Legislature(2013 - 2014)CAPITOL 106

02/17/2014 08:00 AM EDUCATION


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08:01:38 AM Start
08:01:58 AM HB278
09:52:35 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 278 EDUCATION: FUNDING/TAX CREDITS/PROGRAMS TELECONFERENCED
Heard & Held
- Discussion on Tax Credits
         HB 278-EDUCATION: FUNDING/TAX CREDITS/PROGRAMS                                                                     
                                                                                                                                
8:01:58 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS announced  that the only order of  business would be                                                               
HOUSE  BILL  NO.  278,  "An   Act  increasing  the  base  student                                                               
allocation  used  in the  formula  for  state funding  of  public                                                               
education;   repealing    the   secondary    student   competency                                                               
examination  and related  requirements; relating  to high  school                                                               
course credit  earned through assessment;  relating to  a college                                                               
and career readiness assessment  for secondary students; relating                                                               
to  charter  school  application  appeals  and  program  budgets;                                                               
relating  to  residential  school  applications;  increasing  the                                                               
stipend  for  boarding  school students;  extending  unemployment                                                               
contributions for  the Alaska technical and  vocational education                                                               
program; relating  to earning high  school credit  for completion                                                               
of   vocational  education   courses   offered  by   institutions                                                               
receiving  technical and  vocational  education program  funding;                                                               
relating to education tax  credits; making conforming amendments;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
CHAIR GATTIS  established that discussion would  be restricted to                                                               
the language specific to tax credits, Sections 21-32.                                                                           
                                                                                                                                
8:02:54 AM                                                                                                                    
                                                                                                                                
MIKE   HANLEY,   Commissioner,   Office  of   the   Commissioner,                                                               
Department of  Education and  Early Development  (EED), described                                                               
the  governor's bill,  Alaska's Education  Opportunity Act,  as a                                                               
partnership between  three departments:  Department  of Education                                                               
and  Early Development  (EED), Department  of  Labor &  Workforce                                                               
Development (DLWD),  and the  Department of  Revenue (DOR).   The                                                               
tax  credit portion  is  comprised  of two  parts,  he said,  and                                                               
directed  attention to  page  11  lines 23-28  to  point out  the                                                               
subparagraphs which contain new  language and anticipated actions                                                               
of  the  proposed measures.    He  paraphrased subparagraph  (8),                                                               
which reads as follows:                                                                                                         
                                                                                                                                
     (8)  the   funding  of  a  scholarship   awarded  by  a                                                                
     nonprofit  organization  to  a dual-credit  student  to                                                                
     defray the  cost of tuition, registration,  course, and                                                                
     textbook fees; and                                                                                                     
                                                                                                                                
COMMISSIONER HANLEY  said this component  allows tax  credits for                                                               
corporations that  sponsor scholarships specifically  designed to                                                               
assist  students  in  defraying  the costs  associated  with  the                                                               
pursuit of dual-credits.  He  paraphrased subparagraph (9), which                                                               
read as follows:                                                                                                                
                                                                                                                                
     (9) the  construction, operation,  or maintenance  of a                                                                
     residential  housing facility  by a  residential school                                                                
     approved  by  the  Department of  Education  and  Early                                                                
     Development under AS 14.16.200.                                                                                        
                                                                                                                                
COMMISSIONER   HANLEY  explained   that   the  second   component                                                               
establishes  language  to  extend  tax  credits  to  corporations                                                               
choosing  to  contribute  funds  specific  to  the  construction,                                                               
operation,   or  maintenance   of  dormitories   for  residential                                                               
schools; four  existing facilities  and four which  were approved                                                               
in  2013.    He  pointed   out  that  Alaska  lacks  statute  for                                                               
supporting residential school housing.                                                                                          
                                                                                                                                
8:05:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  referred to  Section 21  to note  the nine                                                               
subparagraphs, and pointed  out that in the  [10] subsequent tax-                                                               
related  sections the  differences  appear to  me  minimal.   She                                                               
asked  whether it  would be  technically possible  to provide  an                                                               
inclusive statement for entitlement to a tax credit "period."                                                                   
                                                                                                                                
ALEXEI  PAINTER,  Economist,  Tax-Economic  Research  Group,  Tax                                                               
Division,  Department  of  Revenue   (DOR),  responded  that  the                                                               
education tax  credit appears  in seven  different tax  types and                                                               
each has been  modified.  The proposed legislation  adds the same                                                               
language for  every type  and it  is the  existing nature  of the                                                               
credit that varies.                                                                                                             
                                                                                                                                
REPRESENTATIVE   LEDOUX  maintained   that   this   may  be   the                                                               
opportunity  to introduce  consistency and  eliminate variations,                                                               
save  any  overlooked advantages  or  disadvantages  for such  an                                                               
alignment.                                                                                                                      
                                                                                                                                
MR.  PAINTER pointed  out that  the suggested  action would  be a                                                               
policy call for the committee.                                                                                                  
                                                                                                                                
8:07:15 AM                                                                                                                    
                                                                                                                                
COMMISSIONER HANLEY said the intent  is to offer the two proposed                                                               
tax credits  to all the  identified taxpayer groups  currently in                                                               
statute; language throughout is identical for each named group.                                                                 
                                                                                                                                
