Legislature(2005 - 2006)HOUSE FINANCE 519
04/01/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB25 | |
| HB66 | |
| HB67 | |
| HB20 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 25 | TELECONFERENCED | |
| + | HB 20 | TELECONFERENCED | |
| HB 123 | |||
| + | HB 131 | TELECONFERENCED | |
| + | HB 132 | TELECONFERENCED | |
| = | HB 66 | ||
| = | HB 67 | ||
HOUSE FINANCE COMMITTEE
April 1, 2005
1:44 p.m.
CALL TO ORDER
Vice-Chair Stoltze called the House Finance Committee
meeting to order at 1:44:43 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Jim Holm
Representative Reggie Joule
Representative Mike Kelly
Representative Carl Moses
Representative Bruce Weyhrauch
MEMBERS ABSENT
None
ALSO PRESENT
Representative Paul Seaton; Eddy Jeans, Director, Education
Support Services, Department of Education and Early
Development; Bernie Sorenson, Assistant Superintendent,
Juneau School District; Representative Gabrielle LeDoux;
Representative Bill Thomas
PRESENT VIA TELECONFERENCE
Buck Laukitus, President, North Pacific Fisherman's
Association, Homer; Alan Parks, Homer; Dean Baugh, Finance
Director, Homer; Erika Tritremmel, Akutan; Gary Henning,
City Manager, King Cove; Jeff Currier, Manager, Lake &
Peninsula Borough; Chris Hladick, Manager, Unalaska; Dennis
Watson, Mayor, Craig; Shirley Marquardt, Mayor, Unalaska;
Don Strand, Finance Director, Lake & Peninsula Borough;
Aimee Kniaziowski, Commissioner, Unalaska; Valery
McCandless, Mayor, Wrangell; Julie Decker, Executive
Director, Southeast Fishery Association (SARDFA), Wrangell
SUMMARY
HB 66 "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."
CSHB 66 (FIN) was REPORTED out of Committee with a
"do pass" recommendation.
HB 67 "An Act making appropriations for the operating
and loan program expenses of state government, for
certain programs, and to capitalize funds; 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."
CSHB 67 (FIN) was REPORTED out of Committee with a
"do pass" recommendation.
HB 25 "An Act relating to the sharing of fisheries
business tax revenue with municipalities; and
providing for an effective date."
HB 25 was heard and HELD in Committee for further
consideration. A subcommittee was established.
SSHB 20 "An Act relating to a separate appropriation bill
for operating expenses for primary and secondary
public education and establishing a date by which
the bill must be transmitted to the governor each
year; relating to notice of nonretention for
tenured teachers; and providing for an effective
date."
CSSSHB 20 (EDU) was REPORTED out of Committee with
a "no recommendation" recommendation.
HB 131 "An Act increasing the criminal classification of
theft of an access device and of obtaining an
access device or identification documents by
fraudulent means; increasing the criminal
classification for certain cases of fraudulent use
of an access device; and providing for an
effective date."
HB 131 was postponed until March 4.
HB 132 "An Act relating to sentencing for certain crimes
committed against the elderly; and providing for
an effective date."
HB 132 was postponed until March 4.
1:46:27 PM
At ease.
1:48:30 PM
Co-Chair Meyer brought the meeting back to order.
HOUSE BILL NO. 25
"An Act relating to the sharing of fisheries business tax
revenue with municipalities; and providing for an
effective date."
REPRESENTATIVE PAUL SEATON, sponsor, explained that HB 25
addresses recent changes in fisheries. The "Raw Fish Tax",
or the Fisheries Business Tax was designed so that the state
would share 50 percent of fisheries business tax revenue
collected on processed fishery resources with the
municipality where the resources were processed. In
addition, municipalities that demonstrate significant
effects from fisheries business activities are eligible to
share in 50 percent of the state's fisheries business tax
revenue remaining after the state shares the tax revenue
with those municipalities. All of the fish used to be
processed in Alaska, but with the emphasis on "higher value
products" many of the fish are shipped out unprocessed and
none of the tax is returned to the community.
