Legislature(2017 - 2018)HOUSE FINANCE 519
02/23/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Permanent Fund Forecasting Methodology, Variability and Volatility Discussion and Realized and Unrealized Earnings Presentation: Callan Associates, Inc. | |
| HB57 || HB59 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | HB 57 | TELECONFERENCED | |
| += | HB 59 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE BILL NO. 57
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; repealing appropriations; making
supplemental appropriations and reappropriations, and
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
HOUSE BILL NO. 59
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
2:35:36 PM
Co-Chair Seaton noted that all subcommittee actions were to
Section 1, the numbers section of the budget. The reported
subcommittee recommended budget amounts might be an
incomplete picture of the department's budget. He relayed
that after the committee completed the subcommittee
amendment process including the language amendments that he
would propose, a new committee substitute work draft of the
bill along with the reports that would include both the
numbers and the language appropriations providing a more
complete picture of each agency's budget totals. The
subcommittee reports were distributed to members the
previous day and were posted on the Legislative Finance
Division's website. Since he was the subcommittee chair for
the Office of the Governor and the Department of Revenue he
would begin with his reports.
Co-Chair Seaton reported that the finance subcommittee for
the Office of the Governor had no amendments to consider,
nor did the governor. As the subcommittee chair he
recommended no changes to the Office of the Governor's FY
18 budget. He read the budget totals by fund source:
The budget totals:
Fund Source: (dollars are in thousands)
Unrestricted General Funds (UGF) $23,135.8
Designated General Funds (DGF) -0-
Other Funds 838.3
Federal Funds 205.0
Total $24,179.1
The Unrestricted General Fund difference from FY15
Management Plan to the FYI 18 Governor budget is a
reduction of $8.9 million, a decrease of 27.7 percent.
From FY17 Management Plan, the FYI 18 Governor budget
reflects an unrestricted general fund increase of
$279.7, an increase of 1 .2 percent.
2:38:06 PM
AT EASE
2:38:26 PM
RECONVENED
Co-Chair Foster asked Co-Chair Seaton to provide his next
subcommittee report.
Co-Chair Seaton recommended two budget amendments for
consideration by the House Finance Committee and several
recommendations to various policy committees for statutory
changes. He read from the subcommittee report:
The budget if theses amendments are adopted totals:
Fund Source: (dollars are in thousands)
Unrestricted General Funds (UGF) $25,646.4
Designated General Funds (DGF) $2,587.5
Other Funds $269,013.3
Federal Funds $78,665.5
Total $375,958.7
Positions:
Permanent Full-time 812
Permanent Part-time 33
Temporary 16
Total 861
If these amendments are adopted, the Unrestricted
General Fund difference from FY 15 Management Plan to
the FY 18 House Subcommittee Recommended Budget is a
reduction of
$8.185 million, a decrease of 24.2 percent.
The Unrestricted General Fund difference from FY 17
management plan to FY 18 House Subcommittee
Recommended Budget is a reduction of $455.2 thousand,
a decrease of 1.7%.
2:40:35 PM
AT EASE
2:40:52 PM
RECONVENED
Co-Chair Seaton read the recommendations for DOR:
The following statutory recommendations are also
submitted to the House Finance Committee
1. A recommendation to the House State Affairs
Committee: Amend AS 43.23.008 to consider repealing
allowable absences for the Permanent Fund Dividend. In
2016, 26,524 dividends were paid to people with an
allowable absence from the state. According to a
study, many of those who claim allowable absences do
not return to the state. 64% of students did not
return, and 81% of those accompanying someone else
with an allowable absence did not return to the state.
17% of all appeals through the Permanent Fund Division
relate directly to allowable absence claims. Repealing
allowable absences would increase the value of the
Permanent Fund Dividend for those residents that
remain in the state.
2. A recommendation for the House State Affairs
Committee: Consider amending AS 43.23 to include
directives or incentives to transition to a completely
paperless environment for Permanent Fund Dividend
Applications. Incentivizing paperless applications
would reduce the current printing and postage costs of
$120,705.57. It would also reduce the number of
seasonal employees necessary to process paper
applications, with a corresponding decrease in
$239,000 in seasonal personal costs.
3. A recommendation for the House Fisheries
Committee: Amend AS 43.75 to change the amount of
fisheries taxes distributed to local communities and
direct that revenue to fund direct management of
fisheries. Currently 50% of fisheries taxes collected
by the state are distributed to municipalities.
