Legislature(2013 - 2014)HOUSE FINANCE 519

02/27/2014 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair on 2/28/14 --
+ HB 204 SALMON & HERRING PRODUCT DEV'T TAX CREDIT TELECONFERENCED
Heard & Held
*+ HB 306 EVAL. INDIRECT EXPENDITURES; TAX CREDITS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 49 MEDICAID PAYMENT FOR ABORTIONS; TERMS TELECONFERENCED
Moved HCS SSSB 49(FIN) Out of Committee
HOUSE BILL NO. 306                                                                                                            
                                                                                                                                
     "An Act  relating to tax credits  and administration of                                                                    
     tax  credit  programs;   requiring  the  Department  of                                                                    
     Revenue  to report  indirect expenditures;  relating to                                                                    
     the   duties   of   state   agencies;   requiring   the                                                                    
     legislative   finance  division   to  analyze   certain                                                                    
     indirect  expenditures;  relating  to lapse  dates  for                                                                    
     appropriations for capital  projects; repealing certain                                                                    
     statutes   authorizing   indirect   expenditures;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
3:25:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STEVE THOMPSON, SPONSOR,  spoke to the bill's                                                                    
goal  pertaining to  fiscal responsibility.  The bill  would                                                                    
create  a process  by which  lost  revenue through  indirect                                                                    
spending  was reviewed  by the  legislature. The  bill would                                                                    
enable  the legislature  to make  sound policy  decisions on                                                                    
whether certain  indirect spending should continue.  He read                                                                    
from a prepared statement:                                                                                                      
                                                                                                                                
     House Bill  306 creates the process  which lost revenue                                                                    
     through   indirect   spending   is  reviewed   by   the                                                                    
     legislature  and  enables  them to  make  sound  policy                                                                    
     decisions on  whether certain indirect  spending should                                                                    
     continue.  With  our   future  budget  declining,  this                                                                    
     legislature  must  have  a mechanism  established  that                                                                    
     routinely  brings indirect  spending under  legislative                                                                    
     scrutiny. Indirect  spending in the State  of Alaska is                                                                    
     authorized  through  provisions  in  law  that  confers                                                                    
     preferential  treatment  through  credits,  exemptions,                                                                    
     deductions,   deferrals,  discounts,   exclusions,  and                                                                    
     differential   allowances.    Like   direct   spending,                                                                    
     indirect  spendings are  designed to  encourage certain                                                                    
     kinds of  activities for public  benefit or to  aid tax                                                                    
     payers.  Unlike  direct   spending  programs,  indirect                                                                    
     expenditures  are not  itemized and  do not  go through                                                                    
     the scrutiny  of any  budget process  that we  have. An                                                                    
     indirect    expenditure    provision    may    continue                                                                    
     indefinitely without any  fiscal oversight. [Discounts]                                                                    
     were designed  to encourage  benefit for  taxpayers and                                                                    
     encourage business.                                                                                                        
                                                                                                                                
     What this bill  does is require that  the Department of                                                                    
     Revenue  prepare and  deliver a  report to  include the                                                                    
     name of the indirect  expenditure, a brief description,                                                                    
     statutory  authority, sunset  date, date  of repeal  if                                                                    
     applicable,   legislative   intent,   public   purpose,                                                                    
     estimated annual  effect for the past  five years, cost                                                                    
     to administer the indirect  expenditure, and the number                                                                    
     of  beneficiaries.  The  report would  be  prepared  by                                                                    
     November 1,  before the first  regular session  of each                                                                    
     new legislature.                                                                                                           
                                                                                                                                
     All  the  department  agents and  agencies  and  public                                                                    
     corporations are  directed to work with  the Department                                                                    
     of Revenue  commissioner to complete  this information.                                                                    
     This  requires  Legislative   Finance  to  prepare  and                                                                    
     deliver a  report to the legislature  that includes the                                                                    
     estimate  of   the  lost  revenue  from   the  indirect                                                                    
     expenditure, the  estimate of  the monetary  benefit of                                                                    
     the   indirect  expenditure   to   the  recipients,   a                                                                    
     determination if legislative intent  was met or not and                                                                    
     why   the  intent   was  not   met  if   applicable,  a                                                                    
     recommendation   whether   this  indirect   expenditure                                                                    
     should continue, and an  explanation of the methodology                                                                    
     and the assumptions used to create the report.                                                                             
                                                                                                                                