Representative Seaton continued to explain that of the fish
that are processed outside of any municipal boundaries, half
of the tax revenue goes to the Department of Commerce and
Economic Development (DCCED) and half goes to the general
fund. The department distributes its share among fishing
communities in Alaska based on pounds of fish processed in
14 different Fisheries Management Areas. The percent that
goes to each Fisheries Management Area is split between the
communities.
Representative Seaton related that HB 25 provides that when
products are landed in the municipality and then exported
from the state, the port of landing would get back the share
of the Raw Fish Tax.
The new CS creates a hold-harmless payment for cities with a
population of 500 or less and boroughs with a population of
3,000 or less. The new CS also has a provision where 40
percent of the tax would continue to be distributed under
the old revenue sharing program; however, when municipal
revenue sharing is established at the minimal level of
$20,000 per community, then that provision no longer
applies.
1:53:47 PM
Co-Chair Meyer stated the committee's intent to hold off on
adopting the CS today.
Representative Joule asked if there are winners and losers
because of this bill. Representative Seaton replied that
there are. He named the communities that generate the tax
and export unprocessed fish: Northern Southeast, Southern
Southeast, Prince William Sound, South Central Alaska, Upper
Cook Inlet, and Kodiak. The distribution of the tax is
based on poundage of processed fish and is found mostly out
West because of the large Pollock and Cod fleets. He termed
those communities "gainers". Unalaska, Representative
Moses' district would be a "loser" in the bill because of
the large poundage that is processed there, which is the
main factor in the distribution formula. DCCED spreads 50
percent of the tax based on a per share or per municipality
basis, and the other 50 percent goes on a population basis.
It is based on the fisheries management region and wherever
the large volume of product is.
1:56:53 PM
Representative Joule asked if that is what the fiscal note
analysis from the Department of Revenue is showing.
Representative Seaton said yes. The fiscal note shows the
percentages obtained now and for future impacts. He
explained why he could not provide exact figures, only broad
area figures. He gave examples of communities that are
losing revenue due to the exporting of unprocessed fish.
2:01:16 PM
Vice-Chair Stoltze inquired if this is model legislation for
evaluating other resources. He voiced concern about the
policy direction. Representative Seaton explained that the
policy has already been established in Alaska. The
extracted value of the product is taxed 3 percent. Half of
gross 3 percent tax is shared back to the communities that
are generating the revenue in order to help support the
infrastructure. He explained the problems due to the
definition of "processed" fish. Higher value products are
encouraged, which leads to a reverse incentive. If the
product is processed, the community gets half of the tax; if
the product is shipped out unprocessed, the tax is lost.
Representative Seaton suggested that this tax policy could
apply to mining and other resources as well.
Vice-Chair Stoltze inquired if this policy could be extended
to the infrastructure for the oil industry and in other
areas. Representative Seaton related it to other taxes,
such as oil taxes, on an offset sharing basis.
Co-Chair Meyer asked which areas would be adversely
affected. Representative Seaton repeated the list of areas
that would benefit and not benefit by the bill.
2:06:26 PM
In response to a question by Representative Kelly,
Representative Seaton explained how processing fish has
changed in the last five years toward the higher value
product. The tax structure was based on sharing the revenue
back to where the fish was processed. The category of
exported, unprocessed fish has increased and the tax does
not return to the communities because the fish leaves the
state unprocessed.
Representative Moses related that with Salmon in Bristol Bay
up to 5 percent is applied to the value of the ticket. He
referred to a list of 28 communities that charge a local
fish tax, in addition to what the state charges, which
varies from 1 to 4 percent tax. He pointed out that 17 of
these communities are in his district. He asked if it would
be fair if the winners in this bill implemented a local fish
tax, rather than take away from other communities.
2:10:45 PM
Representative Seaton replied that many of those communities
already have a local fish tax. The state tax gives back to
the communities 50 percent of the raw fish tax. Now it is
being distributed to other communities based on poundage of
fish produced there. It is going from a high value product,
not getting 3 percent, and being distributed to places that
have a large volume of low value product. He explained
again the revenue sharing process. He related that the bill
targets fish landed and exported from the state unprocessed.
Representative Moses asked if Homer has a local fish tax.
Representative Seaton said yes. He inquired if that gives
Homer an unfair advantage in the marketplace.