4. A recommendation for the House Fisheries
Committee: Reconsider AS 43.75.015(b)-(d) and AS
43.77.010(1) to determine if the reduced tax rate for
small fish processers and the reduced tax rate for
developing fisheries are effective or if the reduced
rates should be repealed or more narrowly defined.
These three indirect expenditures currently cost the
state an estimated $525,852 in foregone revenue.
5. A recommendation for the House Education
Committee: Amend AS 43.20.014, AS 43.55.019, AS
43.56.018, and AS 43.77.045 to remove the 100% level
of the education tax credit. Currently the first
$100,000 of an eligible contribution receives a credit
of 50%, the next $200,000 is credited at 100%, and
contributions above $300,000 is credited at 50%. This
credit can be taken across multiple tax types.
Reducing the 100% level of the credit would reduce the
more than $7.4 million in foregone revenue.
6. A recommendation for the House State Affairs
Committee: Amend AS 43.52.255 to remove the deduction
of local levies against the Commercial Passenger
Vessel Tax. This deduction results in an estimated
$13,559,5558 ($13.56 million) in forgone state
revenue.
7. A recommendation for the House Transportation
Committee: Amend AS 43.40.010(c) and AS 43.98.025(d)
to repeal or amend the motor fuel tax timely filing
discount and the tire fee timely filing credit, which
result in forgone revenue of approximately $66
thousand each. Further, reconsider the commercial
passenger vessel tax 72-hour voyage exemption under AS
43.52.295(4), which has likely modified cruise ship
voyage plans in order to avoid the tax.
8. A recommendation for the House Labor and Commerce
Committee: Amend or repeal AS 43.60.010(c), which
reduces the beer and malt beverages tax from $1.07 a
gallon to 35
beer sold in the state from a brewery who meets the
U.S. definition of a small brewery. 35% of this
reduced rate is claimed by out of state breweries. The
estimated forgone revenue is $2.6 million.
9. A recommendation for the House Resources
Committee: As 27.30.030, AS 43.20.044, and AS
43.62.010, relating to mining license tax exemptions,
credits, and deductions, should be re-examined by an
interim taskforce. Some of these deductions and
credits were established pre-statehood and may no
longer meet intent. Estimated known foregone revenue
exceeds $6 million, with more foregone revenue that is
not tracked.
10. A recommendation for the House Resources
Committee: Sunset AS 43.20.053, the in- state refinery
tax credit, on December 31, 2017. The current sunset
date is December 31, 2019. If all three in-state
refineries were to claim this credit each year it is
available, changing the sunset by two years could
result in savings of $60 million. However, because of
the number of tax payers involved it is impossible for
Revenue to report how much has been claimed under this
credit.
11. A recommendation for the House Finance Committee:
Amend or repeal various corporate income tax
exemptions found under AS 43.19 and AS 43.20, several
of which were adopted to conform with federal tax code
but are no longer necessary or no longer meet intent.
The fiscal impact of these exemptions is unknown at
this time because the potential tax revenue is not
reported.
Other Information:
The Subcommittee discussed a variety of issues during
the meetings.
Several members expressed interest in increasing state
investment officers or improving investment officer
recruitment and retention tools. More in-house
investment officers could result in a decrease in
external investment management tools. Ultimately no
amendment was put forward during subcommittee;
however, this remains a point of interest if the
Department can demonstrate a plan to recruit and
maintain these positions.
The subcommittee also discussed a requested remodel of
the Alaska Permanent Fund Corporation office building,
which is also related to investment officer retention.
This request was not offered as an amendment, as it
was more properly viewed as a capital request.
Governor's Amendments:
The Governor did not submit any amendments for this
agency.
2:48:38 PM
Co-Chair Seaton MOVED to ADOPT Amendment H DOR 1 (copy on
file):
Taxation and Treasury
Tax Division
H DOR 1 - Add Corporate Income Tax Auditors
Offered by Representative Seaton
Increase the corporate income tax auditing staff to
capture additional revenue that is currently foregone
due to lack of staff resources. Currently the tax
system is identifying audit leads that the division
lacks the staff time to investigate. Estimated
additional revenue of $500,000 per auditor.
1004 Gen Fund (UGF) 246.0
Representative Wilson OBJECTED for discussion purposes.
Co-Chair Seaton read from a prepared statement (see above).
