Legislature(2003 - 2004)

03/23/2004 03:03 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 333-PUBLIC SCHOOL ENDOWMENT                                                                                                
Number 0628                                                                                                                     
CHAIR WILSON announced  that the next order of  business would be                                                               
HOUSE BILL NO.  333, "An Act relating to an  endowment for public                                                               
education; and providing for an effective date."                                                                                
Number 0680                                                                                                                     
CLIFF  STONE,  Staff  to Representative  Dan  Ogg,  Alaska  State                                                               
Legislature,  testified  on  behalf of  Representative  Ogg,  the                                                               
sponsor of  HB 333.   Mr.  Stone pointed  out that  the committee                                                               
packet should  include some talking points  as well as a  copy of                                                               
the  fax sent  to  Don Bullock,  Legislative  Legal and  Research                                                               
Services,  regarding the  conceptual  amendments  adopted by  the                                                               
House Special  Committee on  Education.  He  also noted  that the                                                               
committee  should   be  in  receipt  of   a  possible  conceptual                                                               
amendment to  AS 37.14.110.   Mr. Stone  read the  following from                                                               
the "Talking Points on CSHB 333":                                                                                               
     This  Bill  endows the  University  of  Alaska and  the                                                                    
     Public School Trust Fund with land grants.                                                                                 
     Each  will  receive  a grant  of  undivided  2  percent                                                                    
     interest  in  all  state  domain   land.    Rights  and                                                                    
     management will be  retained by DNR.  DNR  will not owe                                                                    
     a heightened  fiduciary duty  to either  the University                                                                    
     or  the Education  Trust Fund  who  each shall  receive                                                                    
     receipts  annually  from   their  respective  interests                                                                    
     after  deducting contributions  to  the permanent  fund                                                                    
     and deducting  administrative/service fees,  et cetera.                                                                    
     Receipts are  limited to new receipts  accruing to each                                                                    
     interest after the effective date  of this act.  In the                                                                    
     later  sections of  this bill  it  does rescind  Senate                                                                    
     Bill 7.                                                                                                                    
MR.  STONE  recalled  a  question  asked  in  the  House  Special                                                               
Committee  on Education  regarding  whether  the existing  public                                                               
school trust  fund be utilized  instead of creating  an endowment                                                               
trust  fund.    He  explained  that  Eddy  Jeans,  Department  of                                                               
Education and  Early Development,  said the  aforementioned could                                                               
be  done  with  different  language.   The  conceptual  amendment                                                               
required  to accomplish  that is  at the  bottom of  the "Talking                                                               
Points  on  CSHB  333".    Mr. Stone  also  recalled  a  question                                                               
regarding the transfer of an  interest in state lands and mineral                                                               
rights to these trusts, as there  was concern that it may violate                                                               
Section 6(i) of the Statehood  Compact.  The university indicated                                                               
that  not to  be  the case,  as does  a  1964 attorney  general's                                                               
opinion,  which says,  "The  use of  the  words 'hereby  granted'                                                               
signifies a  present grant of  lands to be  thereafter identified                                                               
by selection.   By virtue of that grant the  state became at once                                                               
vested with the  right of property in selected lands.   It cannot                                                               
be divested of such a right."                                                                                                   
Number 0905                                                                                                                     
REPRESENTATIVE SEATON  moved to adopt CSHB  333(EDU), Version 23-                                                               
LS0991\C, as  the working  document.   There being  no objection,                                                               
CSHB 333(EDU) is before the committee.                                                                                          
MR.  STONE  related  to  the committee  that  the  House  Special                                                               
Committee  on  Education  felt  it   was  important  to  have  an                                                               
applicability section as  is found in Section 7.   He pointed out                                                               
that  "new" language  wasn't  added to  that  section because  it                                                               
isn't defined.   The definition for  "new" could be as  simple as                                                               
"a  lease entered  into or  production or  after this  particular                                                               
date".  However, the drafter  noted that the aforementioned would                                                               
open  some arguments  with  regard to  what  constitutes a  lease                                                               
because a lease can be from two different pools of oil.                                                                         
MR.  STONE  turned  to House  Special  Committee  on  Education's                                                               
desire to conform the legislation  to the sponsor's intent in [AS                                                               
14.40].507  to not  sell  land,  but to  receive  revenue.   This                                                               
change is  on page 6 and  meets the sponsor's intent  that it's a                                                               
tenant  in  common  and  an  undivided 2  percent  for  both  the                                                               
university and the K-12 system.   The new language specifies that                                                               
DNR doesn't owe  the University of Alaska  a heightened fiduciary                                                               
duty.   Furthermore,  page 6,  lines 16-21,  specifies that  land                                                               
conveyed  to  the  university  or  the  education  trust  doesn't                                                               
include an  interest in  possession of land.   The  Department of                                                               
Natural  Resources, upon  a cursory  review, is  happy with  this                                                               
section, as  is Joe  Beedle, University of  Alaska.   He directed                                                               
attention  to  page 5,  line  28,  which includes  the  following                                                               
language change:   "receipts derived  from the management  of the                                                               
land conveyed" in order to meet the sponsor's intents.                                                                          
Number 1155                                                                                                                     
MR. STONE  recalled that many  in the House Special  Committee on                                                               
Education expressed  concern with regard to  how this legislation                                                               
interacts with  the 25 percent that  is constitutionally mandated                                                               
to go into  the permanent fund from the sale  of these leases and                                                               
royalties.   Therefore, on page  5, line 31, the  language "after                                                               
deducting  contributions to  the Alaska  permanent fund  that are                                                               
required  by law"  was included.   To  that same  end on  page 6,                                                               
lines 13-14,  the language "after deducting  contributions to the                                                               
Alaska  permanent  fund  required  by  law  and  after  deducting                                                               