Representative Seaton replied that is like saying since
Anchorage does not have a sales tax, they have an unfair
advantage in the marketplace. He repeated an explanation of
the state fish tax. He restated the problems the bill
addresses.
2:16:28 PM
Representative Moses maintained that cities without a fish
tax have an advantage on the market. Representative Seaton
spoke about encouraging high value fisheries products, but
noted that the tax structure has not kept up. He opined
that the Legislature did not intend the tax share to be
lost. He repeated the intent of the bill.
2:18:29 PM
Representative Weyhrauch compared this discussion to past
sales tax discussions. He asked if there is a way to deal
with the local sales tax issue in the context of the fish
tax issue. Representative Seaton replied that he does not
think it is quite the same. He explained the raw fish tax,
and maintained that it is not related to sales or property
tax. He emphasized that the bill addresses a new segment of
fish only, and returns revenues to the original communities.
Representative Weyhrauch posed a scenario where smaller
vessels process roe on board, sell it to a scow that's not
in a port, and the scow processes the product. He wondered
if the state receives tax on that product. Representative
Seaton said the fish tax applies to that scenario, as well.
The 50 percent still goes through the Department of
Community and Economic Development and is distributed
throughout those regions. This bill does not change that
situation.
Co-Chair Meyer asked why the bill did not go to the House
Resources Committee and the House Fisheries Committee.
Representative Seaton replied that it is a tax distribution
issue. Co-Chair Meyer pointed out that the bill has a zero
fiscal note.
2:23:35 PM
Representative Foster asked about the affects of the bill on
Nome and Western Alaska. Representative Seaton indicated
that the bill would have no effect on those areas because it
is based on the total count of product processed in an area.
2:24:53 PM
BUCK LAUKITUS, PRESIDENT, NORTH PACIFIC FISHERMAN'S
ASSOCIATION, (via teleconference) spoke in support of HB 25.
He emphasized that this bill modernizes and corrects a
poorly constructed tax statute. He opined that Draft C is
the best vehicle for this purpose. He related that if a
community invests in fisheries infrastructure, it should
share in a direct, proportional manner, the tax that is
generated. He gave examples of how fishers all over the
state would benefit from this bill. He termed it a fairness
and equity issue.
2:28:19 PM
ALAN PARKS, HOMER, (via teleconference) testified in support
of HB 25. He spoke of the effects of the Icicle Fire and
the reduction in city taxes. He spoke in support of Version
C.
DEAN BAUGH, FINANCE DIRECTOR, HOMER, (via teleconference)
testified in support of HB 25. He spoke in support of
Version C. and the original bill, as well as the hold-
harmless clause and the sunset provision.
Vice-Chair Stoltze asked if Homer receives any benefits in
the form of fees from fishing. Mr. Baugh noted that a fee
is charged for the use of the dock and cranes.
ERIKA TRITREMMEL, AKUTAN, (via teleconference) related that
the fish tax was established to pay for the impacts of the
fishing industry to the cities. Akutan has no state-owned
infrastructure. She spoke against HB 25.
GARY HENNING, CITY MANAGER, KING COVE, (via teleconference)
spoke in opposition to HB 25 due to potential revenue loss
of $30,000 caused by the bill. He related that 75 percent
of annual revenue comes from fisheries in the North Pacific
and the Bering Sea. He shared methods taken when revenues
to King Cove decreased. He spoke of the disadvantages of
not being on a road system.
2:37:50 PM
JEFF CURRIER, MANAGER, LAKE & PENINSULA BOROUGH, (via
teleconference) agreed with Mr. Henning's testimony. He
spoke of the impacts from fishing on the community and the
lack of cost offset by the tax. He opined that the tax
would take away from some communities. He suggested
changing the definition of processed fish.
2:41:34 PM
DON STRAND, FINANCE DIRECTOR, LAKE & PENINSULA BOROUGH, (via
teleconference) testified in opposition to HB 25. He
commented that this is a processing tax, and if no
processing is being done, a community should not be subject
to the tax. He suggested that the entire bill has been re-
written. He listed various cities that have fish taxes that
are trying to compete with cities that have no tax.
