Legislature(2009 - 2010)HOUSE FINANCE 519

04/07/2010 09:00 AM House FINANCE

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Heard & Held
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 363                                                                                                            
     "An Act relating to the membership of the Alaska                                                                           
     Industrial Development and Export Authority."                                                                              
9:21:55 AM                                                                                                                    
ROB  EARL,   STAFF,  REPRESENTATIVE  BOB   HERRON,  SPONSOR,                                                                    
explained  that  HB 363  had  been  sponsored by  the  House                                                                    
Community & Regional Affairs  Committee, which is co-chaired                                                                    
by Representatives  Cathy Munoz and Bob  Herron. He detailed                                                                    
that the  mission of the  Alaska Industrial  Development and                                                                    
Export Authority  (AIDEA) was to promote  economic growth in                                                                    
the state  through providing entities with  various means of                                                                    
financing and investment.  The organization provides Alaskan                                                                    
businesses with long-term financing  options at a reasonable                                                                    
cost.  Each year,  25 to  50  percent of  AIDEA's return  on                                                                    
assets is redistributed back to  the state's general fund as                                                                    
a dividend. He noted that  the dividend for the current year                                                                    
amounted to $23 million.                                                                                                        
Mr. Earl  informed the committee  that the AIDEA  board also                                                                    
functions  as  the  Alaska  Energy  Authority  (AEA)  board.                                                                    
Currently,  the  board  has   five  members,  including  the                                                                    
commissioners  of  the  Departments  of  Revenue  (DOR)  and                                                                    
Commerce,  Community, and  Economic  Development (DCCED).  A                                                                    
third member  is a  discretionary commissioner  appointed by                                                                    
the governor;  currently the member  is the  commissioner of                                                                    
the Department of Transportation  and Public Facilities. Two                                                                    
public  members are  also appointed  by the  governor. House                                                                    
Bill  363  would add  three  more  private-sector or  public                                                                    
members to  the board  and retain  the commissioners  of DOR                                                                    
and  DCCED,  expanding  the  board  to  seven  members.  The                                                                    
legislation  also  stipulates  that  private-sector  members                                                                    
possess  business  and/or  industry  expertise  as  well  as                                                                    
leadership skills.                                                                                                              
9:25:11 AM                                                                                                                    
ERIN  HARRINGTON,  STAFF,   REPRESENTATIVE  ALAN  AUSTERMAN,                                                                    
provided  background   on  the   bill.  She   reported  that                                                                    
Representative   Austerman   chaired   the   House   Finance                                                                    
Committee subcommittee for DCCED  and had had opportunity to                                                                    
consider  the  resources  the state  puts  towards  economic                                                                    
development.  In  the spring  of  2009,  he asked  staff  to                                                                    
identify  best practices  for the  state's contributions  to                                                                    
economic development  and to make a  comparison with similar                                                                    
activities  in  other  states.  She  noted  that  Alaska  is                                                                    
acknowledged  as  a  leader  in  encouraging  private-sector                                                                    
Ms. Harrington reported that  states with increased economic                                                                    
development  resulting  from   economic  revitalization  and                                                                    
diversification  had all  brought additional  private-sector                                                                    
guidance  into  the  application  of  state  resources.  She                                                                    
summarized  that in  Alaska, the  AIDEA board  was the  only                                                                    
state  entity  with  private-sector  advisors;  furthermore,                                                                    
they  represented  only  two of  the  board's  members.  She                                                                    
pointed  to  a  handout,   "Economic  Development  in  State                                                                    
Government"  (copy  on file),  and  noted  that Wyoming  and                                                                    
North  Dakota were  resource-based Western  states that  had                                                                    
successfully  brought  in   private-sector  advisors.  Other                                                                    
states  with  the  model   included  Oregon,  Kentucky,  and                                                                    
Mr. Earl  pointed to  intent language in  the bill  (page 1)                                                                    
that had  been added  in the Labor  & Commerce  Committee to                                                                    
address concerns  that appointees be  broadly representative                                                                    
of  geographical  areas  in Alaska  and  of  the  industries                                                                    
important  to the  state. He  explained that  a seven-member                                                                    
board  would   give  AIDEA   more  flexibility   in  forming                                                                    
