Legislature(2003 - 2004)
04/15/2004 01:51 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.