Legislature(2019 - 2020)ADAMS 519
02/27/2020 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB79 | |
| HB30 | |
| HB102 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 205 | TELECONFERENCED | |
| += | HB 206 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 79 | TELECONFERENCED | |
| += | HB 30 | TELECONFERENCED | |
| += | HB 102 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
February 27, 2020
2:08 p.m.
2:08:05 PM
CALL TO ORDER
Co-Chair Johnston called the House Finance Committee
meeting to order at 2:08 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Jennifer Johnston, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Andy Josephson
Representative Gary Knopp
Representative Bart LeBon
Representative Kelly Merrick
Representative Colleen Sullivan-Leonard
Representative Cathy Tilton
Representative Adam Wool
MEMBERS ABSENT
None
ALSO PRESENT
Representative Chuck Kopp, Bill Sponsor; Ken Truitt, Staff,
Representative Chuck Kopp; Tom Wescott, President, Alaska
Professional Firefighters; Erin Shine, Staff,
Representative Jennifer Johnston; Elise Sorum-Birk, Staff,
Representative Andy Josephson; Ashley Carrick, Staff,
Representative Adam Wool.
SUMMARY
HB 30 WORKERS' COMP: DEATH; PERM PARTIAL IMPAIR
HB 30 was HEARD and HELD in committee for further
consideration.
HB 79 PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS
HB 79 was HEARD and HELD in committee for further
consideration.
HB 102 RENTAL VEHICLE BY PRIVATE OWNER
HB 102 was HEARD and HELD in committee for
further consideration.
HB 205 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 205 was SCHEDULED but not HEARD.
HB 206 APPROP: MENTAL HEALTH BUDGET
HB 206 was SCHEDULED but not HEARD.
Co-Chair Johnston reviewed the meeting agenda.
HOUSE BILL NO. 79
"An Act relating to participation of certain peace
officers and firefighters in the defined benefit and
defined contribution plans of the Public Employees'
Retirement System of Alaska; relating to eligibility
of peace officers and firefighters for medical,
disability, and death benefits; relating to liability
of the Public Employees' Retirement System of Alaska;
and providing for an effective date."
2:09:27 PM
Co-Chair Foster MOVED to ADOPT proposed committee
substitute for HB 79, Work Draft 31-LS0462\O (Wayne,
02/27/20) (copy on file).
Co-Chair Johnston OBJECTED for discussion.
2:10:09 PM
REPRESENTATIVE CHUCK KOPP, BILL SPONSOR, reviewed the bill.
He indicated that HB 79 created a new tier retirement
system containing unique features and offered financial
sustainability. He characterized the proposed retirement
plan designed for peace officers and firefighters as a
hybrid between a defined benefit and the current Tier 4.
He delineated that the bill contained levers or adjustments
designed to keep the plan solvent that fell into 3
categories: cost saving features, plan asset enhancement
adjustments, and plan benefit reductions. He explained that
the cost saving features did not provide retirement medical
insurance. The medical benefit was the equivalent to
current Tier 4 benefits offering a Health Reimbursement
Arrangement (HRA) acting as bridge to Medicare. The fixed
age of retirement was 55 years with 20 years of service.
Retirement prior to the age of 55 with 20 years of service
was prohibited. The retirement benefits were calculated at
the average of the top earning 5 consecutive years of
employment rather than the highest 3. The plan did not
provide a cost of living adjustment. He reviewed the plan
asset enhancement adjustments. He reported that the
employee contribution rate could be increased based on
actuarial calculations to maintain solvency. The employer
contribution was 22 percent with 12 percent going to the
plan and 10 percent for the current unfunded liability. He
elucidated that the planned benefit reduction could
withhold the post retirement enhancement adjustment if the
plans funding was less than 90 percent. He restated that
the three features kept the plan financially sustainable.