subcommittees and  would provide more potential  for diverse                                                                    
experience  and specialties  as well  as broader  geographic                                                                    
and industry representation.                                                                                                    
Mr. Earl  detailed that the  $23,000 fiscal note  would fund                                                                    
travel and  stipends for  approximately ten  annual meetings                                                                    
for three additional board members.  He pointed out that the                                                                    
money requested  would amount to  one one-thousandth  of the                                                                    
amount the board returns to  the state through the dividend.                                                                    
He  stressed  that  the  state  would  benefit  through  the                                                                    
dividend as  well as through  the jobs,  infrastructure, and                                                                    
access to capital that AIDEA provides.                                                                                          
9:29:52 AM                                                                                                                    
Co-Chair Stoltze  questioned the bill's  legislative intent.                                                                    
Mr. Earl  replied that  the will of  the Labor  and Commerce                                                                    
Committee was to offer direction to the governor.                                                                               
Co-Chair Stoltze  stated that he  felt the language  was not                                                                    
meaningful,  relevant,   or  practical,  and   could  create                                                                    
expectation by other boards.                                                                                                    
Representative Salmon  expressed concerns about  language on                                                                    
page 2, line 6, that  could exclude rural representation. He                                                                    
wanted language  that stipulated  the inclusion of  at least                                                                    
one rural area.                                                                                                                 
Co-Chair Stoltze  thought the business and  industry leaders                                                                    
of Alaska were diverse.                                                                                                         
Ms.  Harrington pointed  out that  the language  intended to                                                                    
reflect some  of the best  practices that had  been observed                                                                    
in other states and the methods used to achieve them.                                                                           
Co-Chair  Stoltze  observed  that AIDEA  probably  developed                                                                    
more than businesses.                                                                                                           
Representative Austerman  noted that  the statement  did not                                                                    
exclude rural  representation. He  believed there  were many                                                                    
competent  business people  in  rural Alaska  and hoped  the                                                                    
governor would choose the best representatives available.                                                                       
9:33:36 AM                                                                                                                    
Representative Foster  referenced experience serving  on the                                                                    
Alaska   Workforce  Investment   Board  (AWIB).   He  shared                                                                    
Representative  Salmon's  concern  and hoped  at  least  one                                                                    
person on the  board would be from rural  Alaska. He queried                                                                    
the difference between  private-sector and industry members.                                                                    
On the AWIB, three people had  to be from the private sector                                                                    
and three had  to be from business and  industry sectors; he                                                                    
did   not  understand   the  difference   between  the   two                                                                    
categories. Ms. Harrington reported  that the issue had been                                                                    
raised in the Labor  & Commerce Committee. Previous language                                                                    
had  referred  to  business expertise;  it  was  changed  to                                                                    
business and/or industry expertise.  She believed the intent                                                                    
was to not  exclude people from organizations  that were not                                                                    
private-sector but might have industry expertise.                                                                               
Representative Doogan opined that  the bill would change the                                                                    
makeup  of  the  AIDEA  board from  one  controlled  by  the                                                                    
governor   (and  designees)   to  an   undefined  group   of                                                                    
civilians.  He  queried the  advantage  of  the change.  Ms.                                                                    
Harrington responded that part of  the advantage would be to                                                                    
give  the  board  a longer-term  planning  cycle  than  that                                                                    
possible within the constraints  of the political cycle. She                                                                    
added  that   AIDEA  had  been   involved  in   a  long-term                                                                    
strategic-planning process.                                                                                                     
9:36:32 AM                                                                                                                    
Representative Doogan pointed out  that the appointees would                                                                    
serve on  cycles as  short as the  election cycle.  He asked                                                                    
for  more information.  Mr. Earl  responded that  the public                                                                    
members would  be appointed by  the governor and  serve two-                                                                    