REPRESENTATIVE  LEDOUX noted  that  some  sections, pertinent  to                                                               
individual   groups,  have   a  varying   number  of   paragraphs                                                               
indicating the existence of differences.                                                                                        
                                                                                                                                
COMMISSIONER  HANLEY  explained  that the  existing  statute  has                                                               
variances but the new additions are identical.                                                                                  
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  whether, in  crafting the  proposed                                                               
legislation,  consideration  was  given to  situations  of  major                                                               
support provided  to a specific project  or school - such  as the                                                               
construction of a facility or identified educational program.                                                                   
                                                                                                                                
COMMISSIONER   HANLEY  responded   yes,  it   was  part   of  the                                                               
discussion,  but ultimately  the  focus settled  on tax  credits.                                                               
The  intent is  to remove  barriers in  order to  assist students                                                               
earning  dual-credits,   as  well   as  to  provide   support  to                                                               
residential facilities.                                                                                                         
                                                                                                                                
8:09:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  inquired  about the  typical  means  for                                                               
payment of dual-credit costs; do students pay out of pocket.                                                                    
                                                                                                                                
COMMISSIONER HANLEY  answered that ways  and means of  payment is                                                               
handled according  to the policy of  individual school districts,                                                               
but typically students  pay the university portion  of the costs.                                                               
Exceptions exist, he said, and  provided a theoretical example of                                                               
a  student   who  has  exhausted   available  high   school  math                                                               
department  offerings and  the local  district agrees  to sponsor                                                               
the credit/enrollment costs for a university level math course.                                                                 
                                                                                                                                
REPRESENTATIVE SADDLER asked if  there are any corporations known                                                               
to be  anticipating the opportunity  for taking advantage  of the                                                               
proposed tax credits.                                                                                                           
                                                                                                                                
COMMISSIONER HANLEY responded no.                                                                                               
                                                                                                                                
REPRESENTATIVE  SADDLER  queried   whether  the  administration's                                                               
support for  the dual-credit provision  is contingent  on funding                                                               
via tax credits, or is student payment satisfactory.                                                                            
                                                                                                                                
COMMISSIONER HANLEY said that the  department is fully supportive                                                               
of students earning dual-credits,  while understanding that costs                                                               
can  be  a barrier;  including  the  $50.00 charge  for  advanced                                                               
placement (AP) testing.                                                                                                         
                                                                                                                                
8:10:59 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS  noted that the  tax credit doesn't  incentivize the                                                               
student  to  take  dual-credit  courses,  but  rather  encourages                                                               
industry  to invest  in the  educational opportunity  that allows                                                               
the student to participate.                                                                                                     
                                                                                                                                
COMMISSIONER HANLEY opined that  a student could be incentivized.                                                               
He explained  that a two credit  course, at $50.00 per  credit, a                                                               
$50.00 book fee,  and a possible lab fee, could  easily amount to                                                               
$200.00,  which represents  a significant  amount for  a student;                                                               
however, if  the student knew that  the sum could be  offset, the                                                               
interest in attaining the credit may be incentivized.                                                                           
                                                                                                                                
CHAIR GATTIS agreed,  and questioned why an across  the board tax                                                               
credit   isn't  being   proposed  -   why  stop   at  residential                                                               
facilities.                                                                                                                     
                                                                                                                                
COMMISSIONER HANLEY  acknowledged that the question  is valid and                                                               
may be worth exploring.  Thus far,  the focus has been on the two                                                               
identified components.                                                                                                          
                                                                                                                                
8:12:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND  noted  that   public  schools  are  not                                                               
nonprofit  organizations,   and  as   such,  unable   to  receive                                                               
contributions.    The Parent  Teacher  Association  (PTA) is  the                                                               
appropriate vehicle to accept the  contribution [and the donee is                                                               
subsequently  allowed a  tax deduction];  however,  a tax  credit                                                               
works differently and provides a  direct reduction of tax payment                                                               
commensurate to the amount of the contribution.                                                                                 
                                                                                                                                
MR. PAINTER  clarified that a  donation up to $100,000  provide a                                                               
50  percent tax  credit to  the donor;  a $10,000  donation would                                                               
result in a $5,000 tax credit.                                                                                                  
                                                                                                                                
REPRESENTATIVE  DRUMMOND  pointed out  that  a  tax credit  is  a                                                               
direct  reduction in  the taxes  paid versus  an amount  deducted                                                               
from taxed income.                                                                                                              
                                                                                                                                
8:14:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  asked  whether  the  proposed  measures                                                               
include charter schools.                                                                                                        
                                                                                                                                
COMMISSIONER HANLEY answered yes, and  said a student attending a                                                               
charter school may pursue dual-credits,  thus benefiting from the                                                               
language  in subparagraph  (8).    To a  follow-up,  he said  the                                                               
facilities  language, proposed  in  subparagraph  (9), would  not                                                               
pertain to charter schools.                                                                                                     
                                                                                                                                
CHAIR  GATTIS acknowledged  that  charter  schools could  benefit                                                               
from secured construction funding.                                                                                              
                                                                                                                                
8:16:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  referred  to the  previous  question  and                                                               
answer to  asked where the  language is located  that establishes                                                               
the  50  percent   tax  credit  allowance  [up   to  $100,000  of                                                               
contribution].                                                                                                                  
                                                                                                                                