Representative Wilson asked why the money would not be
program receipts. She suggested that the money that could
be found could be used to pay the amount. She wondered if
the state would be pursuing people that owed more corporate
tax than what they were paying now. She wondered how the
state would be losing approximately $1 million on corporate
income tax. Co-Chair Seaton relayed that the new accounting
system identified leads. There were multiple leads but no
auditors available to work on those leads. The revenues
were foregone which the department anticipated. He noted
that two other states had hired additional auditors for
corporate income taxes. Those states recovered money and
encountered increased compliance by corporations. The taxes
came in as general funds and were not program receipts. The
funds came in as general taxes from the auditing of the tax
division. It was appropriate for the monies that came in to
the unrestricted general fund to provide the monies for
auditors. He had no problem looking at it a few years down
the road to see about recovery efforts. The estimate was
that the auditors would pay for themselves in the first
year and bringing in $500,000 annually per each additional
auditor.
Co-Chair Foster let committee members know Mr. Spanos was
available for questions.
Representative Wilson indicated that even if the program
receipts were not used currently the legislature would be
adding two additional positions in anticipation that the
state would receive more money. She thought it was great if
the state received additional funds. She wanted to be able
to find out whether the auditors were able to bring in the
anticipated revenue after the first year. She wanted to
follow the money similar to the Alaska Gasline Development
Corporation (AGDC). She did not have a problem with the
amendment if it was successful in bringing in the money.
She would have a problem if she could not follow whether
the state received what the state thought it would She
asked if the committee could make its program receipts.
Vice-Chair Gara relayed that in speaking with DOR. The
department was very clear that they did not have enough
auditors. They were also clear that if they had enough
auditors they would be able to raise more money than the
auditors would cost. The question concerning whether it
would come in in the current year depended on whether the
state caught someone who was underpaid whether they would
take it to court and whether there was litigation. The
state could not be guaranteed that someone was not going to
stall on payments. He thought it had been clear from the
department that the state was very short on auditors. If it
had the auditors, the state would make more money than the
cost of the auditors.
2:53:47 PM
Co-Chair Foster also informed members that Mr. Dan
DeBartolo, Director, Division of Administrative Services,
Department of Revenue, was in the audience available for
questions.
Co-Chair Seaton mentioned the ease of requesting a report
on general tax receipts recovered through corporate income
tax. He thought it would be more difficult to set up a
different account from UGF. He suggested it would be easy
to find out whether the auditors that were hired brought in
the anticipated receipts.
DAN DEBARTOLO, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF REVENUE, spoke to the question. He
had discussed, within the department, the issue following
the subcommittee process. It was agreed that one thing the
department should be doing right away was to create a more
robust reporting mechanism so that it could report back in
the following year during the subcommittee process what the
auditors accomplished, and the amount collected in
corporate income taxes. He anticipated having the
discussion about the effectiveness not only in the first
year but in years 2-5. To claim that the mechanism worked,
he suggested it might be worthwhile to look beyond 5 years.
He would defer further questions on the tax side to Mr.
Spanos on line.
2:56:19 PM
BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION,
DEPARTMENT OF REVENUE (via teleconference), clarified the
question.
Representative Wilson wondered, if the state were to hire
the auditors, why they could not be program receipts. She
understood that it would entail a code. It would make it
easier to find out whether the two additional hires brought
in enough to pay for their wages or more. The same idea
could be applied in other places as well. Mr. Spanos stated
that it would be very difficult to track the payments from
audits of just two auditors. He suggested it might make
more sense to put all the corporate receipts into a special
fund. It was a policy call. It would be difficult to track
payment receipts from audits done by specific auditors.
While the department's system was robust, it did not record
payments attached to audits done by individuals. The
department could do it manually. The department would be
tracking the new auditors' revenues manually and could
report that information back to the legislature. He
provided the caveat that the information could be provided
assuming it was aggregated. If one auditor did one audit
and a payment came in for that one audit it would be
questionable that the specific number could be provided. He
anticipated within one year several audits would be
completed. Assessments could be provided in a total dollar
figure. The department could also provide a report on
payments, assuming they were paid.
Representative Pruitt asked what the state was looking for.
He wondered if the state was looking for people that did
not pay their taxes or people that had errors in their
calculations. Mr. Spanos responded the tax payers were
sophisticated corporations that were doing their best to
pay Alaska as little tax as possible. The corporations
studied Alaska's statutes and interpret them in their best
interest. Often when the division looked at the
corporations it disagreed with the stance they were taking.