2:14:21 PM
KEN TRUITT, STAFF, REPRESENTATIVE CHUCK KOPP, reviewed the
explanation of changes for the committee substitute. There
were no substantive changes to the bill. The representative
had met with the Division of Retirement and Benefits during
the interim to review the bill. The changes were merely
slight language changes making the bill clearer. The
sponsor provided a PowerPoint presentation titled HB 79
Explanation of Changes version U To version O. He began
with slide 2 portraying page 3 of the bill, lines 6 through
9, which dealt with the Alaska Retirement Management Board
(ARMB) as follows:
(C) an appropriate monthly employer contribution under
AS 39.35.255(i); and (D) appropriate adjustments, if
any, under (b)(5) and (b)(6)
Mr. Truitt indicated that the change provided instructions
for how the ARMB performed its evaluation of the plan,
specifically tracking the plans features as proposed in the
legislation. He moved to slide 3 that highlighted Section 2
of the bill [edited]:
Sec. 2. AS 37.10.220(b) is amended to read:
(b) The board may
(5) adjust the amount of the increase in benefits
payable to a peace officer or firefighter who first
becomes a member after June 30, 2006, as provided
under AS 39.35.475;
(6) adjust employee contribution rates under AS
39.35.160(e).
Mr. Truitt pointed to AS 37.10.220(b) which included more
of the ARMBs duties and functions which corresponded with
the boards new function outlined on lines 6 through 9. The
administration was backing away from the term "Tier." He
referred to Section 2, lines 23 and 24 and read the
language, to a peace officer or firefighter who first
becomes a member after June 30, 2006. He noted that the
word tier was not included in the language in the bill
rather, the language previously cited was used to refer to
the new tier 5.
2:18:35 PM
Mr. Truitt continued to the following change on page 10,
Section 15 of the bill shown on Slide 4. He delineated that
the language differed from the prior version only in the
manner the provision proposed to ensure that the new tier
contributed to the past service liability of the Public
Employees Retirement System (PERS) and maintained the
employee contribution at 22 percent. He commented that
Section 15 amended AS 39.35.255(a):
Sec. 15. AS 39.35.255(a) is amended to read:
(a) Except as required by (i) of this section, an
[EACH] employer shall contribute to the system every
payroll period an amount calculated by applying a rate
of 22 percent of the greater of the total of all base
salaries
Mr. Truitt moved to Section 18 which proposed a new
subsection to AS 39.35.255:
Sec. 18. AS 39.35.255 is amended by adding new
subsections to read:
(i) An employer that employs a peace officer or
firefighter who first participates in the plan after
June 30, 2006, shall contribute to the system every
payroll period an amount equal to the sum of
(1) a per capita amount that is calculated by
applying a rate, determined by the board, of not
less than 12 percent of the total monthly
compensation the employer pays to all peace
officers and firefighters who first became
members of the plan after June 30, 2006; and
(2) an amount, determined by the board, that is
equal to the difference between the per capita
amount determined under (1) of this subsection
and the amount calculated under (a) of this
section.
Mr. Truitt reported that the new subsection (i) sets the
employer contribution for the employee's retirement benefit
at 12 percent under paragraph (1). Paragraph (2) specified
that the remainder was applied to the unfunded liability of
the existing PERS plan. The 12 percent contribution rate
was greater than the contribution rate found in Tier 4. The
language was clearer in the current version of the bill,
but the concept remained the same as the original version.
He discussed the final change in Section 25, page 13 of the
bill depicted on Slide 5:
Sec. 25. AS 39.35.475 is amended by adding new
subsections to read:
(g) A person who receives a benefit under AS
39.35.370(l) is eligible to receive an increase in
benefits under this section.
(h) If the board determines that the portion of the
unfunded liability of the plan that is attributable to
all peace officers and firefighters who first become
members of the plan after June 30, 2006, is greater
than 10 percent, the board may reduce the amount of
the increase under (b) of this section that is payable
to a peace officer or firefighter who first becomes a
member after June 30, 2006. At any time, the board
may terminate a reduction made under this subsection.
Mr. Truitt reported that the administration had flagged the
section that pertained to the post-retirement pension
adjustment (PRPA) benefit reduction. He explained that the
section had intended to allow the ARM board to reduce the
plans benefit when necessary to keep the new tier
financially viable. However, the administration discovered
that the prior version of the bill referred to the PERS
unfunded liability as a whole and the HB 79 plan benefit
would always be reduced until the unfunded liability was
paid. The change included the following specific language,
the plan that is attributable to all peace officers and
firefighters who first become as a corrective measure.
Co-Chair Foster WITHDREW his OBJECTION.
Representative Carpenter OBJECTED.
Representative Carpenter spoke to his objection. He asked
for clarification regarding the word attributable. Mr.