MR. PAINTER explained  that the credit parameters are  set in the                                                               
full   section  of   the  referenced   statute,  which   he  then                                                               
paraphrased,  highlighting the  pertinent language  that read  as                                                               
follows:                                                                                                                        
                                                                                                                                
     Sec. 43.20.014.                                                                                                            
          (b) The amount of the credit is                                                                                       
          (1) 50 percent of contributions of not more than                                                                      
     $100,000;                                                                                                                  
          (2) 100 percent of the next $200,000 of                                                                               
     contributions; and                                                                                                         
          (3) 50 percent of the amount of contributions                                                                         
     that exceed $300,000.                                                                                                      
               (d) A contribution claimed as a credit under                                                                     
     this section may not                                                                                                       
          (3) when combined with contributions that are the                                                                     
     basis for credits taken during  the taxpayer's tax year                                                                    
     under  AS   21.96.070,  21.96.075,  AS   43.55.019,  AS                                                                    
     43.56.018,   AS   43.65.018,   AS  43.75.018,   or   AS                                                                    
     43.77.045,  result  in  the  total  amount  of  credits                                                                    
     exceeding $5,000,000;                                                                                                      
                                                                                                                                
REPRESENTATIVE LEDOUX noted that if  a 100 percent allowance were                                                               
given, then the  general fund could be  used without differential                                                               
results.                                                                                                                        
                                                                                                                                
MR. PAINTER concurred.                                                                                                          
                                                                                                                                
REPRESENTATIVE  LEDOUX  summarized  proposed  paragraph  (8),  as                                                               
previously read,  to ask  if the language  applies to  private or                                                               
religious schools.                                                                                                              
                                                                                                                                
COMMISSIONER  HANLEY offered  to  check the  legal component  and                                                               
provide further information.                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  expressed interest in knowing  whether the                                                               
dual-credit  courses  could be  earned  through  attendance at  a                                                               
private or  religious postsecondary facility, as  well as whether                                                               
the student receiving the benefit  could be attending high school                                                               
at a private or religious school.                                                                                               
                                                                                                                                
COMMISSIONER  HANLEY  reiterated that  the  intent  is to  defray                                                               
costs imposed by a postsecondary institution.                                                                                   
                                                                                                                                
REPRESENTATIVE  LEDOUX   offered  three  scenarios   of  students                                                               
enrolled in a  private, religious, or public  school, deciding to                                                               
take a dual-credit  course at the University  of Alaska Anchorage                                                               
(UAA) or  choosing a religious  postsecondary facility  and asked                                                               
how each situation might be addressed.                                                                                          
                                                                                                                                
COMMISSIONER HANLEY said a student  at a private school would not                                                               
be  considered,  as  the proposed  benefit  is  directed  towards                                                               
public school students, and continued:                                                                                          
                                                                                                                                
     You  can  give a  contribution  to  a  church or  to  a                                                                    
     private  school  and  get  a tax  credit.    The  state                                                                    
     doesn't  give tax  credits for  donations to  a private                                                                    
     school, so these  would be public school  students.  As                                                                    
     for   students   taking   courses   at   [a   religious                                                                    
     postsecondary  facility], this  speaks  to nonprofit  -                                                                    
     we'd have to look at ...  that status ... and I can get                                                                    
     the legal opinion on that for you.                                                                                         
                                                                                                                                
COMMISSIONER HANLEY,  to a follow-up  question, said  the context                                                               
of  the bill  is fully  about  the public  system, containing  no                                                               
reference  to  the private  sector,  thus  negating any  need  to                                                               
include a definition for a public school student.                                                                               
                                                                                                                                
8:21:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON referred  to page 11, line 9,  to point out                                                               
the current statute, which reads as follows:                                                                                    
                                                                                                                                
     (2)   secondary  school   level  vocational   education                                                                    
     courses, programs, and facilities  by a school district                                                                    
     in the state;                                                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON   said  this   section  is   to  encourage                                                               
donations  from   the  private   sector  for   furthering  higher                                                               
education,  and  elementary  schools  are  neither  part  of  the                                                               
intent, nor targeted.                                                                                                           
                                                                                                                                
8:22:23 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER asked  for further  information regarding                                                               
the current participants of the  education tax credit scheme; who                                                               
is receiving maximum benefit.                                                                                                   
                                                                                                                                
MR. PAINTER  directed attention to  the committee packet  and the                                                               
handout  titled,   "Tax  Division/2013  Annual   Report,  REVENUE                                                               
COLLECTIONS DETAIL" [pages numbered 17,  19, and 20] to summarize                                                               
the education credit receipts as follows:                                                                                       
                                                                                                                                
     Oil and Gas Production Tax and Surcharges = $2,529,361                                                                     
     Other Corporate Income Tax = $2,733,077                                                                                    
     Fisheries Business Tax = $650,000                                                                                          
     Mining License Tax = $343,564                                                                                              
     Fisheries Resource Landing Tax = $932,500                                                                                  
                                                                                                                                
MR.  PAINTER pointed  out that  this represents  approximately $7                                                               
million.                                                                                                                        
                                                                                                                                