Many of the audits were not what would be called "slam-
dunk" audits. An audit was not an open and shut case, but a
resource intensive audit. An auditor might have to be sent
to a company's corporate headquarters to review large
amounts of paperwork or to communicate frequently back and
forth to get the needed level of substantiation to make a
determination. Some of the issues involved a unitary filing
for corporations. For example, a company doing business in
Alaska might be a member of a much larger corporation. They
might claim that they were not unitary with their parent -
the business they do in Alaska should be looked at as a
separate entity. It was hardly ever the case in the modern
world. Giant corporations controlled their subsidiaries
and, generally, the income from the parent company should
be part of the tax pie. Alaska should be receiving a slice
of the pie. If the income from the parent company was not
in that pie, the pie was much smaller as well as the
revenue Alaska received. There were several other tax
issues that the department would consider assigning to the
new auditors.
Co-Chair Foster recognized Representative Lora Reinbold.
3:01:23 PM
Representative Pruitt thought Mr. Spanos was indicating
that the entities the state was pursuing were typically
multinational or multistate entities rather than the small
business corporations within the state. They were entities
that created different limited liability corporations to
create different tax shields. He asked if his assessment
was fair. Mr. Spanos agreed.
Representative Wilson MAINTAINED her OBJECTION. She thought
the information should be tracked.
A roll call vote was taken on the motion.
IN FAVOR: Grenn, Guttenberg, Kawasaki, Ortiz, Pruitt,
Thompson, Seaton, Foster.
OPPOSED: Tilton, Wilson.
Representative Gara was absent from the vote.
The MOTION PASSED (8/2). There being NO further OBJECTION,
Amendment H DOR 1 was ADOPTED.
3:03:54 PM
AT EASE
3:04:36 PM
RECONVENED
Co-Chair Foster repeated that Amendment H DOR 1 passed on a
vote of 8/2.
Co-Chair Seaton relayed that he was in charge of the
language sections of the operating budget bills. He had two
other amendments to the Department of Revenue's budget that
were linked together.
Co-Chair Seaton MOVED to ADOPT Amendment H DOR 2 (copy on
file):
Child Support Services
Child Support Services Division
H DOR 2 - Move Cost Recovery for Paternity Testing
from Language to Section 1 (Numbers)
Offered by Representative Seaton
This amendment adds the funding from the language
section (formerly sec. 15 in HB 57, version J) to the
numbers section and increases the amount of program
receipt authority from an estimated $46.0 to $50.0.
The language section is deleted in another amendment.
H DOR 2 and H DOR 3 were being offered to clean up and
reduce the language sections of the bill where possible and
to put the information in the numbers section.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read from a prepared statement (see above).
He noted that the item was being moved from the language
section (subcommittees could not address or act on this
section) of the bill to the numbers section. Subcommittee
members would be able to address and amend the numbers
section once the information was moved over.
Representative Wilson asked who was paying for the program.
Co-Chair Seaton responded that the money was from the
general fund and that currently the numbers were in the
language section. Items in the language section could not
be addressed or amended at the subcommittee level. The idea
was to take items out of the language sections, where
possible, and place them into the numbers section to be
available for subcommittee action in the future.
Representative Wilson understood the change Co-Chair Seaton
was suggesting. She was unclear where the full $50,000 was
coming from. Co-Chair Seaton deferred to Mr. DeBartolo.
Mr. DeBartolo did not have the amendment in front of him.
Paternity testing for Child Support Services was a budget
item that was added in every year and adjusted back out at
the end of the year. The source of the funds was a general
fund match. He apologized for not having the documentation
in front of him.
Representative Wilson referred to page 1 of the backup. It
appeared there was an increment of $50,000 and a decrement
of $46,000 that was not used, leaving a balance of $4,000.
She was trying to determine if the legislature was putting
in $50,000 from program receipts. She indicated that
typically when money came from program receipts someone was
paying for it. She assumed, because the test was paternal
in nature, it would be paid for by a man. She was trying to
understand who would be paying for the increase of $4,000.
She requested an "at ease."
3:10:01 PM
AT EASE
3:11:31 PM
RECONVENED
Mr. DeBartolo addressed Representative Wilson's question.
He explained that every year the Child Support Services
Division had to estimate what would be paid for by the
custodial fathers for paternity testing. Representative
Wilson was correct that the parent paid for the testing
rather than the state. Last year the division
underestimated the collection amount by about $4,000 which
was the reason for the change.
Representative Wilson understood the language portion being
moved. She wanted to clarify that money was not being added
to the budget. Rather, it was money the state was recouping
from users of the program. Mr. DeBartolo responded, "That
is correct."
