Legislature(1995 - 1996)

04/12/1995 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HOUSE BILL NO. 269                                                           
       "An Act relating  to credits against certain  taxes for                 
       contributions to  certain public educational  radio and                 
       television networks and stations and to  endowments for                 
       public educational  radio and television  networks; and                 
       providing for an effective date."                                       
  TOM WRIGHT, STAFF, REPRESENTATIVE IVAN  testified in support                 
  of HB 269.  He observed  that the legislation provides a tax                 
  credit for contributions  made to  instate public radio  and                 
  television stations and  networks.   The tax credit  ceiling                 
  was raised  from $100  thousand dollars  to $450.0  thousand                 
  dollars.  The credit is  allowed on 50 percent of  the first                 
  $100.0 thousand dollars in contributions  and 100 percent of                 
  the next $400.0 thousand dollars.  The new limits would also                 
  apply  to  the  university  system  and library  and  museum                 
  acquisitions.   The tax  credit would  be applied  against a                 
  taxpayer's liability under  insurance premiums,  corporation                 
  income, oil and gas production, oil and gas property, mining                 
  licenses and fisheries business taxes.   He explained that a                 
  credit claimed under one of the tax types may not be claimed                 
  under another tax type.                                                      
  Members  were provided with  a proposed committee substitute                 
  for HB  269, Work Draft  #9-LS0937\K, dated 4/3/95  (copy on                 
  file).     Mr.  Wright   explained  that   the  work   draft                 
  incorporates technical changes  requested by the  Department                 
  of Revenue.                                                                  
  Representative Mulder MOVED to adopt Work Draft #9-LS0937\K,                 
  dated 4/3/95.  There being NO OBJECTION, it was so ordered.                  
  Mr. Wright reviewed  changes incorporated by CSHB  269 (FIN)                 
  as   outlined  in   the  sectional   analysis  prepared   by                 
  Representative Ivan (copy on file).                                          
  Representative Mulder observed that the  fiscal note shows a                 
  loss  of revenue to  the state of $35  million dollars.  Mr.                 
  Wright  emphasized  that  revenue is  currently  being  lost                 
  through  contributions  to  the  University  of  Alaska  and                 
  Representative Brown asked  if the  total potential loss  of                 
  state revenues have been calculated.                                         
  EXCISE AUDIT. DEPARTMENT OF REVENUE  replied that the fiscal                 
  note  was  calculated  by  assuming   that  tax  payers  who                 
  participated in the program in FY  95 would take the maximum                 
  credit allowed in FY 96.  He stated that there is no way  to                 
  estimate  the maximum  loss  revenue  through deductions  by                 
  corporations that are not participating.                                     
  Representative Navarre expressed concern  with the level  of                 
  deduction allowed under the legislation.  He emphasized that                 
  tax  credits allow  appropriations  without the  legislative                 
  Mr. Bartholomew observed that not all corporations have made                 
  contributions.  He did not know if all the corporations that                 
  gave did so at the maximum level.                                            
  Representative Navarre expressed  support for the philosophy                 
  of HB  268.   He expressed  reservations in  regards to  the                 
  level  of  contribution  that  would  be diverted  from  the                 
  general fund by the tax credit.                                              
  In  response  to  a question  by  Representative  Brown, Mr.                 
  Wright  acknowledged that the  sponsor considered setting up                 
  two different contribution deductions.  He stressed that the                 
  sponsor did not want the public broadcasting credit to be in                 
  competition with the credit for the University of Alaska and                 
  libraries and museums.                                                       
  Representative  Brown expressed  reservations in  regards to                 
  the constitutionality  of the  tax credit.   She noted  that                 
  there is a prohibition against appropriating public money to                 
  private  institutions.   She  indicated support  for  public                 
  In  response  to a  question  by Representative  Mulder, Mr.                 
