Legislature(2003 - 2004)

04/15/2004 01:51 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 333                                                                                                            
                                                                                                                                
     An Act relating to an endowment for public education;                                                                      
     and providing for an effective date.                                                                                       
                                                                                                                                
Co-Chair  Harris  MOVED  to  ADOPT  work  draft  #23-LS099\G,                                                                   
Bullock, 4/14/04,  as the version  of the legislation  before                                                                   
the Committee.  (Copy on File).                                                                                                 
                                                                                                                                
Representative  Joule OBJECTED, asking  for a description  of                                                                   
the changes made to the draft.                                                                                                  
                                                                                                                                
REPRESENTATIVE  DAN OGG, SPONSOR,  spoke to the  changes made                                                                   
to the work  draft, noting the main difference  was repealing                                                                   
the sectional reference to SB 7, Section 8.                                                                                     
                                                                                                                                
In  the  "G"  version,  Page 3,  Lines  15-17,  contains  new                                                                   
language that  further clarifies that.   Page 6,  Lines 9-12,                                                                   
addresses  a  previous  oversight; the  language  was  needed                                                                   
because  the grant  is  not included  as  net  income in  the                                                                   
existing school trust fund.                                                                                                     
                                                                                                                                
Representative Joule  inquired if the work draft  allowed the                                                                   
University to  generate funds as originally  intended through                                                                   
the endowment  with the 5% split.   In addition to  that, the                                                                   
University  would keep  250 thousand  acres of  land to  help                                                                   
generate  income.     Representative  Ogg  agreed   that  was                                                                   
correct.   Representative Joule pointed  out that he  had not                                                                   
supported SB 7.                                                                                                                 
                                                                                                                                
Representative  Joule  WITHDREW  his OBJECTION  stating  that                                                                   
there should  be further  consideration  on the House  floor.                                                                   
There being  NO further  OBJECTION, the committee  substitute                                                                   
was adopted.                                                                                                                    
                                                                                                                                
Co-Chair  Williams MOVED  to ADOPT  Amendment #1.   (Copy  on                                                                   
File).  Co-Chair Harris OBJECTED.                                                                                               
                                                                                                                                
BOB  LOEFFLER,  (TESTIFIED  VIA   TELECONFERENCE),  DIRECTOR,                                                                   
DIVISION  OF MINING  LAND AND  WATER,  DEPARTMENT OF  NATURAL                                                                   
RESOURCES, ANCHORAGE,  stated that the amendment  was created                                                                   
to rectify a  technical change in how revenues  are accounted                                                                   
for in oil  and gas leases.   Because of the manner  in which                                                                   
royalty settlements  are handled,  a contract should  include                                                                   
all revenue.                                                                                                                    
                                                                                                                                
Mr. Loeffler added that in order  to accomplish the sponsor's                                                                   
intent, language  was changed  so that  it would only  affect                                                                   
new  revenue, and  in this  case,  revenue from  oil and  gas                                                                   
leases following the effect of  the proposed act.  He pointed                                                                   
out this was a technical change.                                                                                                
                                                                                                                                
Co-Chair  Harris asked  if the  Representative Ogg  supported                                                                   
Amendment #1.   Representative Ogg replied he  did.  Co-Chair                                                                   
Harris WITHDREW his OBJECTION.                                                                                                  
                                                                                                                                
Representative  Chenault asked  if it  would include  mineral                                                                   
exploration.  Mr. Loeffler replied it would.                                                                                    
                                                                                                                                
There  being  NO  further OBJECTION,  the  Amendment  #1  was                                                                   
adopted.                                                                                                                        
                                                                                                                                
Representative Joule  reiterated that he did not  know how he                                                                   
felt  about  the proposed  legislation.    Co-Chair  Williams                                                                   
advised that he  had requested additional language  be added,                                                                   
pointing out  that it  has taken  the University 40-years  to                                                                   
get up and going.   He did not know what would  happen in the                                                                   
future years  if the University  needed further funding.   He                                                                   
believed that  the legislation would help the  University for                                                                   
future planning, allowing more  time for property management.                                                                   
                                                                                                                                
Representative  Joule spoke to  support for the  University's                                                                   
growth,  noting that  he was  not a  supporter of  SB 7.   He                                                                   
anticipated that  the proposed legislation would  repeal that                                                                   
act.                                                                                                                            
                                                                                                                                
Co-Chair Williams  commented that it could take  up to twenty                                                                   
years to  develop a land  management plan for  250,000 acres.                                                                   
He did not  know what would  happen in the next  twenty years                                                                   
and that the  proposed legislation would help  the University                                                                   
plan for the future.                                                                                                            
                                                                                                                                
Representative  Joule referenced  the last  version of  SB 7,                                                                   
pointing  out that  there was  an  issue of  borough-selected                                                                   
lands and  entitlements.  He  understood that  the University                                                                   
would not  be able  to choose  lands over  the boroughs.   He                                                                   
asked if  headway was being made  for the boroughs  and their                                                                   
entitlements.  Mr. Loeffler acknowledged  that the Department                                                                   
is  making  headway  and  completing  a  12,000-acre  initial                                                                   
entitlement.   At  the  previous rate,  it  would have  taken                                                                   
fifty years  to get the land  to all the municipalities.   He                                                                   
thought that would be available by the end of the decade.                                                                       
                                                                                                                                
Representative Joule asked if  there was a plan for statewide                                                                   
conveyance  to  those  boroughs.   Mr.  Loeffler  offered  to                                                                   
provide that information to the Committee.                                                                                      
                                                                                                                                