Representative  Thompson  explained  that the  report  would                                                                    
analyze all  departments, agencies, and  public corporations                                                                    
beginning with  the FY 15  legislative two-year  session and                                                                    
including:  Department  of  Fish  and  Game,  Department  of                                                                    
Health  and   Social  Services,  Department  of   Labor  and                                                                    
Workforce  Development,  and   Department  of  Revenue.  The                                                                    
legislative  session beginning  in  2017  would include  the                                                                    
Alaska Court  System and  the Department  of Administration.                                                                    
All  remaining agencies  would be  reviewed  in 2019.  After                                                                    
initial review,  reviews would be  conducted every  6 years.                                                                    
The report would be delivered on  the first day of the first                                                                    
regular  session of  each new  legislature. The  legislature                                                                    
would have two years to review the reports.                                                                                     
                                                                                                                                
3:29:56 PM                                                                                                                    
                                                                                                                                
Representative Thompson continued to read a statement.                                                                          
                                                                                                                                
     Sunsets  the following  credits  on the  day after  the                                                                    
     last   day  of   the  regular   session  of   the  29th                                                                    
     Legislature. First  up would be education  tax credits,                                                                    
     film tax credits, veteran  employment tax credits, Winn                                                                    
     Brindle scholarship tax  credits, salmon production tax                                                                    
     credits,  salmon  utilization   tax  credits,  CDQ  tax                                                                    
     credits.                                                                                                                   
                                                                                                                                
Representative  Thompson  acknowledged   that  many  of  the                                                                    
credits  were important  and  created  jobs; therefore,  the                                                                    
vast majority of the items  would most likely be renewed. He                                                                    
pointed  to an  extensive study  that compiled  the list  of                                                                    
credit programs over  the prior interim. He  stated that the                                                                    
bill would not place a  significant burden on the Department                                                                    
of   Revenue.  He   believed  it   was  important   for  the                                                                    
legislature to  review credits it had  created years earlier                                                                    
and  to  determine  their effectiveness.  Additionally,  the                                                                    
bill included a claw-back  provision that would lapse unused                                                                    
appropriations when substantial and  ongoing work on capital                                                                    
projects  failed   to  begin  within   five  years   of  the                                                                    
appropriation;  including  named recipients,  unincorporated                                                                    
communities,  and state  agencies. Currently  municipalities                                                                    
and  boroughs were  the  only entities  required  to use  or                                                                    
loose within five years. Entities  would either be granted a                                                                    
reappropriation  or  the  funds  would be  returned  to  the                                                                    
state. He thanked the committee for its time.                                                                                   
                                                                                                                                
3:32:03 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze disclosed  that he  was co-sponsoring  the                                                                    
legislation. He  discussed that the  bill would  address the                                                                    
state's general fund expenditures.  He relayed that the bill                                                                    
included  much  more  than  the  film  industry  credit.  He                                                                    
believed the  bill reflected substantial  change in  the way                                                                    
business was done.                                                                                                              
                                                                                                                                
Representative   Thompson  replied   that  every   piece  of                                                                    
legislation  representing  an  indirect expenditure  to  the                                                                    
state  had been  included.  He spoke  to  the importance  of                                                                    
providing equal scrutiny to all programs.                                                                                       
                                                                                                                                
HB  306  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Stoltze discussed his  intent to recess the meeting                                                                    
until the following morning.                                                                                                    
                                                                                                                                

Document Name Date/Time Subjects
HB 306 Sectional Analysis- Legal.pdf HFIN 2/27/2014 1:30:00 PM
HB 306
HB 306 Sponsor Statement.pdf HFIN 2/27/2014 1:30:00 PM
HRLS 4/13/2014 2:00:00 PM
HB 306
Indirect Expenditures Report - Legislative Research.pdf HFIN 2/27/2014 1:30:00 PM
HB 306
Alaskan-Seafood-Processing-Effluent-Guidelines-Notice-of-Data-Availability-Factsheet.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
DOR 2013 Annual Report Page 19.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
HB 204 Summary of Ocean Beauty Testimony.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
HB 204 Support product development tax credit 2.5.14.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
SPD Overview for HFISH.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
HB 204 Sponsor Statement HFIN Committee.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
SSHB204-SPDC qualified vs non qualified equipment.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
Letter of Support HB 204 021714.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
HB 240 Support.pdf HFIN 2/27/2014 1:30:00 PM
HB 240
HB 204 Support - LCF.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
HB 204 Presentation HFIN.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
HB 204 CS WORKDRAFT P version.pdf HFIN 2/27/2014 1:30:00 PM
HB 204
SB 49 - DHSS Support Document.pdf HFIN 2/27/2014 1:30:00 PM
SB 49
HB 306 NEW FISCAL NOTES.pdf HFIN 2/27/2014 1:30:00 PM
HB 306
HJR 10 - Version C - HFIN CS.pdf HFIN 2/27/2014 1:30:00 PM
HJR 10
DOR HB 204 data on Fishery Business Tax Credits 2004-2014.pdf HFIN 2/27/2014 1:30:00 PM
HB 204