  Bartholomew  stated that  the  state  lost  $944.0  thousand                 
  dollars through  the tax credit  in FY  95.   Representative                 
  Mulder  suggested that  the credit  would  be a  "back door"                 
  appropriation.   He emphasized the  difficult decisions  the                 
  Committee  has  had  to  make  in  regards  to  cutting  the                 
  operating budget.                                                            
  Representative Navarre pointed  out that  there is no  match                 
  requirement for the tax credit.                                              
  spoke  in support of HB 268.   He noted that the educational                 
  tax  credit  was  passed  approximately  5  years ago.    He                 
  observed  that the  university  system, public  and private,                 
  have used them extensively.   He maintained that the  Alaska                 
  Pacific University and Sheldon Jackson  College would not be                 
  operating without the  tax credit.   He stated that about  a                 
  third of the contributions go to the University of Alaska, a                 
  third  to  the Alaska  Pacific  University  and  a third  to                 
  Shelton  Jackson College.  He  stressed that it is difficult                 
  to quantify how much the State will loose as a result of the                 
  tax credit.    Mr. Rasmuson  urged members  to consider  the                 
  benefit  to   the  state  of  Alaska.     He  stressed  that                 
  contributions will remain  in the state.   He did not  think                 
  that the state would loose $3.5 million dollars as estimated                 
  by the fiscal note.                                                          
  ENDOWMENT TRUST maintained that more people will be educated                 
  in the state  as a result of  the credit.  He  observed that                 
  the goal of  the Trust is  to wean public broadcasting  from                 
  state support.   He  stressed that  the Trust  will be  more                 
  creditable if funding  is provided  through the tax  credit.                 
  He emphasized that the money will help the Trust to leverage                 
  funding in order to build an endowment for the future.                       
  Mr.  Gottstein  stressed that  Alaska  will remain  a public                 
  schooling state.  He maintained that the public will benefit                 
  from a better educated society.   He asserted that something                 
  needs  to  be  done  to  ensure  that  essential  radio  and                 
  television service  exists in  all  parts of  Alaska in  the                 
  Representative Navarre commended the efforts of Mr. Rasmuson                 
  and Mr.  Gottstein.  He  noted the  competition for  general                 
  fund  dollars,  including K  -  12  education  funding.   He                 
  observed  that  the state  of  Alaska  spends  more  in  the                 
  university system per student  than in K - 12.  He suggested                 
  that  the Committee meet  in executive  session in  order to                 
  more accurately ascertain the potential drain to the general                 
  fund that the tax credit represents.                                         
  Mr. Gottstein  emphasized that  the legislation attempts  to                 
  create  a  mechanism  to  provide  incentives   for  greater                 
  contributions.   He stated  that the mission  is to  attract                 
  outside,  non-state  investment  to  the  recipients  of the                 
  credit.  He  accentuated that they are  seriously interested                 
  in raising outside capital contributions that will result in                 
  more education in Alaska and provide a better assurance that                 
  essential radio and television service will take place.                      
  Mr. Rasmuson observed  that more money  was paid by  outside                 
  sources to Shelton  Jackson than  the college received  from                 
  inside  Alaska.  He added that  there was as much money paid                 
  from outside  sources to  the Alaska  Pacific University  as                 
  came from inside the state.  He emphasized his desire to see                 
  a better educated work force.                                                
  Representative Mulder emphasized  the need  to balance  what                 
  works with what  is affordable to  the state.  He  suggested                 
  that  the credit amounts to an appropriation from the state.                 
  He reiterated the need to reduce spending.  He asked how the                 
  credit ceiling  was decided.   Mr  Rasmuson stated  that the                 
  ceiling level was arbitrary.                                                 
  Mr. Gottstein emphasized that if the  cap is not raised that                 
  public broadcasting will  be in  competition with the  funds                 
  that are currently being raised.  He stressed that it is not                 
  the intent  to take money  away from universities  which are                 
  already receiving  funds from  the credit.   He stated  that                 
  public radio  and television  is an  educational enterprise.                 
  He maintained that it is appropriate  to include them in the                 
  statute.  He  indicated that a  lower ceiling on the  credit                 
  would be  acceptable.   He urged  the Committee  to adopt  a                 
  level high enough not  to impact current contributions.   He                 
  emphasized  the  need  to ensure  that  public  broadcasting                 
  remains in the state of Alaska.                                              
  Mr. Rasmuson pointed  out that  most corporations in  Alaska                 
  are subchapter (s)  corporations and do not pay state taxes.                 