8:24:33 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS  acknowledged that businesses are  donating money to                                                               
education outside  of the funding  formula, and pointed  out that                                                               
this is another means to  receive contributions while providing a                                                               
benefit  to the  businesses.   She suggested  that a  closer look                                                               
might  be given  to the  neighborhood and  charter schools.   She                                                               
asked whether  a tax credit could  be directed by the  donor to a                                                               
named facility or specific educational purpose.                                                                                 
                                                                                                                                
COMMISSIONER HANLEY said the bill  adds to the current tax credit                                                               
law and deferred further comment.                                                                                               
                                                                                                                                
MR. PAINTER  offered that  the taxpayer is  allowed to  specify a                                                               
qualified entity and he deferred further comment.                                                                               
                                                                                                                                
8:27:23 AM                                                                                                                    
                                                                                                                                
JOHANNA  BALES,  Deputy  Director, Tax  Division,  Department  of                                                               
Revenue (DOR),  outlined how  the program works:   the  tax payer                                                               
directs  where the  contribution is  applied, from  the available                                                               
categories, and the  state verifies that the  recipient meets the                                                               
charitable, nonprofit criteria.                                                                                                 
                                                                                                                                
8:28:14 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked how  the [$7 million],  reported by                                                               
Mr. Painter, was distributed.                                                                                                   
                                                                                                                                
MS. BALES  said that the  2013 calendar year totals  are slightly                                                               
different from  the fiscal figures,  and reported:   $3.3 million                                                               
for vocational education; $3.8 to  universities and colleges; and                                                               
$1.5  million to  other  programs  which are  not  split out  for                                                               
confidentiality  purposes.   Historically, she  pointed out,  the                                                               
majority is distributed to universities and colleges.                                                                           
                                                                                                                                
REPRESENTATIVE SADDLER ascertained that  the money is distributed                                                               
outside of the funding formula                                                                                                  
                                                                                                                                
MR. PAINTER concurred.                                                                                                          
                                                                                                                                
8:29:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  noted  that, if  donations to  charter                                                               
schools were  allowed, and  if the proposed  bill became  law, it                                                               
would  be appropriate  to amend  Section  21 in  the future,  and                                                               
suggested [AS 43.20.014(a)] might then read as follows:                                                                         
                                                                                                                                
     (a) A taxpayer is allowed a credit against the tax due                                                                     
     under this chapter for cash contributions accepted for                                                                     
          (10) charter schools.                                                                                                 
                                                                                                                                
MS. BALES  agreed that  an amendment  could provide  a clarifying                                                               
paragraph to include  charter schools, but the  Department of Law                                                               
(DOL) would need to provide an opinion.                                                                                         
                                                                                                                                
REPRESENTATIVE  P. WILSON  said that,  given the  above amendment                                                               
scenario, a  similar subparagraph, number  (7), would need  to be                                                               
proposed for Section 22, adding  charter schools to the qualified                                                               
list.                                                                                                                           
                                                                                                                                
MS. BALES agreed, and clarified  the differences between sections                                                               
21 and 22.  The education tax  credit has been in existence for a                                                               
number of  years, and  in 2010  was increased  from a  maximum of                                                               
$150,000 per taxpayer to $5 million.   At the same time, a sunset                                                               
provision  was inserted,  returning  the maximum  to $150,000  on                                                               
January 1,  2014.  However,  in 2011 the legislature  altered the                                                               
statute once  again to add  a couple  of tax credit  programs and                                                               
extend the $5 million credit to  12/31/2020.  Thus, on January 1,                                                               
2021,  the maximum  $5 million  credit will  again be  subject to                                                               
being reduced to  $150,000, and some of the  entities will sunset                                                               
and no  longer qualify for  a credit,  such as the  Alaska Native                                                               
Cultural  and Heritage  program.   The  sunset  language is  what                                                               
separates  these two  sections,  she pointed  out, and  explained                                                               
that  the governor's  intent is  to  add the  two new  qualifying                                                               
contribution categories  and to  ensure they are  retained beyond                                                               
the sunset date of 2021.                                                                                                        
                                                                                                                                
8:34:59 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  acknowledged  that the  intention  is  to                                                               
allow some of  the tax credit categories to sunset,  in 2021, but                                                               
to retain the  two new categories [proposed  in subparagraphs (8)                                                               
and (9)].                                                                                                                       
                                                                                                                                
MS.  BALES  concurred,  and  clarified   that  it  was  the  2011                                                               
legislature that  identified the  categories for sunset  in 2021.                                                               
The governor is not changing  that legislative intent, but rather                                                               
adding  two new  contribution  categories,  with the  expectation                                                               
that they will be carried forward; beyond 2021.                                                                                 
                                                                                                                                
REPRESENTATIVE  LEDOUX  returned  to the  private  versus  public                                                               
concern, broached  earlier by  Representative Wilson,  to comment                                                               
that  various states  have provided  tax credits  for scholarship                                                               
funds  made to  private/religious schools,  and some  courts have                                                               
ruled that it does not represent  a legal violation of the Blaine                                                               
Amendment.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  P.  WILSON  interjected  that  the  legality  may                                                               
depend on the constitution of each state.                                                                                       
                                                                                                                                
8:38:00 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER asked how  many students take advantage of                                                               
dual-credit options, and what the success rate.                                                                                 
                                                                                                                                