Truitt responded that if the language in the CS was not
included the post-retirement pension adjustment benefit
would always be reduced and the members would never receive
it. He clarified that the new language allowed for the
benefit if the plan was found to be solvent and funded at
90 percent or more.
2:25:10 PM
Representative Carpenter surmised that there was a certain
level of risk with the proposed plan and if it was not
solvent the benefit was not distributed. He asked whether
he was correct. Mr. Truitt answered in the affirmative. He
added that all the features in the bill were included to
plan for uncertainty in the future. Representative
Carpenter thought it was worrying that a peace officer
would participate in a retirement plan with a risk of not
receiving benefits in the future.
Representative Kopp remarked that Representative
Carpenters statement was oversimplified. He explained that
there was a lack of certainty in a future benefit because
the plans levers kept it reactive to market conditions.
He recounted that the committee heard testimony in the
prior session from an actuary in the state of Washington in
charge of a similar plan. He reported that the plan was
consistently funded at over 100 percent as well as a
similar plan in Colorado. The model was proven to perform
reliably in other states. The proposed plan will be tracked
separately from other PERS participants to determine the
funding level of the plan. The new language in the bill was
necessary to target the plans members apart from the
larger PERS group to allow calculation of the post-
retirement pension adjustment. He reminded the committee
that the adjustment was eliminated when the plan was funded
under 90 percent and that maintaining a funding level of 90
percent was the gold standard for retirement plans.
Representative Carpenter understood but was uncertain a
peace officer or firefighter would find comfort in the
plan.
2:29:13 PM
Representative Josephson inquired whether only the PRPA
could be suspended and not the bulk of the pension benefit.
Representative Kopp responded in the affirmative.
Representative Josephson surmised that the tier 5
participant would have 90 percent confidence in their
retirement benefit amount. Representative Kopp answered in
the affirmative. He voiced that there was a high degree of
confidence in the overall plan but the lever to suspend
the PRPA benefit was available to the actuary. He reminded
the committee of Deven Mitchells [Executive Director,
Alaska Municipal Bond Bank Authority, Department of
Revenue] prior testimony regarding Tier 4 models showing
that within 10 years Tier 4 was only performing slightly
better than social security alone. He offered that while
the HB 79 plan was very conservative, there was greater
surety for peace officers and firefighters than Tier 4.
Representative Josephson wondered about the difference
between a Cost of Living Adjustment (COLA) and a PRPA.
2:31:29 PM
TOM WESCOTT, PRESIDENT, ALASKA PROFESSIONAL FIREFIGHTERS,
responded that a COLA was awarded under the legacy Defined
Benefit plans (DB). He furthered that in other states the
COLA was an inflation proofing adjustment, but in Alaska it
was awarded for remaining in the state. The COLA was
eliminated in HB 79. Representative Josephson deduced that
the lack of a COLA disincentivized elderly retirees to
remain in the state. Mr. Wescott agreed that the COLA
benefit had been stripped out. He suggested that the
expensive nature of living in Alaska should be
compensated for in employees pay throughout their career.
2:33:08 PM
Representative LeBon asked about the 5 year average the
retirement benefit was built upon. He wondered whether the
5 year average included annual overtime pay. Representative
Kopp replied in the affirmative.
Representative Carpenter WITHDREW his OBJECTION.
There being NO OBJECTION, it was so ordered. The proposed
CS was ADOPTED.
Co-Chair Johnston asked for a brief introduction to the
bill.
Representative Kopp indicated that the bill was in response
to recruitment and retention issues related to peace
officers and fire fighters. He detailed that only the older
experienced employees in DB plans and younger, less
experienced new recruits were retained. The middle class of
managers, sergeants, lieutenants, and battalion chiefs were
leaving the state for defined benefits. Many positions had
been left open because of a lack of interest due to a lack
of surety in benefits. The scenario resulted in proposing a
very conservative hybrid plan. The idea behind HB 79 was to
retain employees and address unmet needs. The medical cost
savings feature was a very significant part of the plan.
The feature would allow a person to purchase the best plan
possible after retirement until Medicare. He acknowledged
that the fixed age of retirement at 55 was an unpopular
part of the plan. He shared that he retired from policing
at the age of 44 and felt it was a more appropriate age
considering the physical demands of the job. However, the
older retirement age was a necessary feature of the plan.
