Legislature(2001 - 2002)
03/20/2002 02:04 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 303
"An Act relating to the levy and collection of a sales
tax; and providing for an effective date."
Representative Whitaker, sponsor, spoke in support of HB
303, relating to the levy and collection of a sales tax. He
pointed out that a majority of states in the Union have
state and municipal sales taxes and disagreed that a sales
tax would be a regressive tax. He maintained that under an
income tax a small percentage would pay 100 percent of the
tax. Every person that purchases non-exempt items in Alaska
would contribute to the cost of governance and the provision
of services through a sales tax. He addressed concerns
raised by the Administration:
The Department of Revenue believes the only way for a
state sales tax to operate efficiently, and to avoid
placing undue burdens on businesses would be for the
state to take over collection and administration of all
municipal sales taxes in Alaska.
Representative Whitaker disagreed with the above statement
and felt that it should be a matter of municipal choice. The
bill allows municipalities to make the determination.
Although this legislation allows individual
municipalities to opt in and have the state collect
their local sales and use tax, it makes no provision
for municipal taxes outside of the general sales tax,
such as hotel bed tax, rental car tax, fish taxes and
retail alcohol tax. Is it the intent of the legislature
that the state should also take over those municipal
taxes?
Representative Whitaker clarified that it is not the intent
of the legislature that the state take over municipal taxes.
The bill should contain some provisions governing joint
enforcement and collection of municipal and state sales
taxes. What if a community is dissatisfied with the
state's enforcement and audits efforts allocated to the
municipal sales tax?
Representative Whitaker maintained that local enforcement
issues should be the concern of local municipalities. If a
municipality is not satisfied with the way the state is
collecting the municipal tax it can be addressed through
their agreement with the state. Municipalities can opt to
collect their own taxes.
The language in Section 1, Lines 10 and 11, requiring
that a municipal sales tax must be "consistent with AS
43.44" should refer to all of Title 43 in order to
include all administrative provisions including rates
of penalty and interest.
Representative Whitaker noted that he had not been aware of
the issue but that it was not insurmountable. Title 43
refers to provisions for permanent fund dividends, oil and
gas production taxes and coin-operated devices.
The "reasonable fee" provision for what the state may
charge municipalities for collecting the sales tax
could become a point of dispute.
Representative Whitaker agreed and stressed that disputes
are worked out through negotiation.
The legislation should better define services and the
point of taxation for services, is it where is the
service is performed, or the location of the individual
or business ordering the service? The bill also needs
to provide rules for services delivered in interstate
commerce.
Representative Whitaker pointed out that the legislation
addresses a retail sales tax, which would be levied where
the product or service is delivered. If the service is
provided within the state of Alaska it is consumed there and
will be taxed (assuming it is allowable under federal law).
This relates to Internet and other mail order sales.
What about services between related parties? Do we want
to tax services provided by BP PLC to BP Exploration
Alaska?
Representative Whitaker clarified that tax on tax services
provided by BP PLC to BP Exploration Alaska are exempted.
Although the legislation allows the state to administer
and collect a municipal use tax, there is no provision
for a state use tax. This encourages importing products
into the state to avoid the sales tax on goods
purchased in Alaska.
Representative Whitaker pointed out that the Department of
Revenue has indicated that it is nearly impossible to
enforce a use tax on items other than automobiles. The
legislation does not attempt to create an unenforceable tax.
He understood that there would be some leakage.
If the legislature wants to include a state use tax in
this bill, it would make sense to amend state law to
require the payment of the use tax on motor vehicles
purchased outside Alaska. This would serve to eliminate
the price advantage out-of-state car and truck dealers
might have over Alaska businesses that would be
required to collect the sales tax.
Representative Whitaker reiterated that the bill does not
create a use tax and added that the maximum allowable sales
tax on a single item is $60 dollars. He did not think it
would be worthwhile to go out of state for purchases.
Every state that imposes a statewide sales tax also has
a use tax. In general, a use tax is a tax on the
initial use, storage or consumption of tangible
personal property in the state. Enforcing use taxes is
difficult, particularly with the growth of Internet
sales. Most states are addressing this and other sales
and use tax issues by passing versions of a Model Sales
and Use Tax Act.