COMMISSIONER  HANLEY  said  the  districts do  not  provide  that                                                               
specific  data to  the  department, but  the  practice is  highly                                                               
encouraged.                                                                                                                     
                                                                                                                                
REPRESENTATIVE   SADDLER  conjectured   that   the  impetus   for                                                               
extending the tax credit is to further that encouragement.                                                                      
                                                                                                                                
COMMISSIONER  HANLEY  opined  that  it  provides  a  student  the                                                               
opportunity to  establish a vision beyond  graduation and creates                                                               
a  pathway  to  higher  education.    The  result  is  a  win-win                                                               
situation and the motivating factor behind HB 278.                                                                              
                                                                                                                                
REPRESENTATIVE SADDLER  inquired how this action  compliments the                                                               
advanced  placement (AP)  courses;  is it  an  expansion of  that                                                               
program.                                                                                                                        
                                                                                                                                
COMMISSIONER  HANLEY   answered  that   it  is   a  complimentary                                                               
opportunity and does not contradict the AP effort.                                                                              
                                                                                                                                
8:40:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON   noted  that   the  sections   appear  to                                                               
rationalize the  purposes served by the  qualified facilities, as                                                               
grouped in each subparagraph, and  directed attention to page 11,                                                               
line 9.   The subparagraph appears  to be inclusive as  it states                                                               
tax  credit eligibility  for "secondary  school level  vocational                                                               
education courses, programs, and  facilities by a school district                                                               
in  the  state."   Alaska's  charter  schools operate  as  public                                                               
facilities, he pointed out, and  asked if rationale exists in the                                                               
proposed  bill that  would make  a distinction  and exclude  this                                                               
diverse faction  of public institutions from  eligibility for tax                                                               
credit funding.                                                                                                                 
                                                                                                                                
COMMISSIONER HANLEY  agreed that this is  "slightly problematic,"                                                               
and  conjectured how  a  taxpayer  is likely  to  name a  certain                                                               
charter school as  the recipient; however, as pointed  out by the                                                               
previous member, schools cannot receive  the funds directly.  The                                                               
inability  to  distribute  funds   to  a  district  with  strings                                                               
attached  is where  this  action becomes  problematic.   He  said                                                               
there could be a reason for  this to be challenged, and suggested                                                               
the need for a legal opinion.                                                                                                   
                                                                                                                                
8:43:39 AM                                                                                                                    
                                                                                                                                
CHAIR  GATTIS  noted  that  public  charter  schools  lack  equal                                                               
treatment,  opined  on the  need  for  review of  charter  school                                                               
statute, and  stated that  a legal opinion  would be  provided to                                                               
the committee.                                                                                                                  
                                                                                                                                
COMMISSIONER HANLEY agreed that  charter schools face significant                                                               
challenges.   He established that  the department  recognizes the                                                               
scope of the void and said the governor shares the concern.                                                                     
                                                                                                                                
REPRESENTATIVE P. WILSON offered  that charter school parents may                                                               
be buoyed by the opportunity to  gain a tax credit for supporting                                                               
their school of choice.                                                                                                         
                                                                                                                                
COMMISSIONER  HANLEY  emphasized  that  all  charter  schools  in                                                               
Alaska are part of the public system.                                                                                           
                                                                                                                                
8:47:48 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX observed that  the tax credit is applicable                                                               
to businesses that pay state taxes, not individuals.                                                                            
                                                                                                                                
8:48:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER paraphrased  from  page 11,  line 24,  to                                                               
note that scholarship  funds may be used to, "defray  the cost of                                                               
tuition, registration,  course, and textbook fees;"  and asked if                                                               
there are any  fees that would be specifically  denied.  Further,                                                               
he asked if this list  characterizes the majority of expenses for                                                               
college.                                                                                                                        
                                                                                                                                
COMMISSIONER  HANLEY indicated  that costs  could include  an on-                                                               
line connection,  but the list  is designed to be  inclusive, not                                                               
restrictive.                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked about  the intent for  inclusion of                                                               
fees associated  with campus activities, parking,  student union,                                                               
and lab use.                                                                                                                    
                                                                                                                                
COMMISSIONER  HANLEY offered  that  it would  be  atypical for  a                                                               
student to  be on campus,  when engaged in a  dual-credit course;                                                               
the norm is for on-line course work.                                                                                            
                                                                                                                                
8:50:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON   asked  whether  Native  corporations                                                               
qualify as nonprofit organizations.                                                                                             
                                                                                                                                
MS.  BALES answered  that the  Native corporations  are nonprofit                                                               
entities.    Further, she  clarified  that  a profit  corporation                                                               
could  contribute  to  a  nonprofit  organization  which  in-turn                                                               
establishes  the  scholarship  fund to  support  the  dual-credit                                                               
students.  Any  profit based corporation, Exxon  for example, can                                                               
contribute  in  this  way  and  receives  a  tax  credit  on  its                                                               
corporate return; the  nonprofit does not receive  a tax benefit.                                                               
Students  apply to  the scholarship  fund  to defray  educational                                                               
costs.  To  a follow-up question she said this  does not prohibit                                                               
a corporation  from making an earmarked  contribution directly to                                                               
a  district  for  a  specific  vocational  program;  possibly  to                                                               
sponsor a teacher.                                                                                                              
                                                                                                                                