He listed the remaining cost saving features: high 5 year-
average retirement income calculation, lack of a COLA,
employee contribution rate increase option, and suspended
PRPA. He noted the public safety communitys support for
the bill despite its limitations when compared to the
current plan.
2:37:25 PM
Representative Sullivan-Leonard asked whether an actuarial
fiscal analysis would be provided. Representative Kopp
reported that he had been working with the administration
to obtain the actuarial analysis. He thought that the
information would be forthcoming shortly.
Vice-Chair Ortiz asked if it was common to begin receiving
retirement benefits at age 55 in other states.
Representative Kopp indicated that in the states with
similar plans age 55 was a common retirement age. A
couple states lowered the age to 51. He added that in
most states with DB plans retirement was based on 20 to 25
years of service. However, they were considered high
liability plans. The delayed retirement helped make the
hybrid plan affordable.
Vice-Chair Ortiz asked whether adopting the plan would
significantly help accomplish the goal of retention. He
believed that if the plan did the job of retaining enough
employees, other savings would be realized in areas like
recruitment. Mr. Wescott replied in the affirmative. He
accentuated that the plan would absolutely assist with
recruitment and retention. He noted that one of the
characteristics of a DB plan was that the employee was
required to invest time, which was a deterrent to leaving
the position as the years built up. He performed some rough
estimates and determined that the state saved $4 million
per year by retaining one percent of the public safety
workforce at $120 thousand per employee in training costs.
He ascertained that completely solving the problem was not
required to pay for the new plan.
Representative Wool asked Representative Kopp to review
what was available to help the retiree fill the medical
gap; the period between 55 and the eligibility age for
Medicare. He asked whether there was an associated plan.
Representative Kopp replied that the health reimbursement
arrangement was a cash pool that built up through
contributions and was available for any market based plan
the employee chose as a bridge to Medicare. Some agencies
had affiliations with certain plan participants. He
deferred further answer to Mr. Westcott.
Mr. Westcott agreed that the gap was significant and
tough to deal with. He commented that it could be
addressed in the future. He expounded that when medical
benefits were attached to a pension plan it added an
unknown cost that historically grew quickly. He reported
that he had analyzed other pension plans and discovered
that the medical benefits were typically problematic
because they grew rapidly adding significant costs.
2:43:56 PM
Representative Wool wondered what happened to an employee's
contributions if they had to leave the state prior to
retirement. Representative Kopp responded that once a
participant met the vestment period, an individual could
withdraw the benefit once they reached retirement age.
Representative LeBon had heard that one problematic reason
for the liability in the Teachers' Retirement System (TRS)
and PERS was due to employees accepting positions in remote
locations or working extra overtime during their last three
years to build up the retirement benefit. He wondered
whether the practices affected the liability the state was
currently paying. Representative Kopp reported that most of
the states public safety employees worked in
municipalities and were not entitled to a geographic
differential. He stated that few state troopers chose to
work remotely for a period of time, preferring life on the
road system. He did not believe that the practice affected
the current liability issues. He elucidated that the state
received poor actuarial advice, which caused the state to
underpay over many years. In fact, many municipalities did
not pay an employer contribution based on erroneous
actuarial advice.
2:46:58 PM
Representative LeBon assumed that a trooper working in a
remote area receiving differential pay would likely leave
the area upon retirement. He wondered why the retirement
benefit was built upon the location differential and if
eliminating overtime and location differential would help
protect the plan. Mr. Westcott replied that the practice
Representative LeBon described was known as spiking. He
noted that the highest five years was identified in the
Washington state plan as a best practice that prevented
spiking and was more representative of a career. He
indicated that a state trooper had to work 50 percent of
their career in the remote location to receive a location
differential. Representative LeBon was glad to hear the
issue was addressed in the bill. He reported knowing state
workers that moved to a remote location to get their 3
highest years.
2:49:36 PM
Representative Carpenter voiced that just the fact that
spiking was an established term meant the issue needed
combating. He suggested inserting language that prevented
spiking rather than using the 5 year average. He felt that
a prohibition in statue was a better solution.
Representative Kopp replied that when a person earned more,
they also contributed more to the plan. He spoke about
peace officers aversion to forced overtime and
experiencing burnt-out. He indicated that municipal police
departments forced overtime due to staff shortages and
burn-out was affecting officers. He acknowledged that
working extra overtime at the end of a career to enhance
retirement happened, but it was not currently the problem.
