Legislature(2003 - 2004)
03/23/2004 03:03 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 follows: Page 5, line 27: Delete "equal shares" Insert "three-fifths and two-fifths shares respectively" 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 three-fifths. 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.