8:56:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER asked  if there is a  mechanism to measure                                                               
the effectiveness of the tax-credit program.                                                                                    
                                                                                                                                
COMMISSIONER HANLEY deferred.                                                                                                   
                                                                                                                                
The committee took an at-ease from 8:57 a.m. to 9:03 a.m.                                                                       
                                                                                                                                
9:04:00 AM                                                                                                                    
                                                                                                                                
BYRON CHARLES,  Shareholder, Sealaska Corporation,  sated support                                                               
for the  intent of HB 278,  and suggested it would  be beneficial                                                               
if a  request were  made to have  the Native  corporations obtain                                                               
majority  approval from  all shareholders  for prioritization  of                                                               
educational support.                                                                                                            
                                                                                                                                
9:06:29 AM                                                                                                                    
                                                                                                                                
MARY NANUWAK  clarified that the  Native corporations  are profit                                                               
organizations, but not all of them  are able to realize a profit.                                                               
However,  even without  profit innovative  methods to  meet needs                                                               
exist and she invited the members to visit the outlying areas.                                                                  
                                                                                                                                
9:10:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON offered Amendment 1, labeled 28-                                                                          
GH2716\A.5, Mischel, 2/14/14, which read as follows:                                                                            
                                                                                                                                
     Page 11, line 25:                                                                                                          
     Delete "and"                                                                                                           
                                                                                                                                
     Page 11, line 28, following "AS 14.16.200":                                                                            
     Insert "; and                                                                                                          
     (10) a program that  provides early childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
     Page 12, line 14:                                                                                                          
     Delete "and"                                                                                                           
                                                                                                                                
     Page 12, line 17, following "AS 14.16.200":                                                                            
     Insert "; and                                                                                                          
     (7) a  program that provides early  childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
     Page 13, line 16:                                                                                                          
     Delete "and"                                                                                                           
                                                                                                                                
     Page 13, line 19, following "AS 14.16.200":                                                                            
     Insert "; and                                                                                                          
     (10) a program that  provides early childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
     Page 14, line 5:                                                                                                           
     Delete "and"                                                                                                           
                                                                                                                                
     Page 14, line 8, following "AS 14.16.200":                                                                             
     Insert "; and                                                                                                          
     (7) a  program that provides early  childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
     Page 15, line 7:                                                                                                           
     Delete "and"                                                                                                           
                                                                                                                                
     Page 15, line 10, following "AS 14.16.200":                                                                            
     Insert "; and                                                                                                          
     (10) a program that  provides early childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
     Page 15, line 27:                                                                                                          
     Delete "and"                                                                                                           
                                                                                                                                
     Page 15, line 30, following "AS 14.16.200":                                                                            
     Insert "; and                                                                                                          
     (7) a  program that provides early  childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
     Page 16, line 30:                                                                                                          
     Delete "and"                                                                                                           
                                                                                                                                
     Page 17, line 2, following "AS 14.16.200":                                                                             
     Insert "; and                                                                                                          
     (10) a program that  provides early childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
     Page 17, line 20:                                                                                                          
     Delete "and"                                                                                                           
                                                                                                                                
     Page 17, line 23, following "AS 14.16.200":                                                                            
     Insert "; and                                                                                                          
     (7) a  program that provides early  childhood education                                                                
     by a nonprofit  agency or school district  in the state                                                                
     or   by  the   Department   of   Education  and   Early                                                                
     Development"                                                                                                           
                                                                                                                                
REPRESENTATIVE REINBOLD objected for discussion.                                                                                
                                                                                                                                
9:11:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON pointed  out that  this adds  subparagraph                                                               
(10), and conforming language.   He stressed that early childhood                                                               
education  has been  recognized  as the  most  important area  to                                                               
support  in  order  to  assure  that  a  child  will  complete  a                                                               
successful  school  career.   The  state  has sponsored  a  pilot                                                               
program,  but  faced  with  budget   cuts,  funding  has  been  a                                                               
challenge.  He said it  is important to incentivize businesses to                                                               
help with early childhood education  in their communities through                                                               
established programs,  which might include: Parents  as Teachers;                                                               
Imagination  Library; local  school district  preschool programs;                                                               
and  the  EED   pilot  program.    The   amendment  covers  three                                                               
categories  for  encouraging  business contributions  to  further                                                               
local efforts in early childhood education.                                                                                     
                                                                                                                                
9:13:57 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS referred  to the distribution of the  $7 million, as                                                               
reported earlier  by DOR, and asked  if this would dilute  or add                                                               
to that figure.                                                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON  stated his  belief that Amendment  1 would                                                               
expand  the use,  and said  these  are targeted  tax credits  for                                                               
rationale  of the  contributor.   He opined  that this  would not                                                               
divert  funds  from  colleges  but   bring  attention  and  allow                                                               
corporate support to a vital area of early childhood education.                                                                 
                                                                                                                                
9:15:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  clarified   that  local  businesses  can                                                               
certainly   provide  financial   support   for  early   childhood                                                               
education programs, but a tax  credit cannot be claimed for their                                                               
contributions.                                                                                                                  
                                                                                                                                