administrative  service  fees,  application  fees,  filing  fees,                                                               
processing fees, or  other similar fees" was added.   The drafter                                                               
has  assured the  sponsor that  those two  areas won't  upset the                                                               
constitutional mandate.                                                                                                         
Number 1300                                                                                                                     
CHAIR  WILSON moved  that  the committee  adopt  Amendment 1,  as                                                               
     Page 5, line 27:                                                                                                           
          Delete "equal shares"                                                                                                 
       Insert   "three-fifths   and   two-fifths   shares                                                                       
REPRESENTATIVE GATTO  objected, and inquired  as to the  share of                                                               
the budget that K-12 and the university currently receive.                                                                      
Number 1353                                                                                                                     
EDDY  JEANS, School  Finance  and  Facilities Section,  Education                                                               
Support Services, Department of  Education and Early Development,                                                               
said that he couldn't answer that.                                                                                              
CHAIR  WILSON  interjected that  it's  more  than two-fifths  and                                                               
REPRESENTATIVE  SEATON  highlighted  that this  legislation  also                                                               
eliminates SB  7, which was  the 250,000 acres to  be transferred                                                               
to  the  university.    Therefore,   that  land  grant  would  be                                                               
eliminated.  Representative Seaton inquired  as to the balance of                                                               
that income.                                                                                                                    
Number 1435                                                                                                                     
REPRESENTATIVE DAN  OGG, Alaska State Legislature,  sponsor of HB                                                               
333,  explained that  the intent  was to  replace the  land grant                                                               
that was  in SB  7 with  the land  grant proposed  in HB  333 and                                                               
provide it  to K-12 as  well as the  university.  He  pointed out                                                               
that  the land  grant under  SB  7 hasn't  been transferred,  and                                                               
therefore the selections haven't been  made.  Furthermore, such a                                                               
transfer would be  onerous because under the terms of  SB 7 there                                                               
has to  be an  agreement between  DNR and  the university.   This                                                               
fall  the  administration has  put  forth  two proposals  to  the                                                               
university, but  no agreement  could be reached.   Even  if there                                                               
was  agreement, the  university  would have  to  come before  the                                                               
legislature for  approval.   Representative Ogg  highlighted that                                                               
his  proposal  provides  quite  a  savings.    In  essence,  this                                                               
legislation would  take the place of  the land grant under  SB 7.                                                               
With regard to what is  lost, Representative Ogg opined that K-12                                                               
would gain.  He explained  that presently the public school trust                                                               
has a .5  percent of the current revenue stream  and that fund is                                                               
at $275 million  and will provide about $12 million  to K-12 this                                                               
year.  The university's land  grant trust fund from existing land                                                               
has a balance  of about $80 million.   Representative Ogg related                                                               
his understanding that [Amendment  1] would increase K-12 portion                                                               
at a greater rate than the university.                                                                                          
REPRESENTATIVE  SEATON asked  if  [Amendment 1]  is a  reasonable                                                               
balance against 250,000 acres.                                                                                                  
REPRESENTATIVE OGG  recalled that  when the  legislation referred                                                               
to 1  percent, Mr. Beedle believed  that the 1 percent  over time                                                               
would be better for the university than the 250,000 acres.                                                                      
Number 1637                                                                                                                     
REPRESENTATIVE GATTO withdrew his objection to Amendment 1.                                                                     
CHAIR WILSON, upon hearing no  further objections, announced that                                                               
Amendment 1 was adopted.                                                                                                        
REPRESENTATIVE  COGHILL asked  if  Amendment 1  would change  the                                                               
language necessary  on page  5, line 22,  where is  says "equally                                                               
for the  support of public  elementary and  secondary education."                                                               
Representative Coghill explained  that he wanted to  be sure that                                                               
if the intention  is divide what goes between  post secondary and                                                               
secondary education would there be  any discussion with regard to                                                               
primary and secondary education.                                                                                                
REPRESENTATIVE  SEATON opined  that Amendment  1 would  designate                                                               
that three-fifths of  the 4 percent would go  into this education                                                               
trust fund  and wouldn't  impact the  split [between  primary and                                                               
secondary education].                                                                                                           
Number 1741                                                                                                                     
REPRESENTATIVE SEATON  moved that the committee  adopt Conceptual                                                               
Amendment 2, which would:   "replace in the bill where applicable                                                               
language  creating an  education trust  fund and  board with  the                                                               
existing public  school trust fund  and public school  trust fund                                                               
advisory board (AS 37.14.110-170)."                                                                                             
REPRESENTATIVE COGHILL objected for discussion purposes.                                                                        
REPRESENTATIVE SEATON  referred to Mr. Stone's  earlier testimony                                                               
that there is  no need to create an education  trust fund because                                                               
the existing  public school trust  fund can be utilized  for this                                                               
purpose.   This legislation would merely  provide another revenue                                                               
stream into the existing public school trust fund.                                                                              
REPRESENTATIVE COGHILL removed his objection.                                                                                   
Number 1798                                                                                                                     
CHAIR WILSON,  upon determining there  was no  further objection,                                                               
announced that Amendment 2 was adopted.                                                                                         
Number 1810                                                                                                                     
REPRESENTATIVE SEATON moved to report  CSHB 333(EDU), as amended,                                                               
out  of   committee  with  individual  recommendations   and  the                                                               
accompanying  fiscal  notes.   There  being  no  objection,  CSHB                                                               
333(HES)  was  reported  from the  House  Health,  Education  and                                                               
Social Services Standing Committee.                                                                                             

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