Representative Whitaker agreed that it is difficult to
enforce a use tax. There is no provision for a use tax in
the legislation.
The legislation lacks definitions needed for the
administration of the tax. For example: What is meant
by "educational services" in the legislation's list of
tax-exempt purchases and services: College and
university tuition?
Representative Whitaker affirmed that college and university
tuition would be exempt.
Any class offered by any business or self-proclaimed
school, regardless of accreditation, religious
affiliation or venue?
Representative Whitaker responded in the negative. Classes
would need to be offered by an entity recognized by the
state as a school. He expected that the department would use
good judgment in implementing the law and that the
legislation would be able to deal with any problems that
arise.
Would tutoring be exempt?
Representative Whitaker observed that this is an area where
there might be some leakage. He noted that educational
computer software would not be exempt.
Petroleum products would be exempt under the
legislation, but does that include aspirin, Vaseline,
products made of carbon fiber and other petroleum or
carbon-based products?
Representative Whitaker noted that the intent of the
exemption is to affect natural resource development,
processing and refining.
Is a commercial operation, such as a salmon bake at an
old mine site, considered an "historic site" for tax-
exempt status under the legislation?
Representative Whitaker observed that food for consumption
and souvenir sales are not exempt but admission to
historical sites would be, as determined by a appropriate
historical register.
Are club dues taxable?
Representative Whitaker affirmed that club dues are taxable.
Under this legislation, Girl Scout cookies would be
taxable, as would any other sale by a nonprofit
organization for fund-raising purposes.
Representative Whitaker agreed that sales of Girl Scout
cookies would be taxable.
Representative Whitaker quoted Bill Wood, President of the
University of Alaska: "It doesn't matter how much you pay,
as long as you pay. The poorest person in the town or
village has to understand that their government belongs to
them and if they don't invest in it, it no longer belongs to
them; it belongs to those that have made the investment."
It's also possible that under this legislation the
state would have collected sales tax on the sale of
Arco's assets to Phillips.
Representative Whitaker agreed; they would have paid $60
dollars.
Is the sales tax on a vehicle lease due up front, or
strung out based on the stream of lease payments?
Representative Whitaker concluded that the sales tax would
be applied on the total lease contract and would be applied
up front: $60 dollars.
Representative Whitaker noted that barters are not subject
to sales tax because it would be impractical.
Representative Whitaker explained that the legislation
doesn't understand concerns regarding resale. He noted that
wholesale exemptions apply if the resale is to occur outside
the state. Packaging would not be exempt.
Representative Whitaker observed that if you purchase a new
home in the state of Alaska you would pay $60 dollars.
If a lawyer submits interim bills under $2,000 each for
a large, ongoing case, would all of the bills be fully
taxable under this legislation
Representative Whitaker observed that the total single
purchase rule would apply: $60 dollars. The same would apply
to furniture and large appliance purchases.
The Department of Revenue noted in its fiscal note that
businesses nationwide and other states are working hard to
win nationwide adoption of a Streamlined Sales and Use Tax
Agreement. Representative Whitaker stated that Alaska should
be part of the Uniform Multi-state Tax Agreement, but
observed that there is nothing to be part of at the present
time. He acknowledged that there would be problems in
regards to uniformity, which would have to be dealt with if
Alaska becomes part of the agreement. He acknowledged that
it could affect municipalities in the future.
Representative Whitaker continued his response to remarks by
the Administration:
There is no authority under this legislation for the
department to use sampling in its audits of taxpayers.
Sampling would make the audit process easier for the
department and the taxpayer.
Representative Whitaker agreed that the authority for
sampling should be given.
There is no requirement for sellers to register with
the state. Without such a provision, the state would be
unable to track businesses responsible to collect and
remit the sales tax -making it easier for businesses,
particularly at-home or part-time businesses to avoid
the tax.
Representative Whitaker observed that the state currently
licenses retail businesses; the business license is a
registration. This could be incorporated into enforcement of
a sales tax.
Representative Whitaker pointed out that the legislation
uses the Department of Revenue's estimates.
Co-Chair Williams appointed HB 303 to a subcommittee
existing of: Mulder, chair, Whitaker, and Moses.