He identified the lack of recruitment, forced overtime, and
burnout as the problem. He assured that by spreading out
the retirement average over 5 years a person would burnout
making spiking almost impossible. He was unsure how to
nuance the bill to prohibit spiking.
Co-Chair Johnston indicated the committee would set the
bill aside.
HB 79 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 30
"An Act relating to the exclusiveness of liability of
an employer in the case of death; relating to the
payment of workers' compensation benefits in the case
of permanent partial impairment; relating to notice of
workers' compensation death benefits; relating to the
payment of workers' compensation death benefits
payable to a child of an employee where there is no
surviving spouse; relating to the payment of workers'
compensation death benefits for an employee without a
surviving spouse or child; and providing for an
effective date."
2:52:54 PM
Co-Chair Foster MOVED to ADOPT proposed committee
substitute for HB 30, Work Draft 31-LS0280\R (Marx,
01-31-20).
Co-Chair Johnston OBJECTED for discussion.
2:53:43 PM
ERIN SHINE, STAFF, REPRESENTATIVE JENNIFER JOHNSTON,
reported that she had worked with Representative
Josephson's staff to produce the version of the draft
Committee Substitute (CS). She reviewed the changes in the
CS. She reported that on page 1, lines 1 through 5 the
title was changed to reflect the changes in the CS. On page
1, line 7, Section 1, the prior Section 1 was removed that
included the short title of the bill. She explained that
new Section 1 included all new language and added a
requirement for notification of workers at time of hire.
The notification described the compensation generally
available and specifically required that employees be
informed about compensation available in the case of death
for workers who are unmarried and lacked dependents.
Section 3 included 2 edits of conforming language
corresponding to changes in other sections in the bill. She
noted that new Section 4 eliminated AS 23.30.215 (a) and
created a new subsection (j) on line 9 that contained the
following conforming language:
continues until the child reaches the 23 years of
age unless extended
Ms. Shine read the prior language as follows:
shall terminate five years after the person is no
longer considered a child
Ms. Shine concluded that the effective date was changed
from January 1, 2020 to January 1, 2021.
Co-Chair Johnston WITHDREW her OBJECTION. There being NO
OBJECTION, it was so ordered.
2:56:18 PM
ELISE SORUM-BIRK, STAFF, REPRESENTATIVE ANDY JOSEPHSON,
addressed the current version of the bill. She explained
that the bill updated the permanent partial impairment
rates and the language had not changed in the CS. The rates
had not been adjusted since 2000. The state was ranked as
one of the lowest in the country regarding permanent
partial impairment rates. She pointed to page 2, line 15 of
the CS and noted that the impairment rate rose from $177
thousand to $255 thousand, which was the national average
rate. She reported that new Section 1 required notification
of employees regarding death benefits. She indicated that
the original bill added a death benefit for single workers
and recalled that the issue was discussed in committee in
the prior session. The provision was withdrawn from the CS
due to philosophical issues among some committee members.
She relayed that Representative Josephson felt that it was
imperative that employees were made aware of the
disparities between the amount a single childless worker
would receive in death benefits versus a married worker
with dependents. She cited an additional provision in
Section 3 regarding death benefits, which stated that a
personal representative of a deceased employee would be
notified regarding available benefits. She moved to Section
4 and related that the provision pertained to orphans who
were parentless. She recounted that an issue regarding the
definition of child arose in the prior session. The
current version of the bill allowed for benefits until the
age of 23. Therefore, an orphaned child would continue to
receive death benefits until 23 years of age.
3:00:21 PM
Representative Knopp inquired whether the orphaned childs
age limit was specified in the prior legislation. Ms.
Sorum-Burke replied that a specific age was not provided.
However, the provision stated that if a person was
attending college full-time, they were still considered a
child. She remarked that the language created a gray area
that the sponsor was not comfortable with. Representative
Knopp clarified that the change meant the benefits ceased
at the age of 23 regardless of what the individual was
doing. Ms. Sorum-Burke articulated that the reason for the
age 23 was that an individual might still be dependent on
their family. She provided an example of a young person in
the military whose parents died and would not receive a
benefit. Representative Knopp wondered what the allowable
extension under AS 23.30.395(8) was. Ms. Sorum-Burke
responded that it applied to children with intellectual or
physical disabilities considered a dependent.