2:43:56 PM
AIMEE KNIAZIOWSKI, COMMISSIONER, UNALASKA, (via
teleconference) spoke in opposition to HB 25. She noted
that the intent of the original tax structure was to support
communities through revenue sharing to help mitigate the
impact of processing and fisheries. Unalaska does have a
raw fish tax. It does experience a tremendous impact by the
fishing industry. She spoke in favor of redefining
processing.
2:48:18 PM
DENNIS WATSON, MAYOR, CRAIG, (via teleconference) testified
in opposition to HB 25. He pointed out that the shared
fisheries business tax bill from the 90's was a result of
Craig's proposal. He read the original bill analysis and
summarized that the bill does not allow for sharing the tax
with other communities. He maintained that HB addresses
impact monies, not revenue sharing monies.
2:51:46 PM
SHIRLEY MARQUARDT, MAYOR, UNALASKA, (via teleconference)
agreed with Aimee Kniaziowski's testimony in opposition to
the bill. She discussed the volatility of the market and
the major differences in Alaska fishing communities, and
cautioned against legislation that attempts to "cherry pick"
an ever-changing area and market. She asked why the bill
did not pass through the fishery committee. She stressed
that the smaller communities have to be protected.
2:56:39 PM
VALERY MCCANDLESS, MAYOR, WRANGELL, (via teleconference)
requested that committee members look through a new "lens",
not that of "winners and losers". She stated that the
proposed bill is a raw fish tax bill. She provided a brief
history on the process of the fish tax. Wrangell pays a 7%
sales tax and receives no money back from the tax on fresh
fish products. She gave an example of two hypothetical
communities, one that receives money from the tax, and one
that doesn't. Wrangell needs to be able to obtain money
from this raw fish tax, but because of an interpretation,
those monies are going to those communities that do the bulk
of the processing themselves. It is based on a formula
regarding poundage cost. She mentioned fuel taxes in the
context of the fish tax. She voiced distress that money was
going out to the Aleutian Chain and spoke in favor of the
bill.
JULIE DECKER, EXECUTIVE DIRECTOR, SOUTHEAST FISHERY
ASSOCIATION (SARDFA), WRANGELL, (via teleconference) voiced
support for the legislation. She questioned the decision
that unprocessed fish is treated as processed. She
maintained that the original bill was clear and plain. She
provided an example that occurred in Ketchikan regarding the
raw fish tax. Another aspect is that the market place is
demanding more product. She feared that the problem would
grow. She opined that the money has been "hijacked" from
her community. Ms. Decker voiced support for a sunset on
the hold harmless clause.
3:07:15 PM
Co-Chair Meyer placed HB 25 into a Subcommittee consisting
of members: Representative Hawker, Chair, and
Representatives Weyhrauch and Moses.
Representative Seaton responded to the comment about fund
allocation, and repeated that the bill only allocates funds
generated within a municipality into that municipality.
Representative Kelly noted that the difficulty with the
legislation is that it sets up winners and losers. He
warned about the zero sum situation and the hold harmless
concerns. Representative Seaton agreed. He thought that
there would be more problems down the road with the increase
in fisheries.
HB 25 was heard and HELD in Committee for further
consideration. A subcommittee was established.
AT EASE: 3:13:33 PM
RECONVENE: 3:26:32 PM
HOUSE BILL NO. 66
"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."
Co-Chair Chenault brought the meeting back to order. He
highlighted the issues related to the mental health budget.
Representative Croft asked if the mental health board has
submitted a letter to the committee about the budget. Co-
Chair Chenault said he has not seen any.
3:28:58 PM
Co-Chair Meyer moved to report CSHB 66 (FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CSHB 66 (FIN) was REPORTED out of Committee with a "do pass"
recommendation.
3:29:32 PM
HOUSE BILL NO. 67
"An Act making appropriations for the operating
and loan program expenses of state government, for
certain programs, and to capitalize funds; 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."
Co-Chair Chenault mentioned that the issues in HB 67 have
been discussed in subcommittee. He related that this budget
is a $271,492,000 increase over the FY 05 plan. He listed
increases in various areas. He thanked all committee
members for their hard work. He concluded that this budget
goes a long way to address the needs of the citizens of
Alaskans.
Vice-Chair Stoltze thanked Bruce Tangeman for his
assistance.