year terms; the commissioners would  be on the board as long                                                                    
as they were in office.                                                                                                         
Co-Chair  Stoltze asked  whether the  members served  at the                                                                    
pleasure  [of the  governor] or  could only  be removed  for                                                                    
cause.  Mr.   Earl  answered  that  the   power  to  appoint                                                                    
implicitly includes  the power  to remove  unless explicitly                                                                    
stated otherwise.                                                                                                               
Representative  Doogan questioned  the  need for  a fix  for                                                                    
something  that  was not  broken;  AIDEA  already gives  the                                                                    
state money each year. He  had not heard a compelling reason                                                                    
to  change  the  system  except   that  it  might  move  the                                                                    
decision-making further away from elected officials.                                                                            
Representative Austerman  did not think it  was government's                                                                    
place to  create new businesses  and tell them what  kind of                                                                    
investments they should be making.  He acknowledged that the                                                                    
board had  done a good  job of creating new  businesses that                                                                    
returned money to  the state. He did not  think the business                                                                    
sector  was   well  represented  on  the   board,  which  he                                                                    
characterized  as  dominated   by  state  commissioners.  He                                                                    
stated  that  the measure  intended  to  provide a  stronger                                                                    
business presence to  guide the kind of  investments made by                                                                    
AIDEA. He referred  to a group created by  Governor Palin to                                                                    
guide  business-sector  investments  and  increase  economic                                                                    
development in  Alaska; he thought  the group  was top-heavy                                                                    
with  commissioners and  had  failed without  private-sector                                                                    
input. He believed the example was informative.                                                                                 
9:41:30 AM                                                                                                                    
Representative Doogan  argued that AIDEA was  a state agency                                                                    
chartered  by the  state; its  assets and  powers are  state                                                                    
ones.  He  maintained  that the  legislation  would  make  a                                                                    
substantial change by altering the  make-up of the board. He                                                                    
was concerned about  putting private members in  charge of a                                                                    
state  agency; he  believed  the agency  had  made some  bad                                                                    
Co-Chair  Stoltze asserted  that most  of AIDEA's  bad calls                                                                    
had initiated in the legislature.                                                                                               
Representative  Joule referred  to examples  of other  state                                                                    
boards with  similar appointments, including  the University                                                                    
of Alaska's Board  of Regents, which is entirely  made up of                                                                    
public members, as well as  the board of the Alaska Railroad                                                                    
9:45:03 AM                                                                                                                    
Representative Salmon  stated concerns  with the  make-up of                                                                    
the board,  which could be concentrated  in one geographical                                                                    
area. He  argued that corporate concerns  could be addressed                                                                    
more  than social  concerns,  which  could adversely  affect                                                                    
rural areas.                                                                                                                    
Representative   Gara  thought   the  governor   would  have                                                                    
discretion   to  appoint   members.  He   described  various                                                                    
scenarios  in which  appointees would  have strength  in one                                                                    
area rather than  another. He pointed to page 2,  line 7 and                                                                    
wondered  whether language  could be  added saying  "each of                                                                    
whom has  expertise in  economic development."  The governor                                                                    
would  then have  discretion to  pick five  people from  the                                                                    
private sector, but would have broader range.                                                                                   
Representative  Austerman thought  the point  would be  well                                                                    
made  if the  subject was  DCCED, but  AIDEA is  basically a                                                                    
bank. He did  not want board members who  did not understand                                                                    
banking. He wanted people from  the business sector who made                                                                    
similar decisions.  He did not  intend to  disqualify people                                                                    
from rural areas.                                                                                                               
TED   LEONARD,   EXECUTIVE   DIRECTOR,   ALASKA   INDUSTRIAL                                                                    
DEVELOPMENT  AND EXPORT  AUTHORITY, DEPARTMENT  OF COMMERCE,                                                                    
COMMUNITY, AND ECONOMIC  DEVELOPMENT, informed the committee                                                                    