Representative John Davies requested that the subcommittee
clarify assumptions and calculations regarding the amount of
revenues, which would be raised and who would pay the tax:
resident versus non-resident.
Representative Croft asked the subcommittee to look at
whether municipalities would have to have identical
exemptions. Representative Whitaker noted that if the
municipality enters into negotiation with the state to
collect the tax then it would have to comply with the
state's rules. If municipalities do not opt in they could
operate under an additional set of rules.
HB 303 was heard and HELD in Committee for further
consideration.
#hb20
HOUSE BILL NO. 20
"An Act relating to state aid to municipalities and
certain other recipients, and for the village public
safety officer program; relating to municipal
dividends; relating to the public safety foundation
program; and providing for an effective date."
MIKE TIBBLES, STAFF, REPRESENTATIVE WILLIAMS summarized that
proposed committee substitute: work draft 22-LS0008\J,
2/22/02 was adopted. The committee substitute established a
$100 dollar per capita transfer to the Municipal Dividend
Fund. The legislature would be allowed to appropriate money
from the Fund to Municipal Assistance, Safe Communities,
Capital Matching Grants and Community Jails. The $100 dollar
per capita would total $60 million dollars.
Mr. Tibbles referred to the fiscal note. There is $10
million dollars more in the Municipal Dividend Fund than
would have been appropriated in the next year's budget. The
municipal assistance would be divided into two programs: Tax
Resource Equalization and Municipal Services. The Municipal
Services program is derived on a formula in statute, which
is derived from the number of public and ice road miles,
health facilities, hospitals and volunteer fire departments
in unincorporated communities. It has a statutory minimum,
which would not be fully funded. There would be a pro rata
reduction on each community as it stands.
Mr. Tibbles noted that the Tax Resource Equalization program
generates money based on the amount that each community
taxes itself in relation to property values and population.
Mr. Tibbles discussed the Revenue Sharing for Safe
Communities program. He noted that there were revenues left
from the Gross Business Receipts program in 1979. The money
is allocated on a per capita level.
Representative Croft asked the FY02 amount. He thought that
revenue sharing and the Safe Communities program totaled $30
million dollars. Co-Chair Mulder explained that capital-
matching grants would be funded at $15.0 million dollars,
which is slightly more than FY02. The Community Jails
program would be funded at $5 million dollars. He explained
that municipal assistance and the Safe Communities program
comprises approximately $30 million dollars; plus $15
million for the Capital Matching Grants program and $5
million dollars for the Community Jails program [for a total
of $50 million dollars]. This $50 million dollars is being
replaced with $60 million dollars. The additional $10
million would go to municipal assistance, The Tax Resource
Equalization program and the Safe Communities program. Local
communities would benefit by an additional $10 million
dollars.
Mr. Tibbles explained that revenue sharing has been
allocated over the last 22 years: two-thirds to tax
equalization and one-third split to municipal services. The
department has indicated that the revenue sharing
appropriation would follow the same pattern unless the
legislature indicates otherwise.
Representative Davies noted that the [additional] $10
million dollars would be distributed through the tax fund in
the Revenue Sharing program. Mr. Tibbles clarified that if
the funding was split between revenue sharing and safe
communities that the portion to revenue sharing would be
split one-third/two-thirds, but not the portion to safe
communities.
BOB WEINSTEIN, MAYOR, KETCHIKAN AND CHAIR, SOUTHEAST
CONFERENCE OF MAYORS spoke in support of the legislation. He
stressed that the services are critical to cities large and
small throughout the state. He noted that funding was
eliminated in the operating budget. He asked that unrelated
items be placed in other legislation.
Vice-Chair Bunde observed that the bill would significantly
change the use of permanent fund earnings. He asked mayors
to communicate the need to do so with their constituents.
Representative Lancaster asked if the Conference of Mayors
would oppose an education amendment. Mr. Weinstein responded
that he would support an amendment if the amendment did not
dilute assistance to municipalities.