REPRESENTATIVE SEATON  agreed, and added that  Amendment 1 allows                                                               
the state to provide encouragement  for early childhood corporate                                                               
contributions by  offering a tax  credit.  He suggested  that not                                                               
including  early childhood  education was  an oversight  and this                                                               
brings it  into the  bill.  The  rationale contained  in existing                                                               
statute  directs  education  tax-credit  funding  to  efforts  of                                                               
direct instruction,  research, and educational  support purposes.                                                               
He opined  that one of  these primary rationales should  be early                                                               
childhood education,  and stressed that  it is an  important area                                                               
to target.   Promoting early childhood education has  been on the                                                               
legislative table for a decade, he finished.                                                                                    
                                                                                                                                
9:18:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX said  the  decision is  a  policy call  of                                                               
whether to  specify targeted programs or  adopt blanket language.                                                               
The broad  approach would be  inclusive of everything  in respect                                                               
to education.   However,  she said, if  the targeted  approach is                                                               
decided on, Amendment 1 is  supportable.  An additional amendment                                                               
could  be   proposed  to  address   funding  of   charter  school                                                               
buildings, which she said she may sponsor.                                                                                      
                                                                                                                                
9:20:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND  stated  support for  Amendment  1,  and                                                               
directed  attention to  page 11,  lines 16-18  to point  out that                                                               
subparagraph (5)  includes grades kindergarten through  12, as it                                                               
relates  to Alaska  Native cultural  or heritage  programs, thus,                                                               
early  childhood  education is  not  entirely  excluded from  the                                                               
bill.  Although this subparagraph  does not specify preschool, an                                                               
amendment to that effect may  not be necessary, with the adoption                                                               
of Amendment 1.                                                                                                                 
                                                                                                                                
9:21:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  opined  that subparagraph  (5) may  be                                                               
limited to Alaska Native cultural or heritage programs.                                                                         
                                                                                                                                
9:22:23 AM                                                                                                                    
                                                                                                                                
COMMISSIONER HANLEY  urged the committee  to review  the original                                                               
intent  for  including the  statutory  language  of [Section  21,                                                               
subparagraph  (5)] and  counseled that  the committee  to explore                                                               
the reason that it was placed into law.                                                                                         
                                                                                                                                
9:22:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON   recalled  that   the  drafting   of  [AS                                                               
43.20.014(a)(5)]  predated the  focus, as  understood today,  for                                                               
preschools.  He said Amendment  1 would allow a preschool program                                                               
to be  developed and supported  under the Alaska  Native cultural                                                               
and heritage  program rationale, but  is not intended  to limited                                                               
programs based on those principles.                                                                                             
                                                                                                                                
9:24:14 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER agreed  with the  counsel to  explore the                                                               
original  intent  of  the  education  tax-credit  measures.    He                                                               
commented   that  reasons   may  exist   to  exclude   particular                                                               
educational areas from this type of benefit.                                                                                    
                                                                                                                                
9:24:55 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS asked  if there is a problem in  removing limits and                                                               
establishing broad language for an inclusive policy.                                                                            
                                                                                                                                
COMMISSIONER HANLEY  said that  when the  language was  placed in                                                               
statute, a  specific target was  the goal.  The  governor intends                                                               
to remove  barriers, and he  said it would  be a policy  call for                                                               
the committee.                                                                                                                  
                                                                                                                                
9:26:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD stated support  for providing tax credits                                                               
on a broad scale, not limited to public preschools.                                                                             
                                                                                                                                
9:27:13 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS observed  that all preschools seem  to be beneficial                                                               
and helps provide children a "great jump" in their education.                                                                   
                                                                                                                                
9:27:37 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  clarified that a nonprofit  preschool will                                                               
qualify, regardless of the setting.   The only limiting factor is                                                               
the qualification  for the  recipient program  to be  a qualified                                                               
nonprofit;  a   profit  corporation  that  directly   operates  a                                                               
preschool could not qualify.                                                                                                    
                                                                                                                                
9:30:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked whether  a  church  qualifies as  a                                                               
nonprofit,  and  whether  a  profit   corporation  that  funds  a                                                               
nonprofit subsidiary to  operate a daycare or  preschool would be                                                               
eligible.                                                                                                                       
                                                                                                                                
9:31:37 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND confirmed,  as a  church official,  that                                                               
sacred organizations hold a  nonprofit status, authorized through                                                               
the Internal Revenue  Service (IRS).  She reported  that only one                                                               
in  five children  in need  of daycare/preschool  are provided  a                                                               
space  in the  Juneau  area, perhaps  throughout  the state,  and                                                               
opined that  priority should be  granted to  create opportunities                                                               
and  expand  services.   Many  of  the childcare  facilities  are                                                               
located in  churches because of  availability of  space; however,                                                               
the location does not define the program.                                                                                       
                                                                                                                                
9:33:54 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS  acknowledged that a  challenge exists  in directing                                                               
public money to  preschool programs, as well  as providing enough                                                               
opportunities.                                                                                                                  
                                                                                                                                
9:34:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked the  amendment sponsor  whether the                                                               
intent  is to  allow  corporations to  claim  tax-credits if  the                                                               
donations is directed to a church preschool.                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  said the area of  childcare/preschool does                                                               
not fall  under the purview of  EED or the school  districts as a                                                               
system  of public  education,  and, for  that  reason, funding  a                                                               
church hosted preschool would not present a problem.                                                                            
                                                                                                                                