that AIDEA  supported increasing  the size  of the  board to                                                                    
increase flexibility and allow  for more working committees.                                                                    
He  noted that  he had  been on  the Alaska  Housing Finance                                                                    
Corporation board when he was  deputy commissioner of DCCED;                                                                    
he  believed the  seven-member board  was comprised  of four                                                                    
public members and three commissioners.                                                                                         
Mr.  Leonard  added  that  AIDEA  had  decided  through  the                                                                    
strategic  planning process  that  it  needed more  private-                                                                    
sector input.  The board believed a  combination of advisory                                                                    
committees and increasing the  board through the legislation                                                                    
would help  the agency  deal with rural  and other  kinds of                                                                    
9:51:45 AM                                                                                                                    
Co-Chair  Stoltze queried  the administration's  position on                                                                    
the  bill. Mr.  Leonard replied  that  he had  not gotten  a                                                                    
statement  but  believed they  were  neutral;  they want  to                                                                    
increase the  size of the board  but do not have  a position                                                                    
on the composition.                                                                                                             
Representative Kelly  spoke to past problems  with the AIDEA                                                                    
board having a quorum. He believed  five was a low number to                                                                    
do big  business with. He  supported increasing the  size of                                                                    
the board.  He queried  whether the proposed  language would                                                                    
allow    for    the    appointment   of    rural    business                                                                    
representatives. Mr. Leonard replied in the affirmative.                                                                        
Representative  Kelly believed  the  challenge of  involving                                                                    
rural  representatives   was  met.  He  asked   whether  the                                                                    
governor could  dismiss board members. Mr.  Leonard answered                                                                    
that  the  statute  would   not  explicitly  stipulate  that                                                                    
members serve "at the pleasure  of the governor." The agency                                                                    
asked the  assistant attorney  general whether  the governor                                                                    
would   implicitly  have   the  power.   He  reported   that                                                                    
Representative Herron's  staff had discussed the  issue with                                                                    
Legislative   Legal  Services,   who  determined   that  the                                                                    
governor would have the power.                                                                                                  
Co-Chair Stoltze  opined that someone  would have  the power                                                                    
until it was explicitly stated otherwise.                                                                                       
Representative Kelly  had serious concerns about  the issue,                                                                    
as he  felt the  governor currently controlled  the majority                                                                    
of  the decision-makers  on  the board  and  the terms  were                                                                    
short. He wanted the issue to be very clear.                                                                                    
9:55:42 AM                                                                                                                    
Representative  Doogan queried  the amount  of the  dividend                                                                    
paid to  the state.  Mr. Leonard  replied that  the dividend                                                                    
had been  $23,600,000 for  the current  year. Representative                                                                    
Doogan  pointed out  that changing  the system  could affect                                                                    
the money paid and create problems.                                                                                             
Vice-Chair   Thomas   understood    concerns   about   rural                                                                    
representation.  He   believed  the  Alaska   Native  Claims                                                                    
Settlement  Act  resulted in  the  best  rural people  being                                                                    
"urbanized"  and disconnected  from rural  life. He  relayed                                                                    
personal  experience.  He   stated  concerns  about  members                                                                    
leaving rural  areas and not  coming back and  urged caution                                                                    
in choosing  rural representatives. He named  retired people                                                                    
in Barrow and Kodiak that could fit.                                                                                            
9:59:31 AM                                                                                                                    
Representative  Joule  felt  the  definition  of  "industry"                                                                    
(page 2,  line 7) was  broad and could relate  (for example)                                                                    
to fishing,  energy, or oil  and gas industries.  He thought                                                                    
there had  to be  an interest  on the  part of  rural people                                                                    
first;  he believed  persons  who had  been  named could  be                                                                    
appropriate and  that the administration would  consider the                                                                    
people if the board were expanded.                                                                                              
Representative  Austerman commented  that the  dividend from                                                                    