Representative Whitaker MOVED to ADOPT Amendment 1:
Page l, line l:
Delete "municipal dividends"
Insert "dividends for municipalities and education"
Page l line 4:
Delete "Municipal dividend fund"
Insert "Dividend fund for municipalities and education"
Page 1, line 5:
Delete "municipal dividend fund consisting of municipal
dividends"
Insert "dividend fund for municipalities and education
consisting of dividends"
Page 1, line 7:
Delete "municipal dividend"
Page 1, line 11:
Delete "for"
Page 1, following line 11
Insert
"(1) to the University of Alaska to fund an increase in
the total amount of appropriations for the university
when compared to the total amount of appropriations to
the university for fiscal year 2002;
(2) to the Department of Education and Early
Development for payment as learning opportunity grants
to school districts based on the school district's
average daily membership to pay for instructional
programs intended to improve student performance; an
amount equal to $115 for each district adjusted ADM as
defined in AS 14.17.990 for the immediately preceding
fiscal year may be appropriated under this paragraph;"
Renumber the following paragraphs accordingly.
Page 1, line 12, before "capital":
Insert "for"
Page 1, line 13, before "payments":
Insert "for"
Page 2 ,line 2:
Delete "municipal"
Page 2, line3:
Delete "municipal dividend fund"
Insert "dividend fund for municipalities and education"
Page 2, line 4:
Delete "municipal"
Page 2, line 5:
Delete "$100"
Insert"$160"
Co-Chairs Mulder and Williams OBJECTED for the purpose of
discussion.
Representative Whitaker explained that Amendment 1 would set
aside $25 million dollars for K-12 education and $10 million
dollars for the University of Alaska. He maintained that the
amendment would establish a placeholder for K-12 and
University of Alaska education funding.
Representative John Davies noted that the amount distributed
from the Earnings Reserve Fund would be changed from "100"
dollars to "$160" dollars per capita and questioned if this
amount would cover the $35 million dollar total.
Representative Whitaker affirmed.
Co-Chair Mulder clarified that provision (2) of the
amendment would amount to $25 million dollars. Funding for
the University would be approximately $10 million dollars.
Representative Whitaker stressed the importance of these two
increments to the state of Alaska.
Representative Harris observed that HB 20 is approximately
$10 million dollars more than the FY02 budget without the
amendment. The amendment would add another $25 million
dollars for K-12 education and $10 million dollars for the
university resulting in a total increase of $45 million
dollars in new money.
Representative Croft acknowledged the good of the municipal
dividend program and additional funding for education, but
questioned if they would add up to a plan.
Representative Whitaker reiterated that adoption of the
amendment would provide a placeholder in a plan for
education and university spending.
Vice-Chair Bunde thought that the amendment would cloud the
municipal dividend question and spoke in support of
addressing the issue in another bill.
TAPE HFC 02 - 56, Side B
Vice-Chair Bunde observed that where other states have added
another funding stream that there is often a no net gain to
education. He argued that the amendment would not create new
money.
Representative Harris referred to section 2 and questioned
if it were a one-time arrangement. Representative Whitaker
affirmed that it would be a one-time opportunity grant.
Representative Harris expressed concern that the general
fund obligation would not be reduce.
Representative John Davies questioned if the $160 dollar
draw was only for FY03. He thought that it would be an
increment to the base.
Vice-Chair Bunde pointed out that the bill increases
spending. The amendment would increase spending in the FY03
budget. He stressed the need to limit state spending before
asking for revenue measures.
Representative Carl Moses stated that the original intent of
the legislation was to provide for municipal assistance at a
$150 per capita, for a total of $180 million dollars to
municipalities. He pointed out that different municipalities
have different needs. A rural area may not prioritize snow
removal. He maintained that communities could spend on the
local level.
Co-Chair Mulder acknowledged that he was sympathetic toward
the areas addressed but spoke against the amendment. He
maintained that the focus should be toward closing the
fiscal gap. He asserted that the amendment would provide
inconsistency and confusion.
Representative Lancaster observed that the amendment is an
attempt to inflation proof education.
Representative Harris noted that he supports education and
would support the amendment. He hoped that if the amendment
passed that it would become part of a plan to close the gap.
Representative Croft didn't believe that the amendment would
advance the plan or address the larger issue.
Representative John Davies MOVED to AMEND Amendment 1: page
1, line 21 after "an" insert "$11 million dollars"; and on
line 22 after "university" insert ";" and delete "when
compared to the total amount of appropriations to the
university for fiscal year 2002." He expressed concern that
the amendment would not be effective if other funds were
available.