3:36:01 PM
Representative Joule opined that progress has been made in
developing this budget, but some issues still need to be
addressed. Though oil projections may spike and the state
does well, impacts on communities may be harmful. There are
currently 9 communities that no longer function well, 17
with serious debt issues, and 39 that have terminated key
services. He emphasized that the state needs to step up to
the plate and provide assistance. He related that matching
grants allow communities to improve. He expressed a belief
that if teen alcohol prevention programs are funded, money
can be saved in other areas. He encouraged the House of
Representatives to consider pro-active action.
3:41:46 PM
Representative Croft noted that the budget has nothing for
K-12 education, and the fast track bill with funds for
education is being "held hostage". The increase for the
university is 5 percent, the amount for municipalities is
nothing, and there is nothing for PERS and TRS. He
emphasized that the overall operating budget increases 13.7
percent, yet does not fund education. He voiced serious
concerns about municipalities and education.
3:44:17 PM
Co-Chair Chenault said he does not believe that the
committee approved the language that the other body has used
in their education bill, HB 1. The conference committee
should address that concern.
3:45:06 PM
Co-Chair Meyer MOVED to report CSHB 67 (FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CSHB 67 (FIN) was REPORTED out of Committee with a "do pass"
recommendation.
3:46:07 PM
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 20
"An Act relating to a separate appropriation bill for
operating expenses for primary and secondary public
education and establishing a date by which the bill
must be transmitted to the governor each year; relating
to notice of nonretention for tenured teachers; and
providing for an effective date."
Representative Paul Seaton explained that SSHB 20 requires a
separate appropriation bill for operating expenses for
primary and secondary public education. The purpose of the
bill is to get early funding for education. The governor
would submit an education bill, which the legislature would
pass out by March 5. This would improve teacher morale when
pink slips have to be sent out because the school district
does not know their budget ahead of time. It would be
limited to the operating budget.
Co-Chair Meyer noted that Amendment 1 has been withdrawn.
3:50:55 PM
Representative Hawker indicated that the bill bifurcates the
budget process and may violate a fundamental constitutional
principle regarding dedicated funds. The bill creates a
situation where education is funded first.
Representative Seaton related that legislative legal found
no constitutional problems with the bill. It only sets up a
procedure and tries to do what the House did this year; get
early funding.
Representative Hawker maintained that it violates the
constitution. He opined that the legislature has the option
to deal with this issue in another way. He said he is
looking for substance in the bill. Representative Seaton
replied that the legislature does this quite a bit. He gave
examples of the Alaska Seafood Marketing Association and
Aquaculture Associations where taxes are collected with the
intent to rebate. In those instances, a procedure is set up
similar to that in the bill.
3:55:50 PM
Representative Hawker agreed in principle.
Representative Joule noted that each funding increase has
come at the very end of the session.
Representative Seaton stressed that the prevailing argument
is adequate funding versus early funding. He emphasized
that education has become a priority. He pointed out the
number of letters from school districts in support of this
legislation.
3:59:56 PM
Representative Kelly acknowledged the importance of the
issue and questioned if similar legislation has been
discussed in previous legislatures.
Representative Seaton recalled that HB 19 was discussed in
rd
the 23 Legislature. Previously, many school boards felt
they had a better chance of receiving increased funding by
coming before the legislature at the end of the session.
Many school boards have concluded that early funding is
preferred.
Representative Kelly expressed concern that the
Legislature's hands not be tied.
4:03:50 PM
EDDY JEANS, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, testified in support of
the legislation.
Co-Chair Meyer wondered if education would receive more
funding by holding out to the end of the legislative
session.
Mr. Jeans observed that the increase to the foundation
formula must come through the student base allocation, which
occurs through statute. He acknowledged the problems
associated with notification of tenured teachers and the
purchase of supplies. He cautioned school districts from
building budgets beyond the amount allocated through
statute. Local school districts are required by law to
st
submit their budgets to local municipalities by May 1.
Representative Foster MOVED to report CSSSHB 20 (EDU) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSSSHB 20 (EDU) was REPORTED out of Committee with a "no
recommendation" recommendation.
Co-Chair Meyer announced that HB 131 and HB 132 would be
postponed until March 4.
ADJOURNMENT
The meeting was adjourned at 4:08 PM
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