AIDEA  was great  but should  not  be the  driving force  in                                                                    
promoting economic  development in  the state. He  wanted to                                                                    
find good  people who would serve  on the board and  use the                                                                    
bank as  a tool  to expand  economic development.  He opined                                                                    
that  a lower  dividend would  be a  good investment  if the                                                                    
board created new businesses across the state.                                                                                  
Representative  Austerman thought  the issue  of people  not                                                                    
returning to  the village  was irrelevant  to who  should be                                                                    
appointed to  the board. He did  not think there would  be a                                                                    
problem appointing  qualified rural representatives.  He was                                                                    
concerned  that geographically  stipulating  how boards  are                                                                    
appointed would open  the question for all  state boards. He                                                                    
believed the governor makes the  best appointments he or she                                                                    
can. He did not know how the rural aspect could be defined.                                                                     
10:03:56 AM                                                                                                                   
Vice-Chair  Thomas  commented  that   99.9  percent  of  the                                                                    
state's resources come from rural Alaska.                                                                                       
Representative  Gara expressed  concerns regarding  language                                                                    
that could  be too  narrow. He  had suggested  replacing the                                                                    
terms   "private-sector  business   or  industry"   with  "a                                                                    
background  in  economic  development",  but  Representative                                                                    
Austerman  had wanted  people  with  banking experience.  He                                                                    
wondered  what could  happen if  there  were five  competent                                                                    
board  members  without  banking  knowledge.  He  questioned                                                                    
whether someone  in AIDEA could  guide the board  on banking                                                                    
issues so that board members  would not need the experience.                                                                    
Mr.  Leonard thought  the governor  would want  someone with                                                                    
banking experience  on the  board since  banking is  a large                                                                    
portion of  AIDEA business;  AIDEA has  a loan  portfolio of                                                                    
approximately $370  million. He reminded the  committee that                                                                    
the board is  for AEA as well. He believed  that the Labor &                                                                    
Commerce Committee  had wanted  to add the  word "expertise"                                                                    
to  include  persons  with  expertise  in  policy  decision-                                                                    
making;  the committee  tried to  make the  definition broad                                                                    
enough to  meet the responsibilities  of both the  AIDEA and                                                                    
AEA boards.                                                                                                                     
Mr.  Leonard reported  that AIDEA  believed that  increasing                                                                    
the  number   of  board  members   would  allow   for  rural                                                                    
representation  without  stipulating  geographic  areas.  He                                                                    
assured the  committee that the  board would  promulgate by-                                                                    
laws to  broaden its  perspective through  representation by                                                                    
rural, urban, and "economically distressed" areas.                                                                              
Representative  Doogan asked  whether the  bill would  allow                                                                    
AIDEA  to buy  into a  portion of  a project.  He questioned                                                                    
other changes that would be made by the proposition.                                                                            
10:08:33 AM                                                                                                                   
Mr.  Leonard explained  that  HB 410  would  allow AIDEA  to                                                                    
partner, to  change the  way rates  are set  for internally-                                                                    
funded loans, and  to set up an  incentive-rebate program to                                                                    
incentivize businesses  to invest  in certain areas  to meet                                                                    
economic  criteria.  The  fourth change  would  improve  the                                                                    
agency's rural-development  initiative fund by  changing the                                                                    
rates and conditions of getting a loan.                                                                                         
Representative Kelly  asked whether the current  AIDEA board                                                                    
supported the  proposition. Mr.  Leonard responded  that the                                                                    
board did not have a position.                                                                                                  
Representative  Kelly asked  whether the  strategic planning                                                                    
mentioned earlier  included a board  expansion like  the one                                                                    
proposed.  Mr. Leonard  responded  that the  agency did  not                                                                    
think of increasing the board;  it was going to use advisory                                                                    
boards because  the legislative process was  longer and more                                                                    
Representative Kelly  reminded him  of the question  for the                                                                    
