new subsection (b) was inserted. It formally places the current State training and employment program under the office of the new board. On page 9, line 9-25, new language was inserted. It increased the funding amount to 3/10 of one percent, and half will come from employees and half will come from employers as a contribution. SENATOR LEMAN stated the funding that was increased is false. If it is to be 3/10 of one percent, the figure needs to say 3/1000, and "percent" needs to be deleted. MS. JACKSON stated yes. The intent is for the figure to be 3/10 of one percent. The word "percent" should be deleted and the figure should say "3/1000". CHAIRMAN MACKIE stated the drafters would correct the mistake. MS. JACKSON stated the last change was made on page 12, line 18. It is transitional language that accommodates the first year of funding for the program. The intent is to assure that funds are distributed from the new source. Because the new board will not have been in place and able to go through a notification process for grants to all entities, those funds will be available and they will be distributed for that first year as is provided in the language. Senator Torgerson feels strongly that the efforts need to be focused on one board with authority, and accountability, and that is how SB 289 would work. SENATOR KELLY asked if there was legislative confirmation of the board. MS. JACKSON answered yes. SENATOR LEMAN asked if the consolidation of this board would lead to the elimination of other boards. MS. JACKSON stated with the inclusion of the step program in the committee substitute, funds will remain given to the Alaska Human Resource Council (AHRIC) committee, but the funding would decrease. SENATOR LEMAN asked if AHRIC would still exist. MS. JACKSON stated yes. MR. MIKE ANDREWS, Executive Director of AHRIC, stated AHRIC believes these types of grants are important for employers, workers, vocational education programs, students, and the State's economy. AHRIC has concerns about SB 289, it seems to reverse the consolidation efforts of Congress over the last five years. Four major pieces of legislation in 1995 consolidated three councils into AHRIC that included the Governor's council on vocational education. In 1998, SB 334 was a reform bill of the system that created performance measures and accountability, and provided more authority for AHRIC for planning and reporting to the legislature. In 1999, HB 40 consolidated 17 federal state workforce investment programs and adult education programs, from three departments into one new department, the Alaska Department of Labor & Workforce Development. In 1998, Congress passed the Workforce Investment Act that goes into effect July 1, 2000 which consolidated 60 federal programs and established AHRIC as the State's workforce investment board. AHRIC believes some areas of SB 289 are duplicative, and will increase administrative effort. AHRIC has been effective bringing business and education closer together to work on career pathways and skilled training for students and adults. The job training programs are meeting their performance levels. AHRIC has been able to receive additional funds to help Alaska's rural youth, and develop regional skills consortiums for the State, so business and education work directly in providing industry standard training. There are no eligibility requirements for persons being trained and that is a concern for AHRIC. AHRIC is concerned if SB 289 passes it should be viewed as a demonstration program so AHRIC is assured that it is providing the results that AHRIC would like to see, and that it doesn't offset the actuarial condition of the unemployment trust. AHRIC believes the grant program and the State coordinated plan is a good idea and necessary at this time, but this can be accomplished without creating a duplicative board and a duplicative administrative and funding cycle. AHRIC has not had time to review the committee substitutes, but is raising concerns about shifting step funds into this program. CHAIRMAN MACKIE asked if Mr. Andrews had talked with Senator Torgerson about the committee substitute. MR. ANDREWS answered yes. They have discussed how to raise additional money for vocational education training that would help support the connection with post-secondary education, and the need for a coordinated plan. Where AHRIC differs from Senator Torgerson and Congress is in the need for a new board and some duplicative text. AHRIC's administration cannot support SB 289 as it exists. SENATOR KELLY asked if AHRIC's position and the administration's position are the same. MR. ANDREWS stated he was speaking for the administration. MS. BARBARA THOMPSON, Deputy Director of the Division of Teaching & Learning Support for the Department of Education & Early Development (DEED), referred to the fiscal note. What the DEED saw as a cost for establishing this new board would be included first for the Alaska Technical Vocational Education Program Fund. The Department of Labor & Workforce Development (DLWD) estimates what they would collect for this portion of SB 289. TAPE 00-11, SIDE B MS. THOMPSON explained the funds listed in the grant line on page 1 of the fiscal note. The other costs are related to the establishment and operation of the new board and ongoing activities, personal services for staffing of the board, a grant administrator, travel for the board, contractual relating to the ongoing cost of the board, and supplies for the board. The last page of the fiscal note discusses existing resources that are in DEED, that would fall under the preview of the new board. Those include federal grant funds, text prep grant funds, and non K-12 portions of the federal Carl Perkins Grant. The management fee assessed from the Alaska Vocational Technical Center (AVTeC) is currently a management assessment fee to AHRIC, and assume the fee would go to the new board. MR. DWIGHT PERKINS, Deputy Commissioner of the Department of Labor & Workforce Development (DLWD), stated the concerns that DLWD has are financial and technical in nature, with employment security and the Unemployment Insurance trust fund. CHAIRMAN MACKIE stated his concerns are dealing with the fiscal note of CSSB 289. Chairman Mackie stated the bill should be passed to the Finance committee so Senator Torgerson can work with Mr. Andrews and Ms. Thompson. MR. PERKINS stated DLWD will continue to cooperate with Senator Torgerson regarding the fiscal note, but Mr. Andrews' concern seems to be a philosophical concern. MS. RUTH DECAMPI, Program Manager for the Municipality of Anchorage Workforce Development Program, stated opposition for CSSB 289. The Workforce Development Program administers the step training program for people who are unemployed, and for half of the State's workforce in Anchorage. CSSB 289 defies the entire Workforce Investment Act, which is based on customer choice, and performance base. Institutions receive funding if people choose to go there. Ms. Decampi does not see a reason for AHRIC to exist if CSSB 289 passed. SENATOR KELLY moved CSSB 289 (L&C) with individual recommendations and accompanying fiscal notes. Without objection, the motion carried. There being no further business to come before the committee, CHAIRMAN MACKIE adjourned the meeting at 3:00 p.m.