Representative Wilson WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment H DOR 2 was
ADOPTED.
Co-Chair Seaton MOVED to ADOPT Amendment H DOR 3 (copy on
file):
Child Support Services
Child Support Services Division
H DOR 3 - Move Cost Recovery for Paternity Testing
from Language to Section 1 (Numbers)
Offered by Representative Seaton
See 30-GH1855J.7, Wallace, 1/31/17
This amendment deletes section 15 in HB 57, version J.
The funding is added to the numbers section and
increased to $50.0 in another amendment.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton explained that the amendment reflected the
other half of the change to the language section. It
removed an estimated amount in the language section to a
specific dollar amount receipt authority in the numbers
section.
Representative Wilson asked Co-Chair Seaton to restate his
position. Co-Chair Seaton repeated his explanation.
Representative Wilson WITHDREW her OBJECTION.
There being NO further OBJECTION, H DOR 3 was ADPOTED.
Co-Chair Seaton MOVED to ADOPT Amendment H DOR 4 (copy on
file):
Alaska Mental Health Trust Authority
Mental Health Trust Operations
H DOR 4 - Restore Funding Level to Trust Requested
Amount or FASD Campaign
Offered by Representative Seaton
This amendment in the amount of $150,000 is to fully
fund and maintain the capacity of the Institute for
Circumpolar Health Studies to continue to develop,
implement and evaluate Fetal Alcohol Spectrum Disorder
(FASD) prevention strategies and to continue the FASD
media campaign, which has been instrumental in the
dissemination of FASD prevention messaging. Each child
diagnosed with FASD will cost the State of Alaska
$850,000 to $4.2 million from age 0-18.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton read from a prepared statement (see above).
3:16:14 PM
Representative Wilson assumed that the state already funded
the program in the amount of $250,000. The amendment would
add $150,000 to program funding. Co-Chair Seaton responded
that the current funding level was $500,000. There was a
decrement of $150,000 in the governor's budget relating to
the media campaign which disseminated the message that no
amount of alcohol was appropriate during pregnancy. The
other portion of funding would be applied to pregnancy test
kits. He reported 2000 responses to surveys by women. The
funding would provide money for survey follow-ups regarding
those women that stopped drinking upon finding out about
their pregnancies. The purpose of the project was to lower
FASD in Alaska.
Representative Wilson argued that although the amount being
requested was minimal, she opposed providing additional
funding. She thought the tests were provided at bars to
determine whether an individual was pregnant or eligible to
drink. She was unclear where the survey data would come
from. She did not feel it was the job of state government
to provide the funding. She would be opposing the
amendment.
Representative Kawasaki agreed with some of the comments
made by Representative Wilson. He reported that the program
was being funded for the second year. Although the survey
provided some results, it was difficult to tell from the
sample whether the information that was gleaned was
voluntary. He was trying to understand the efficacy of the
specific program of putting pregnancy tests in bars. If the
program was not working the state should cease paying for
it. Conversely, if the program was working, he thought it
deserved further discussion. If there were results, he
wanted to hear about them. Co-Chair Seaton relayed that Mr.
Jesse was available for questions. He reminded members that
the amount would restore the media campaign to adults
across the state.
3:19:41 PM
JEFF JESSE, LEGISLATIVE LIAISON, ALASKA MENTAL HEALTH TRUST
AUTHORITY, introduced himself. He responded to
Representative Kawasaki that the surveys were voluntary. He
explained that there was a que code on a poster with the
pregnancy dispensers. He believed there was a small gift
certificate that was provided to women who completed the
survey. It was a remarkable return of the survey for the
type of an analysis. He emphasized that the survey was
completely voluntary.
Representative Wilson noted that the $150,000 was
designated general funds. She wondered if the amount could
be utilized in another part of the budget for another
program. She asked if she was accurate. Co-Chair Seaton
answered that the amount was for alcohol and drug treatment
prevention funds, 20 percent of which was to go towards
alcohol and prevention programs. He thought FASD was an
appropriate target for reducing the effects of alcohol on
the Alaska population. The state had a high rate of FASD.
He invited Mr. Jesse to talk about the distribution of
funds.
Mr. Jesse thought Representative Wilson was correct that
the state did not have dedicated funds. The amount was a
designated fund which meant the money could be used for any
purpose.