attorney  general's  office.  He  also wanted  to  know  the                                                                    
governor's position.                                                                                                            
Co-Chair Stoltze  asked whether Representation  Kelly wanted                                                                    
to  hold the  bill. Representative  Kelly responded  that he                                                                    
did not want to hold it long.                                                                                                   
Representative Austerman agreed that  the question should be                                                                    
answered before the bill was moved from committee.                                                                              
Representative Austerman  asked whether the board  would use                                                                    
advisory boards  regardless of  the size  of the  board. Mr.                                                                    
Leonard  responded that  the agency  believed that  advisory                                                                    
boards  would be  needed in  either case  to give  the broad                                                                    
perspective  regarding  the  different  industries  and  the                                                                    
private sector.                                                                                                                 
Representative Kelly advised having  an amendment ready if a                                                                    
change was required because of the governor's position.                                                                         
10:12:51 AM                                                                                                                   
WAYNE  STEVENS,  PRESIDENT/CEO,   ALASKA  STATE  CHAMBER  OF                                                                    
COMMERCE,  testified in  support  of the  bill. He  detailed                                                                    
that  the chamber  has had  a  position over  the past  four                                                                    
years  encouraging   the  development  of   a  comprehensive                                                                    
strategy for  the state. The  position includes the  goal of                                                                    
having  the private  sector work  more collaboratively  with                                                                    
state government to find and  develop a strategy so that the                                                                    
state, legislature, administration,  business community, and                                                                    
the university would  end up at the same  place. The chamber                                                                    
viewed the legislation as one part of the direction.                                                                            
Representative  Doogan  asked   whether  the  state  chamber                                                                    
believed the  proposed changes  were necessary.  Mr. Stevens                                                                    
responded  that  there  are many  different  and  disjointed                                                                    
efforts in economic development arenas.  He felt that HB 363                                                                    
was one  part of  the effort to  bring together  an economic                                                                    
strategy for the state.                                                                                                         
Representative Salmon asked whether  the rural community was                                                                    
part of  the larger economic strategy.  Mr. Stevens answered                                                                    
in the affirmative.                                                                                                             
STEVE  HAAGSON,  DIRECTOR,   ALASKA  ENERGY  AUTHORITY  (via                                                                    
teleconference),   reported  that   he  was   available  for                                                                    
10:16:24 AM                                                                                                                   
Representative Gara  queried the  different missions  of the                                                                    
shared board for AIDEA and  AEA and wondered if language was                                                                    
needed to  ensure that  AEA's mission  was met.  Mr. Haagson                                                                    
opined that  the language  was insightful as  it spoke  to a                                                                    
broad spectrum. He thought  the requirement for demonstrated                                                                    
leadership skills  was critical.  He informed  the committee                                                                    
that the  two organizations  had shared  the board  for many                                                                    
years. The current board had  expertise that worked well for                                                                    
both  entities even  though their  missions were  different;                                                                    
AIDEA concentrated on economic  growth opportunities and AEA                                                                    
focused  on  program management  for  both  rural and  urban                                                                    
Co-Chair Stoltze closed public testimony.                                                                                       
Representative Gara  cautioned against holding the  bill for                                                                    
a position from the  governor. Representative Kelly proposed                                                                    
that no answer would be an answer.                                                                                              
10:19:30 AM                                                                                                                   
HB  363  was  HEARD  and   HELD  in  Committee  for  further                                                                    

Document Name Date/Time Subjects
CSHB 363 (L&C) Bill Changes.doc HFIN 4/7/2010 9:00:00 AM
HB 363
CSHB 363 (L&C) sponsor statement final.doc HFIN 4/7/2010 9:00:00 AM
HB 363
HB363 AIDEA Reponse To Questions.pdf HFIN 4/7/2010 9:00:00 AM
HB 363
HB363 AIDEA Strategic Plan.pdf HFIN 4/7/2010 9:00:00 AM
HB 363
HB363CS(L&C)-CED-AIDEA-3-24-10.pdf HFIN 4/7/2010 9:00:00 AM
HB 363
HB 363 - AIDEA Board Fact Sheet & Member Info.PDF HFIN 4/7/2010 9:00:00 AM
HB 363
HB 363 - Briefing Paper Economic Development in State Government.pdf HFIN 4/7/2010 9:00:00 AM
HB 363
HB 363 - Letters of Support.PDF HFIN 4/7/2010 9:00:00 AM
HB 363
SB 270 AHFC Transfer Plan Sectional Analysis[1].pdf HFIN 4/7/2010 9:00:00 AM
SB 270
SB 270 AHFC transfer plan Sponsor Statement[1].pdf HFIN 4/7/2010 9:00:00 AM
SB 270
SB 270 Transmittal Letter.pdf HFIN 4/7/2010 9:00:00 AM
SB 270
HB 363 Econ Dev. in State Gov..pdf HFIN 4/7/2010 9:00:00 AM
HB 363