Representative Carpenter asked for clarification on Section
1. He ascertained that the employer must notify the
employee of the death benefits available for single and
married employees. He asked if he was correct. Ms. Sorum-
Burke responded that his assessment was generally accurate.
She delineated that an equal protection issue was
discovered while drafting the legislation. Therefore, all
employees regardless of their marital status had to receive
notification concerning single and childless employees
benefits. Representative Carpenter was trying to understand
the reason for the notification.
3:03:39 PM
Representative Josephson provided the example of a 19 year
old man working in Prudhoe Bay without a wife and family
who died on the job. He indicated that under current law
nothing was available to the worker, even if his death was
due to gross negligence on the employer's part. The family
had no recourse; they could not sue the employer nor could
they collect workers compensation. He believed that
notification would provide the worker the insight to
purchase life insurance. He added that the intent was to
provide notice to the workers that they were on their
own.
Co-Chair Johnston would be setting the bill aside.
HB 30 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 102
"An Act relating to rental vehicles; relating to
vehicle rental networks; relating to liability for
vehicle rental taxes; and providing for an effective
date."
3:05:23 PM
REPRESENTATIVE ADAM WOOL, BILL SPONSOR, provided a brief
statement about the bill. He read the sponsor statement:
The ways that Alaskans procure transportation services
have changed over time. In the past, getting off a
commercial flight and heading to the nearest rental
car agency was common practice. Now, consumers are
turning increasingly to ridesharing, carpooling, and
rental vehicle network options to get around. Vehicle
rental networks are rental car businesses that arrange
or execute personal passenger vehicle rentals through
a network of individual private vehicle owners and are
becoming a common alternative to traditional rental
car options.
HB 102 adds a definition for the new service of
providing private vehicle rental programs, including
these services into existing statutes that regulate
car rental providers to reflect changes in how people
secure transport in Alaska. It also extends the same
laws and regulations which apply to rental car
companies to private vehicle rental networks,
including the payment of the State's Vehicle Rental
Tax. Therefore, HB 102 brings equity to the rental
industry for motor vehicles and will generate
additional income for the State's general fund as the
private vehicle rental network industry continues to
grow and diversify in the Alaskan economy.
Please join me in supporting House Bill 102 to bring
our statutes up to date and to incorporate this new
industry into the existing language governing vehicle
rentals in Alaska.
Representative Wool compared a peer-to-peer auto rental to
Airbnb. He detailed that if an individual wanted to rent
out their car, they listed it on a platform such as Turo
and paid a fee to Turo. An interested party could rent the
car through the platform. He pointed out that Airbnb paid a
bed tax in the municipalities that they operated. The bill
indicated to the platform companies that the car renter
must pay the state vehicle rental tax and any municipal
tax, if applicable, and aligned peer-to-peer car rental
companies with traditional vehicle rental companies.
3:09:36 PM
ASHLEY CARRICK, STAFF, REPRESENTATIVE ADAM WOOL, reviewed
the sectional analysis:
This bill amends Alaska Statutes 43 and 45.
Section 1: States that this act may be known as the
"Vehicle Rental Modernization Act."
Section 2: Specifies that Alaska's existing Vehicle
Rental Tax should be paid by the individual who either
provides the leased or rented vehicle, or by a vehicle
rental network.
Section 3: References the definitions for "Vehicle
Rental Business" and "Vehicle Rental Network" in
Section 7.
Section 4: A "Vehicle Rental Network" is a business
that arranges or executes personal passenger vehicle
or recreational vehicle rentals, and which is subject
to laws which govern vehicle rental businesses,
including AS 19.75.915, AS 28.10.375, AS 28.35.320, AS
45.32, and AS 45.45.425-459. Electronic notices or
disclosures apply to vehicle rental networks.
Section 5: Adjusts language to specify that vehicle
rental businesses and individual owners leasing or
renting their vehicles should disclose all costs,
fees, airport-costs, government taxes, and government
surcharges applied to consumers.
Section 6: Adjusts language to specify that vehicle
rental business may only charge renters or consumers
fees relevant to recovering actual costs of operating
and must adjust costs based on the actual costs of
operation.