Representative Wilson suggested that the money could be
used for more services in behavioral health to get more
services to people with drinking problems. She pointed out
that the money could be spent towards more services rather
than a campaign. She thought the gift cards given to survey
participants were likely another cost to the state. She
thought the money should be utilized for a behavioral
service having to do with alcohol or drug addiction. She
wanted the committee members to understand that it was not
money the state would be giving up, it was money that could
go directly towards services. She did not need a response.
She knew her statement to be true.
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Ortiz, Gara, Grenn, Foster, Seaton.
OPPOSED: Kawasaki, Pruitt, Thompson, Tilton, Wilson.
The MOTION PASSED (6/5). There being NO further OBJECTION,
Amendment H DOR 4 was ADOPTED.
3:23:28 PM
AT EASE
3:24:14 PM
RECONVENED
Co-Chair Seaton asked Representative Kawasaki to present
the subcommittee report for DMVA.
Representative Kawasaki read from his report:
The Chair of the House Finance Budget Subcommittee for
the Department of Military and Veterans' Affairs
recommends that the House Finance Committee accept the
Governor's FY18 Amended Budget with further
amendments:
The FY18 budget with recommended subcommittee
amendment totals:
Fund Source: (dollars are in thousands)
Unrestricted General Funds (UGF) $16,349.4
Designated General Funds (DGF) 28.4
Other Funds 10,180.6
Federal Funds 30,995.1
Total $57,553.5
Representative Kawasaki indicated that there was an
increase of roughly $100,700 from the FY 17 Management Plan
with an unrestricted general fund (UGF) of $16,248.7
representing a .6 percent increase. He continued that the
subcommittee met several times over the month and was
forwarding two budget amendments which he would speak to
shortly.
Representative Kawasaki read the statutory recommendations
by the finance subcommittee:
The following statutory recommendations are submitted
to the House Finance Committee:
1. Amend AS 26.27 to provide statutory authority to
the Alaska Aerospace Corporation to issue dividends to
the State of Alaska. This change is necessary because
the corporation stated intentions to provide dividends
to the State in the future, but does not currently
have the statutory authority to do so.
2. Move Alaska Aerospace Corporation from Title 26,
the Department of Military and Veterans' Affairs, to
Title 14, the Department of Commerce, Community and
Economic Development. This change is important because
several public corporations are housed in DCCED,
including Alaska Energy Authority, Alaska Railroad.
Alaska Gasline Development Corporation and the Alaska
Industrial Development & Export Authority, several of
which have bonding authority, issue dividends, can
purchase land and have tangible assets. AAC was
originally housed in DCCED until 2011 when moved by
Executive Order 115.
Representative Kawasaki reviewed other information from his
report:
Other Information:
1. An amendment proposal was offered that would have
reduced $388.0 UGF from personal services in the
Office of the Commissioner, an approximate 20 percent
reduction from post-vacancy amount. The sponsor
offered the proposal as flexibility to reduce UGF
spending in the Office of the Commissioner.
Subcommittee Discussion:
The Department said the $388.0 deletion would impact
46 PCNs that specialize in human
resources, budget submissions, equipment procurement,
internet technology and others that
support 270 personnel across the state, including
those who oversee the development and
submission of its operating, capital and federal
budget requests.
2. An amendment proposal was offered that would have
reduced $273.0 UGF from services in the Office of the
Commissioner, a 15 percent reduction of services from
the Governor's FY18 Amended Budget. The sponsor
offered the amendment to scale back on recent years
increases.
3:27:38 PM
Representative Kawasaki MOVED to ADOPT Amendment H MVA 1
(copy on file):
Military and Veterans' Affairs
Office of the Commissioner
H MVA 1 - Eliminate Expansion of Alaska State Defense
Force for Rural Engagement
Offered by Representative Kawasaki
Due to current budget deficit, the subcommittee does
not wish to expand or create new programs at this
time.
1004 Gen Fund (UGF) -210.9
Co-Chair Foster OBJECTED for discussion.
Representative Kawasaki read the amendment (see above). He
noted that while the committee agreed that the rural
engagement component and the Alaska State Defense Force
were very important, due to budget restraints the committee
denied the increment. He furthered that the department came
to the legislature in FY 17 for a $1.3 million UGF request
and a $1 million capital request which were denied at the
time for similar reasons.
Co-Chair Foster WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment H DMV 1 was
ADOPTED.