  He gave a brief history of  the institutions that have taken                 
  advantage of the tax credit.                                                 
  Representative Kelly  suggested that public  broadcasting be                 
  deleted and the current credit ceiling raised.  Mr. Rasmuson                 
  replied that he  would not  support such an  amendment.   He                 
  emphasized  that  public   broadcasting  and   postsecondary                 
  education are both educational items.  He stated that public                 
  broadcasting should  not be  sacrificed for  education.   He                 
  emphasized that they should be treated together.                             
  Mr. Gottstein speculated  that more than  50 percent of  the                 
  benefit will go to higher education.                                         
  Representative  Martin  suggested that  the  state's general                 
  fund contribution to the University  was reduced in response                 
  to increased contributions in  the form of tax credits.   He                 
  thought there would  be no net  gain in terms of  University                 
  funding.      He   observed  that   the   University   is  a                 
  responsibility  of  the state.    He expressed  concern that                 
  other non-profit organizations would want to be added to the                 
  Mr. Rasmuson did not  think that corporations would  give to                 
  other organizations.                                                         
  (Tape Change, HFC 95-83, Side 2)                                             
  Representative  Parnell  queried  the  long  term  plan  for                 
  phasing out state funding.                                                   
  Mr. Gottstein replied that the plan is to create a mechanism                 
  to provide a substantial trust that will throw off income in                 
  lieu of federal  and state  funding.  He  observed that  the                 
  state  contributes $7.2  million  dollars to  public  radio,                 
  television and RATNet.   He noted  that they are asking  for                 
  less  in  FY  96  than  was  appropriated  in  FY  95.    He                 
  acknowledged that the  state contribution  must be  reduced.                 
  He stated that the  goal is to raise $100.0  million dollars                 
  for the endowment.  He emphasized that it would be easier to                 
  raise  money if  there  was  some money  in  the  bank.   He                 
  stressed that incentives to attract  private capital must be                 
  developed.  He reiterated that the contribution amount could                 
  be reduced.                                                                  
  Mr. Rasmuson emphasized that there are not many corporations                 
  that pay taxes in the state of Alaska.                                       
  In  response  to a  question  by Representative  Mulder, Mr.                 
  Gottstein  stated  that   a  five   year  sunset  would   be                 
  reasonable.   He did not support a  sunset in regards to the                 
  education contribution.                                                      
  Representative  Navarre noted  that  the legislation  allows                 
  credits to individual stations as well as to the  endowment.                 
  He  expressed  concern  that  the   system  will  suffer  as                 
  contributions  are allocated  to individual  stations.   Mr.                 
  Gottstein felt that  the majority of contributions  would go                 
  to the endowment.  He stated  that most of the contributions                 
  to  the University are  given to endowments.   He emphasized                 
  that  contributions  to  the  endowment  will   protect  the                 
  principal investment.                                                        
  Mr.  Rasmuson observed  that most stations  do not  have the                 
  luxury  of   setting   money   aside   for   an   endowment.                 
  Representative Navarre expressed  concern that the Anchorage                 
  television  station  and  other urban  radio  stations could                 
  create competition for the endowment.                                        
  Mr. Gottstein emphasized that essential  service needs to be                 
  protected.   He stated  that contributions  to rural  Alaska                 
  would  be  to the  same  end,  of ensuring  that  service is                 
  provided.   He  did not think  that urban  broadcast centers                 
  would receive significant  contributions, since  substantial                 
  commercial competition exists in those areas.                                
  Representative  Kelly  asked   if  underwriting  on   public                 
  broadcasts will amount to commercials.                                       
  Congress set  in the Communications Act  specific parameters                 
  which  limit  underwriting  to things  that  do  not mention                 
  price, adjectives that  are comparative or superlative,  and                 
  do not  amount to a call to  action.  He did  not think that                 
  federal guidelines would be relaxed.                                         
  HB 269 was HELD in Committee for further discussion.                         

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