Representative Whitaker did not objection to the amendment.
There being NO OBJECTION, it was so ordered.
Co-Chair Williams expressed concern with the increase in
spending. He noted that the amendment would be tied to the
Permanent Fund and people would say: "There they go they've
got their nose under the tent." He observed that it is only
a small portion of the revenue plan and cautioned against
trying to save all Alaska.
A roll call vote was taken on the motion to adopt Amendment
1.
IN FAVOR: Davies, Harris, Lancaster, Whitaker
OPPOSED: Bunde, Croft, Foster, Hudson, Moses, Mulder,
Williams
The MOTION FAILED (4-7).
Vice-Chair Bunde MOVED to ADOPT Amendment 2:
Section 1. AS 29.05.180(a) is amended to read:
(a) To defray the cost of transition to city to
for government operations, each city incorporated after
June 30, 2002, [DECEMBER 31, 1985] is entitled to [AN]
organization grants [GRANT OF $50,000 FOR THE FIRST
FULL OR PARTIAL FISCAL YEAR] after incorporation as
follows:
(1) $100,000 for the city's first full or partial
fiscal;
(2) $50,000 for the city's second fiscal year;
and (3) 25,000 for the city's third fiscal year.
* Sec. 2. AS 29.05.180(b) is amended to read:
(b) To defray the cost of reclassification, each
second class city in the unorganized borough
incorporated before January 1, 1986, that reclassifies
as a first class city or adopts a home rule charter
after June 30, 2002, [DECEMBER 31, 1985] is entitled to
[AN] organization grants [GRANT EQUAL TO $50,000 FOR
THE FIRST FULL OR PARTIAL FISCAL YEAR] after
reclassification as follows:
(1) $200,000 for the city's first full or partial
fiscal year;
(2) $100,000 for the city's second fiscal year;
(3) $50,000 for the city's third fiscal year.
Co-Chair Williams OBJECTED. Vice-Chair Bunde explained that
the amendment would address a "catch 22" that exists in
Alaska. There are areas of the state that aren't able to
make a local contribution to their services because they
have no taxes. The do not have taxes because they are not
organized. He maintained that these areas do not want to
organize because they don't want to pay taxes. The amendment
would provide "a carrot rather than a stick." The amendment
would provide money to unorganized areas to encourage
organization. There is an indeterminate fiscal note. The
amendment would not require an increase in the current
budget, but would have the potential of increasing future
budgets, which could be reduced by a reduced demand on state
supplied services.
Co-Chair Williams acknowledged the problems with unorganized
communities. He pointed out that it takes resources to run a
community without taxes.
Co-Chair Mulder stated that he would support the amendment.
He observed that the city of Talkeetna is in discussions
regarding organization and felt that the amendment would
encourage them to do so. He did not know if it would be a
large enough enticement to small communities, but thought
that it would help larger communities to get over the first
hurdle.
Representative Whitaker questioned how much it would cost if
Talkeetna became a city and received funding under the
legislation.
Vice-Chair Bunde estimated that Talkeetna would receive $175
thousand dollars spread over a 3 year period in diminishing
amounts to assist them in the initial organization: $100,
$50 and $25 thousand dollars. He observed that current
statutes contain encouragement for city and boroughs to
combine in a $600 thousand dollar stipend over a three-year
period. The amendment would duplicate what exists for city
and boroughs for unorganized areas. The amendment would not
require organization.
Representative Carl Moses stated that he supported the idea
but pointed out that there has been a history of cutting
revenue sharing. He questioned what would happen when the
state takes away all of the benefits for incorporation.
Sales taxes are the only revenue sources but the state is
moving into that area. He did not want to tie the amendment
to the legislation.
Vice-Chair Bunde stressed that the amendment is an attempt
to help communities. If the amendment passes it would
provide assurance that there would be a constant revenue
stream.
Representative Hudson clarified that the amendment is
discretionary and that it would be provided on a
discretionary basis to organize as part of an organized
area.
Vice-Chair Bunde pointed out that with the adoption of HB 20
they would have an additional incentive toward organization.
Representative Lancaster asked if [communities that organize
under the amendment] would be required to perform any
services. Vice-Chair Bunde responded that there would be
required services under existing statute, such as fire
protection.