Co-Chair   Harris  referenced   the  Department  of   Natural                                                                   
Resources  fiscal  note,  pointing   out  the  $412  thousand                                                                   
dollars coming from the FY05 University endowment.                                                                              
                                                                                                                                
NICO  BUS,   ACTING  DIRECTOR,  DIVISION   OF  ADMINISTRATIVE                                                                   
SERVICES,  DEPARTMENT OF  NATURAL  RESOURCES, explained  that                                                                   
the legislation  would transfer  $353.9 thousand  dollars out                                                                   
of the general fund and $59 thousand  dollars out of the land                                                                   
disposal income  fund into the University Endowment  Fund and                                                                   
the Public School Trust Fund for  the first year.  That ratio                                                                   
would change over  the years.  He added that it  would be the                                                                   
amount of money  for any new resource development  revenue to                                                                   
be generated after the effective date of the legislation.                                                                       
                                                                                                                                
Co-Chair Harris asked the intent  of the $459 thousand dollar                                                                   
note in the FY05 expense budget.   Mr. Bus explained that the                                                                   
                                          th                                                                                    
most  current  note   was  dated  April  9,    and  the  note                                                                   
referenced by Co-Chair Harris no longer applies.                                                                                
                                                                                                                                
Co-Chair Harris mentioned the  timber sale receipts.  Mr. Bus                                                                   
stated that  the amount  of timber sales  that would  be lost                                                                   
through  the  program  could  amount  up  to  $21.8  thousand                                                                   
dollars.                                                                                                                        
                                                                                                                                
Co-Chair   Harris   noted   an    additional   request   from                                                                   
administrative  services  component  in  the  amount  of  $48                                                                   
thousand dollars.   Mr. Bus advised  that in the  first year,                                                                   
the Department would need to change  the computer programs to                                                                   
be able  to implement capability  for revenues coming  out of                                                                   
the  various leases  and  accounts,  moving into  the  school                                                                   
trust fund and  the University endowment.  After  the initial                                                                   
investment,   it  would   cost  $15   thousand  dollars   for                                                                   
maintenance  level up keep.   He  maintained that this  would                                                                   
double the current accounting structure.                                                                                        
                                                                                                                                
Representative  Chenault inquired  about the fiscal  analysis                                                                   
accompanying  the  note.    Mr. Bus  explained  that  in  the                                                                   
initial conversion, it would be  $10 thousand dollars; by the                                                                   
end of the year,  it would amount to $7 thousand  dollars and                                                                   
would fund a part time position.                                                                                                
                                                                                                                                
Representative   Hawker  reminded   members  of  a   previous                                                                   
discussion  with  Representative  Ogg regarding  the  Supreme                                                                   
Court challenge  that had been made  to SB 7.   He understood                                                                   
that  ruling did  not violate  the Constitution  as being  an                                                                   
appropriation and  they declined to rule whether  making this                                                                   
type  of  grant  to  the University  was  a  violation  of  a                                                                   
dedication of funds.  He inquired  if that had been resolved.                                                                   
Representative  Ogg replied  that it  has not  and was  still                                                                   
before the Supreme Court.                                                                                                       
                                                                                                                                
Representative Hawker  questioned if HB 333,  which transfers                                                                   
interest to the University, would  be affected by the outcome                                                                   
of that  court case.  Representative  Ogg responded  that the                                                                   
bill before  the Committee attempts to  differentiate between                                                                   
that  concern.   However,  they are  similar  issues and  the                                                                   
accounts have been bifurcated.   He added that the University                                                                   
portion could be subject to that  concern but that the school                                                                   
portion should not.                                                                                                             
                                                                                                                                
Representative  Hawker grilled  the  representative that  the                                                                   
sponsor did  not appear comfortable providing  assurance that                                                                   
the bill before the Committee  was sufficiently different and                                                                   
that  it  would   not  be  subject  to  a   court  challenge.                                                                   
Representative  Ogg acknowledged  that  he did  not know  and                                                                   
that a potential challenge could be out there.                                                                                  
                                                                                                                                
PETE ECKLUND, STAFF, REPRESENTATIVE  BILL WILLIAMS, attempted                                                                   
to clear  up some  of the  fiscal concerns.   He pointed  out                                                                   
that there are  two notes, which are a cost to  the State and                                                                   
that they  would change  with the  adoption of the  committee                                                                   
substitute.   The  change  is from  general  funds to  public                                                                   
school trust funds.  The committee  substitute changed one of                                                                   
the purposes that those funds  could be used for.  They could                                                                   
be used  for paying the costs  of education and the  costs of                                                                   
managing the  fund itself.   Fiscal note #3,  from Department                                                                   
of Revenue  has costs, which should  be moved to  the "other"                                                                   
component.    The last  fiscal  note  addressed by  Mr.  Bus,                                                                   
Information Services  component should  also be changed  from                                                                   
general funds to the "other" category.                                                                                          
                                                                                                                                
Co-Chair Harris  MOVED to ADJUST  the fiscal note  to reflect                                                                   
testimony  made by Mr.  Ecklund.   There being NO  OBJECTION,                                                                   
the fiscal change was adopted.                                                                                                  
                                                                                                                                
Representative Foster MOVED to  report CS HB 333 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal notes.  There  being NO OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS  HB 33  (FIN) was  reported out  of Committee  with a  "no                                                                   
recommendation"  and  with  three  new fiscal  notes  by  the                                                                   
Department  of Natural Resources,  one new  zero note  by the                                                                   
Department of Revenue, one new  fiscal note by the Department                                                                   
of Revenue, fiscal  note #1 by the Department  of Education &                                                                   
Early Development  and fiscal  note #4  by the University  of                                                                   
Alaska.                                                                                                                         
                                                                                                                                

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