Representative Kawasaki MOVED to ADOPT Amendment H MVA 2
(copy on file):
Alaska Military Youth Academy
H MVA 2 - Report on Alaska Military Youth Academy UGF
Structure
Offered by Representative Kawasaki
It is the intent of the Legislature that the
Department of Military and Veteran's Affairs (DMVA)
develops a report to the Co-Chairs of the Finance
committees and Legislative Finance Division by
December 1, 2017, identifying funding
options available to the Alaska Military Youth Academy
to generate revenue. The report shall include
recommendations and limitations for tuition and fee
structures based on income levels of applicants'
households, and how to incorporate those
recommendations into Fiscal Year 2019 budget for the
Department. The report shall also include the impact
of those recommendations on federal matching dollars
and the UGF budget.
Co-Chair Foster OBJECTED for discussion.
Representative Kawasaki read the amendment (see above). He
indicated that, according to the department, any dollar
recuperated from tuition or voluntary contributions might
reduce the federal pay-in to a ratio of 75 cents per
dollar.
3:30:08 PM
Representative Wilson commented that the Military Youth
Academy had taken less money for BSA [Base Student
Allocation] than any academy. The academy set a fee
structure a few years prior. She was concerned with the
intent language and whether it would apply to Mount
Edgecombe or other public schools. She thought the academy
had made great efforts. She noted the entity had accepted
Alaska dropouts and helped them get back into school. She
did not believe there would be very few parents of the
academy that would be able to provide funding for their
children. She suggested the intent language be adjusted.
She also suggested some of the schools giving up their BSA.
She wanted additional information prior to including intent
language that could result in the loss of federal funding.
She was concerned with entities being treated equitably.
Co-Chair Seaton clarified that the DMVA budget was the only
one before the committee presently. He also noted that
during round two of the amendment process individual
finance members could offer further intent or other
amendments.
Representative Pruitt mentioned the 75/25 ratio. He
suggested that the state received $25 for every dollar the
state brought in. He wondered if it would make sense to
seek the funds from a few available people. His friends
that attended the academy would not have had the means to
pay for it on their own. He noted that in the narrative a
non-profit was mentioned. He wondered if there was an
opportunity to utilize monies from non-profits or money
from outside state government to cover the 25 cents to
avoid losing federal funding.
Representative Thompson was concerned with the amendment.
He reported that over the last 3 years the legislature had
reduced the Youth Academy funding. The entity had laid off
several people and was operating on a shoestring budget. He
thought demanding an additional report that would require
research was unreasonable because of the reduction in
personnel. He thought the committee would be asking the
academy to do more with less people. He opposed the
amendment.
Representative Kawasaki believed at the time the department
had no objection to the amendment. Subcommittee members
also had no objection. The committee did not want to deny
someone the ability to attend or to create a chilling
effect with a tuition. There were cases in which there were
kids whose families could pay that had no avenue to capture
the funds. He relayed that there was a 501(c)3 non-profit
that was being lined up, but the paperwork was in process.
The recommendation, if passed by the committee, would come
before the body again in the following year at which time
options would be presented. He reiterated that there were
no objections in the subcommittee to the amendment
proposal.
3:35:13 PM
Co-Chair Seaton asked if it meant the 501(c)3 being set up
to receive funds was providing a mechanism for receipt
authority. He wondered if the state of Alaska would be able
to accept donations from the 501(c)3 for augmentations to
the program. Representative Kawasaki responded that it was
envisioned that the 501(c)3 would allow offsetting of
general funds. Research was still needed to determine
whether the offsetting of funds would cause a problem with
federal receipts - the reason the intent language was being
offered.
Co-Chair Seaton clarified that it was intent language to
allow it. However, nothing had been done to-date.
Representative Kawasaki responded affirmatively.
Co-Chair Foster WITHDREW his OBJECTION.
Representative Wilson OBJECTED. She commented that the
military academy had done what she wished all schools did.
They dwindled their budget and only charged the state what
it needed. She wished all the districts would do the same.
The academy had a very successful program and attained
federal dollars. She thought it was terrible to tell the
academy it needed to find additional funds somewhere else
when they had been a model. She believed it would be
sending the wrong message to a successful program. She
invited members to imagine what would happen if the academy
got caught up, causing anguish and a lack of desire to
participate. The academy accepted mostly dropouts. She
concluded that instead of rewarding the academy for its
performance, the amendment sent the wrong message. She
could not support it.