PATTI SWENSON, STAFF, VICE-CHAIR BUNDE explained that the
amendment would only increase the limits of the existing
statute. Statutory requirements would remain the same.
A roll call vote was taken on the motion to adopt Amendment
2.
IN FAVOR: Davies, Foster, Harris, Hudson, Lancaster, Bunde,
Mulder
OPPOSED: Croft, Moses, Whitaker, Williams
The MOTION PASSED (7-4).
Amendment 3 was WITHDRAWN.
Representative John Davies MOVED to ADOPT Amendment 4. He
explained that the amendment would tie HB 20 to passage of
HB 225. The intent is to tie HB 20 to enactment of a
[fiscal] plan.
Representative Carl Moses spoke against tying HB 20 to any
other legislation and pointed out that there is no way to
know what HB 225 would look like.
Representative Croft spoke in support of the amendment and
stressed the need for a plan. He pointed out that his
support of HB 20 is conditioned on a plan.
Co-Chair Williams spoke against the amendment.
Representative Hudson pointed out that 11 votes on the other
side could untie the binding of any legislation. He thought
that the concept and intent was to build toward a fiscal
plan and show the nexus between taxes and the use of the
earnings of the Permanent Fund.
Representative John Davies observed that the other body is
independent and emphasized that the House should not
condition their action on what the other body would do. He
stressed the need for a plan.
Representative Croft stated that he would work to explain,
to his constituent's, actions taken to raise revenues if
there is a plan. He stressed that the future is not
guaranteed without a plan. The concept is safer as part of a
plan. He maintained that it would be harder for the Senate
or the Governor to ignore or veto a plan than one
independent component.
Representative Lancaster questioned if tying the legislation
would interfere with the single subject law. Representative
John Davies clarified that it would not interfere with the
single subject law.
Vice-Chair Bunde gave the analogy of one leg of a three-
legged stool: use of earnings reserve funds, a new broad-
based revenue and assurance for the public that the
legislature cannot spend the money faster than it can be
taken away.
A roll call vote was taken on the motion to adopt Amendment
4.
IN FAVOR: Hudson, Lancaster, Bunde, Croft, Davies
OPPOSED: Foster, Harris, Moses, Whitaker, Mulder, Williams
The MOTION FAILED (5-6).
Representative John Davies MOVED to ADOPT Amendment 5. He
noted that the amendment would increase the amount withdrawn
from the earnings reserve of the Permanent Fund in order to
include funding to municipalities for the senior property
tax exemption. This is currently an unfunded mandate, which
is being funded by municipalities. This would free up local
property taxes for other uses.
Co-Chair Williams spoke against the amendment and emphasized
the need to keep spending down. Representative John Davies
argued that it would not increase spending and pointed out
that the money is already being spent. The burden would be
shifted.
A roll call vote was taken on the motion Amendment 5.
IN FAVOR: Moses, Davies
OPPOSED: Bunde, Davies, Foster, Harris, Hudson, Lancaster,
Whitaker, Williams, Mulder
The MOTION FAILED (2-9).
TAPE HFC 02 - 57, Side A
Representative Lancaster MOVED to ADOPT Amendment 6(new).
TIM BENINTENDI, STAFF, REPRESENTATIVE CARL MOSES, explained
that the amendment would extend an entitlement benefit to
unorganized communities that are within boroughs; a benefit
currently enjoyed by those outside of boroughs. It would not
increase costs to the state because the funding would come
from within the program. Sixty-five communities would be
added to the pool of those eligible. All unincorporated
communities would be eligible for a minimum entitlement
under the revenue sharing program.
Representative Lancaster noted that his intent would be for
the money to flow through a borough to the community.
Co-Chair Mulder clarified that the communities do not
currently receive funding through municipal assistance or
the Safe Communities program. The Alaska Municipal League
supports the amendment. He questioned why the change was not
made previously and noted that the pool would be diluted by
approximately $1.6 million dollars.
Mr. Benintendi thought that the impact would be closer to
$300 thousand dollars. He observed that 65 - 70 communities
would be affected.
Co-Chair Mulder questioned if capital-matching grants would
be affected.