Section 7: Deletes existing definitions of "car" and
"rental car business." Adds new definitions to include
passenger vehicles, personal vehicles, and
recreational vehicles, vehicle rental businesses and
vehicle rental networks. A vehicle rental business can
be either a direct renter of vehicles or a vehicle
rental network.
3:11:49 PM
Representative LeBon asked if a Bed and Breakfast operator
offering a peer-to-peer car rental not going through a
platform could carry out the transactions on the quiet
and not be subject to taxes. Ms. Carrick responded in the
negative. She related that the individual would be liable
for state and local taxes, but it would be difficult to
collect it. Representative LeBon asked if there were
individuals on Turo that had multiple vehicles and were
essentially running a business.
Representative Wool answered that the number of vehicles
rented through Turo in Alaska was unknown. Turo refused to
release the information to the state. He relayed that the
State of Alaska was currently involved in a lawsuit to get
Turo to release information about the individuals operating
through Turo. He shared from personal experience that he
knew someone who operated an Airbnb and ran a multiple
vehicle rental through Turo. He was also aware of many
people who purchased cars for the sole purpose of renting
them out on Turo. He offered that the Turo rentals are
often more expensive than the rental car companies' rates.
3:14:45 PM
In response to a question by, Representative Knopp,
Representative Wool indicated that Turo was not happy with
the idea of paying the tax and other technology companies
along with Turo were in opposition to the bill. The
platforms wanted to negotiate and pay lower tax rates than
entities such as Uber and Lyft or through traditional
rental car companies. He recounted that Uber, Lyft, and
Airbnb had to pay the full amount of applicable taxes. He
did not understand the logic for a discounted tax but
acknowledged that the car rental platforms made the
argument for lower taxes.
3:17:18 PM
Representative Carpenter pointed to page 1, lines 11 and 12
of the bill and read, person who provides the leased or
rented vehicle; vehicle rental business. He asked if the
legislation would apply to a mother and father who rent
their vehicle to their child. Representative Wool responded
that it was not his intent for family members to have to
pay a tax. He reiterated that the intent of the bill was
strictly meant for peer-to peer rental platforms. He
emphasized that people in the car rental business should
pay the tax. He revealed that the state collected over $10
million in vehicle rental tax in the prior year and
expected the number would be higher if peer-to-peer rentals
were included. He reminded the committee that a rental
transaction between two individuals was still liable for
the tax. Representative Carpenter wanted to avoid any
unintended consequences of a non-business owing taxes.
Ms. Carrick interjected that if someone wanted to start
their own traditional car rental business with a small
number of cars the bill would capture that type of business
as well. The bill included any type of car rental business
that was a source of income. She recounted testimony in the
prior year in the House Labor and Commerce Committee from
Brandon Spanos [Deputy Director, Tax Division, Department
of Revenue] that it would be unlikely that individuals
would do proper reporting to alert the department that
taxes were owed making enforcement difficult.
3:21:11 PM
Representative Josephson referred to his notes from the
previous hearing of the bill. He noted testimony that over
700 peer-to-peer cars were being rented. He asked for an
estimate of the amount of income the state was not
collecting. Representative Wool responded that presently,
Turo would not release information and without the data it
was difficult to calculate. He was unaware of the 700
figure. He asked Ms. Carrick if she remembered the
testimony.
Ms. Carrick recalled that in the prior year a testifier
from Turo had roughly estimated the number of owners
renting vehicles at 700. She emphasized that the Turo
testifier stressed that his number was a very rough
estimate.
Co-Chair Johnston referenced Representative Wool's account
of a person who was running a car rental business through
Turo. She wondered if the individual received a vehicle
manufacturer's discount as well. Representative Wool did
not know the answer to the question. He guessed that the
purchases were random. Co-Chair Johnston commented that one
platform that was highly likely to pop up in Alaska was the
popular scooter rentals. She wondered how it would work
with HB 102. Representative Wool replied that he was
familiar with the scooter rental. He voiced that it was a
vehicle rental platform and wanted to see it under the HB
102 umbrella as a vehicle rental. He did not believe the
state should forego potential revenue especially when the
traditional vehicle rental companies were collecting it.
Co-Chair Johnston reviewed the agenda for the following
day.
HB 102 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
3:25:38 PM
The meeting was adjourned at 3:25 p.m.