Representative Kawasaki addressed one of the concerns that
was mentioned. He thought the Alaska Military Youth Academy
had done a great job. However, the academy was capacity
driven and was up such that they needed to match every
federal dollar available. If the state was able to
contribute more into the GF function, it could potentially
expand and grow with another unit. He pointed out that the
problem was that the state was looking for nickels and
dollars everywhere. If the state wanted a successful
program within the Alaska Military Youth Academy to
increase, utilizing a 501(c)3 or some sort of tuition
system provided an avenue to do so.
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Kawasaki, Ortiz, Seaton, Foster
OPPOSED: Pruitt, Thompson, Wilson, Grenn
Vice-Chair Gara and Representative Tilton were absent from
the vote.
The MOTION PASSED (5/4). There being NO further OBJECTION,
Amendment H MDV 2 was ADOPTED.
Co-Chair Seaton asked Representative Kawasaki if there were
any other amendments for DMVA. Representative Kawasaki
responded in the negative.
Representative Pruitt asked if the statutory
recommendations would be discussed further. He asked if it
was currently the time to discuss the recommendations. Co-
Chair Seaton relayed that the statutory recommendations
were developed by the subcommittees and forwarded to the
policy committee by the subcommittees. House finance was
not taking any action. Every member had the ability to
forward statutory amendments on their own. The
recommendations were for the policy committees to consider.
The legislature was not voting on the statutory
recommendations developed by the policy committee.
Representative Pruitt wondered if it was an appropriate
time to discuss the subcommittee recommendations prior to
the bill moving out of the House Finance Committee. He
restated his question about discussing the items prior to
them moving out of committee. Co-Chair Seaton explained
that one of the ideas of having the policy committees serve
as the budget subcommittees was for the recommendations to
be discussed within the subcommittee except for those from
the Department of Revenue. He explained that DOR was
considering tax items. In most cases, the subcommittees
were policy committees reviewing proposed actions. It was
not the finance committee telling the policy committee but
rather the policy committee's functioning as budget
subcommittees. The budget subcommittees were responsible
for identifying statutory actions for consideration. The
recommendations would come through the House Finance
Committee in the form of a piece of legislation because
they would most likely be related to finance. He
anticipated that the statutory recommendations based on
change in the budget would come to the committee. If
recommendations did not evolve into bills they could be
offered by any individual member of the subcommittee or
anyone in the House. The committee would not get into a
discussion about the subcommittee recommendations. They
were subcommittee recommendations to the policy committees.
3:44:14 PM
Representative Pruitt express confusion about the policy
committee versus the subcommittee. He indicated that the
subcommittees were chaired by House Finance members. He
thought there would be some statutory recommendations that
would come from the finance subcommittee that he might have
concerns with. He felt there was confusion about why
statutory recommendations would be generated from a finance
subcommittee. He thought they should have been left with
the policy committee and left out of the finance reports.
Co-Chair Seaton added that he wanted the full committee to
have the information about the findings of the
subcommittees. However, changes could not be accomplished
through the finance committee. They had to be accomplished
through statutory change.
Representative Wilson noted the Alaska Aero Space
Corporation and wondered if it would take a statute change
to move the division into commerce rather than to change it
in the budget. Co-Chair Seaton responded affirmatively.
Representative Wilson wanted clarification. She thanked Co-
Chair Seaton.
HB 57 was HEARD and HELD in committee for further
consideration.
HB 59 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton reviewed the agenda for the following day.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Callan - APFC -H. Finance Committee Presentation.pdf |
HFIN 2/23/2017 1:30:00 PM |
Callan Presentation HFIN |
| Return Projection Methodology APFC HFIN 01.17.17.pdf |
HFIN 2/23/2017 1:30:00 PM |
Callan Presentation HFIN |
| DMVA-Subcommittee Packet HFIN.pdf |
HFIN 2/23/2017 1:30:00 PM |
HB 57 |
| GOV-Subcommittee PKT Packet HFIN.pdf |
HFIN 2/23/2017 1:30:00 PM |
HB 57 |
| DCCED-Subcommittee Packet HFIN.pdf |
HFIN 2/23/2017 1:30:00 PM |
HB 57 |
| DPS-Subcommittee Packet HFIN.pdf |
HFIN 2/23/2017 1:30:00 PM |
HB 57 |
| DEC-Subcommittee Packet HFIN.pdf |
HFIN 2/23/2017 1:30:00 PM |
HB 57 |
| DOR-Subcommittee Packet HFIN.pdf |
HFIN 2/23/2017 1:30:00 PM |
HB 57 |
| Operating Budget emails 1- 2.17.17.PDF |
HFIN 2/23/2017 1:30:00 PM |
HB 57 |