BILL ROLFZEN, STATE REVENUE SHARING, DEPARTMENT OF COMMUNITY
AND ECONOMIC DEVELOPMENT explained that funding for
unincorporated communities would come out of the Municipal
Services Account within the Revenue Sharing program. This is
the same account that pays for road maintenance and health
facilities; there is no minimal entitlement. The statute
says that each unincorporated community should receive $25
thousand dollars, but this fluctuates with the appropriation
level. Based on this year's funding each unincorporated
community would receive $3,681 dollars per community. He
estimated that, with the qualifier in section 2, only 20 or
30 communities would qualify. He noted that they would have
to be eligible for the Capital Matching Grant program to
receive $25 thousand dollars per community.
Co-Chair Mulder concluded that the total draw would be about
$1 million dollars.
KEVIN RITCHIE, ALASKA MUNICIPAL LEAGUE, JUNEAU explained
that the Alaska Municipal League has not taken an official
position on the issue.
Representative Hudson questioned if any of the elements are
covered in the existing operating budget. Co-Chair Mulder
clarified that the elements were not in the operating
budget. Representative Hudson observed that funding would
come out of the assets of the Permanent Fund.
Representative Whitaker questioned if the $59 million dollar
appropriation would be increased by a million dollars. Co-
Chair Mulder explained that the total amount would not
change; funding would be reduced to the communities. He
pointed out that the amendment would send an inconsistent
message.
A roll call vote was taken on the motion to adopt Amendment
6.
IN FAVOR: Lancaster, Moses, Davies
OPPOSED: Hudson, Whitaker, Bunde, Croft, Davies, Foster,
Harris, Mulder, Williams
The MOTION FAILED (3-8).
Representative Hudson MOVED to ADOPT Amendment 7. Co-Chair
Mulder and Co-Chair Williams OBJECTED. Representative Hudson
explained that the amendment would reestablish the
distribution of the Permanent Fund to a percent of market
value and establish a 5 percent payout, which would insure
annual inflation proofing of the Permanent Fund at 3
percent. The amendment would statutorily fix a distribution
stream of the five percent payout at: 50 percent permanent
fund dividends and 50 percent general fund. The General Fund
would receive 50 percent minus the payout established in HB
20. He maintained that the amendment would provide a good
distribution of the assets of the Permanent Fund across two
boundaries. The dividend would continue to find strength and
would be difficult to modify without public notice.
Representative Hudson spoke in support of the payout. There
would be a 7% distribution of the earnings of the total
market value of the Permanent Fund [in FY03], which would
provide $900 million dollars toward the deficit and $900
million dollars to the dividend. There would be no change to
the dividend in 2002. In 2003, under the 7 percent payout,
the permanent fund dividend would be approximately $30
dollars less than the status quo. He acknowledged that the
amendment would affect the Permanent Fund dividend, but
stressed that dividends would be eliminated if the state
continues to drain the Constitutional Budget Reserve.
Representative Hudson noted that he introduced legislation
to respond to the constant draw upon the Constitutional
Budget Reserve, which is currently at $2.2 billion dollars.
He maintained that the Constitutional Budget Reserve would
be come the cash cow for the general fund and result in the
elimination of the Permanent Fund dividend. The amendment
would modify the title.
Representative Hudson observed that the amendment adds the
market value concept with a fixed distribution and fixed
sharing, an accommodation of the municipal dividend and
makes a significant effort toward filling the revenue gap
and preventing the need for onerous taxes or the elimination
of the dividend. He urged the Committee to pass Amendment
7.
Co-Chair Williams noted that legislative legal counsel
indicated that there could be a constitutional challenge
under the "single subject" provision if the amendment were
adopted.
Representative Carl Moses noted that he opposed the
amendment. He thought it should be a bill in and of itself.
Co-Chair Mulder noted that he supported the intent of the
amendment but stressed the need for another vehicle. He
offered to work on the concept and thought it was important
to the overall [revenue] package.
Representative John Davies clarified that the adoption of
Vice-Chair Bunde's amendment would not create a
constitutional problem under the "single subject" provision.
Representative Hudson stated that he would WITHDRAW
Amendment 7 due to legal concerns and noted that he would
work toward another vehicle. There being NO OJBECTION, it
was so ordered.
HB 20 was heard and HELD in Committee for further
consideration.
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