9:35:27 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  said it  would  be  helpful to  support                                                               
every setting,  including a profit  corporation that  maintains a                                                               
preschool for employees.                                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON  the  amendment  skirts  the  conflict  of                                                               
interest  areas  where  corporations provide  benefits  to  their                                                               
employees.   Certainly, the corporation  could allow space  for a                                                               
nonprofit childcare entity to operate.                                                                                          
                                                                                                                                
REPRESENTATIVE REINBOLD  emphasized that a daycare  facility in a                                                               
corporate setting is a convenience  to parents, and that it seems                                                               
appropriate to encourage onsite facilities.                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  clarified that  the Amendment  1 addresses                                                               
programs, not facilities.                                                                                                       
                                                                                                                                
9:38:29 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  noted that federal and  state laws already                                                               
provide  tax-credit/deductions  for  many  corporate  activities,                                                               
including salaries.   She voiced  support for  allowing corporate                                                               
childcare, to be included in the qualified list.                                                                                
                                                                                                                                
9:39:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND  pointed  out   that  the  IRS  provides                                                               
parents a  tax-credit of up to  one third of the  childcare cost.                                                               
She said British Petroleum (BP)  offices in Anchorage, as well as                                                               
the University of Alaska Anchorage,  both offer onsite childcare.                                                               
Corporations are free to provide  whatever employee benefits they                                                               
so choose,  and opined that  the state should  avoid involvement;                                                               
however,  the  Amendment  1  does  not  appear  to  impact  these                                                               
activities or present a conflict.                                                                                               
                                                                                                                                
CHAIR GATTIS  expressed concern  for existing  private preschools                                                               
and,  despite  good intent,  whether  Amendment  1 might  have  a                                                               
negative effect on these facilities.                                                                                            
                                                                                                                                
REPRESENTATIVE  DRUMMOND suggested  testimony be  invited from  a                                                               
number of the established facilities  who provide early childhood                                                               
education, such  as Rural Alaska  Community Action  Program, Inc.                                                               
(RurAL CAP) and Kids' Corp. Inc.                                                                                                
                                                                                                                                
9:42:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON said daycare, preschool,  and education                                                               
are all on  the table, and she suggested that  the difference and                                                               
qualifications be noted.                                                                                                        
                                                                                                                                
9:43:34 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER asked  the  sponsor for  a definition  of                                                               
early childhood education; does statute provide one.                                                                            
                                                                                                                                
REPRESENTATIVE SEATON deferred.                                                                                                 
                                                                                                                                
COMMISSIONER HANLEY offered to provide the information.                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON  interjected  that childcare  is  often  a                                                               
profit business and would not qualify.                                                                                          
                                                                                                                                
CHAIR  GATTIS  described  how  some  daycare  situations  provide                                                               
valuable  preschool  activities,  and conflict  may  arise  under                                                               
Amendment 1, as proposed.                                                                                                       
                                                                                                                                
9:45:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX observed  that private preschools, operated                                                               
for profit, appear to be the  concern.  She asked about licensing                                                               
requirements for preschools versus  daycares.  Tax credits should                                                               
be awarded to preschools and  not babysitting services.  Further,                                                               
she  opined,  it  would  be  helpful  to  include  language  that                                                               
discerns the difference.                                                                                                        
                                                                                                                                
9:47:14 AM                                                                                                                    
                                                                                                                                
CHAIR   GATTIS   asked   for   specific   curriculum   or   other                                                               
differentiating   conditions   that   identify   daycare   versus                                                               
preschools.                                                                                                                     
                                                                                                                                
COMMISSIONER  HANLEY  indicated  that   criteria  exist  for  the                                                               
licensing  of  each  entity,  and   offered  to  provide  further                                                               
information.                                                                                                                    
                                                                                                                                
9:48:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  stressed that Amendment 1  is not specific                                                               
to   a   physical   preschool  and   named   existing   nonprofit                                                               
organizations  that provide  on-site services,  including:   Best                                                               
Beginnings; Sprout,  Inc.; Imagination  Library; and  Parent's as                                                               
Teachers.   He  said  these are  examples  of programs  promoting                                                               
early childhood education that would  qualify, and represent more                                                               
than a room with chairs and a specific curriculum.                                                                              
                                                                                                                                
9:48:52 AM                                                                                                                    
                                                                                                                                
CHAIR  GATTIS recapped  the number  of questions  surrounding the                                                               
Amendment 1 and suggested holding it over.                                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON  agreed and  indicated  that  it would  be                                                               
helpful to  have further stakeholder  comments for  the committee                                                               
to consider, particularly from corporations.                                                                                    
                                                                                                                                
9:52:04 AM                                                                                                                    
                                                                                                                                
CHAIR GATTIS announced HB 278 would be held over.                                                                               

Document Name Date/Time Subjects
HB278 Testimony Vernessa Richards.pdf HEDC 2/17/2014 8:00:00 AM
HB 278
Letter from TCyrus_TVEP Reauthorization_2-6-2014.pdf HEDC 2/17/2014 8:00:00 AM
HB 278