Legislature(2001 - 2002)

03/05/2002 03:22 PM MLV

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 371-ALASKA VETERANS' MEM.ENDOWMENT FUND                                                                                    
CHAIR CHENAULT announced the first  order of business, HOUSE BILL                                                               
NO.  371,  "An Act  establishing  the  Alaska veterans'  memorial                                                               
endowment fund  and providing for  credits against  certain taxes                                                               
for contributions  to that  fund; relating  to other  tax credits                                                               
for certain contributions; and providing for an effective date."                                                                
Number 0167                                                                                                                     
CAROL CARROLL, Director,  Central Office, Administrative Services                                                               
Division, Department  of Military  & Veterans'  Affairs, informed                                                               
the committee  that the  bill would  indeed establish  the Alaska                                                               
veterans'  memorial  endowment fund.    The  purpose is  to  have                                                               
income from  that fund  maintain the  monuments and  memorials to                                                               
veterans and the military around the  state.  She noted that some                                                               
memorials  are in  pretty bad  shape; in  the past,  the veterans                                                               
themselves have volunteered their time  to keep up the memorials.                                                               
She pointed  out that  already $125,000  has been  collected from                                                               
members of the Alaskan community.                                                                                               
Number 0246                                                                                                                     
MS. CARROLL explained  that the fiscal note is  for an additional                                                               
$125,000 for  the state "match" to  get some seed money  into the                                                               
endowment fund.   She reported  that businesses would be  able to                                                               
get a tax  credit for any donations given to  the fund, but there                                                               
are  some limitations  on that.   She  referred to  the sectional                                                               
analysis which  describes what  the tax  credit is  and indicated                                                               
that  someone  from  the  Department   of  Revenue  could  answer                                                               
questions on the tax credit portion of the bill.                                                                                
Number 0303                                                                                                                     
MS. CARROLL  informed members that  Section 4 is  the description                                                               
of the fund  that would be managed by the  Department of Revenue.                                                               
The Department  of Revenue  would determine  the income  off that                                                               
and would be allocated to  the Department of Military & Veterans'                                                               
Affairs by the  legislature.  From that point  on, the department                                                               
would work  with veterans groups to  grant money to them  for the                                                               
maintenance or construction of military monuments and memorials.                                                                
Number 0367                                                                                                                     
REPRESENTATIVE MURKOWSKI  said she understands from  talking with                                                               
[Major General  Oates, Adjutant  General/Commissioner, Department                                                               
of Military and Veterans' Affairs]  and some of the veterans that                                                               
there is no  state money that currently  goes towards maintenance                                                               
of  any  of  the  memorials.     The  memorials  have  only  been                                                               
maintained  through  volunteer  efforts.    She  asked  how  many                                                               
veterans' memorials there are in the state.                                                                                     
Number 0458                                                                                                                     
PAT CAROTHERS,  Chair, Alaska  Veterans Advisory  Council (AVAC),                                                               
replied that there are  78 right now.  He said  there will be one                                                               
more with promised funds.                                                                                                       
Number 0516                                                                                                                     
MR. CAROTHERS reported that in  his experience with administering                                                               
the Archie Van  Winkle memorial fund, there was  $2,000 left over                                                               
from the  construction and building of  that particular memorial.                                                               
He reported  that the veterans  have repaired  it, professionally                                                               
cleaned it,  and put in  benches and  trees, and that's  all been                                                               
done with the  interest of the $2,000.  He  told members there is                                                               
no question  in his mind that  with $250,000, up to  90 different                                                               
memorials could be supported.   He noted that there are different                                                               
kinds  of memorials.    Several are  memorial  highways -  DOT/PF                                                               
[Department of Transportation &  Public Facilities] takes care of                                                               
them anyway - and some are a plaque on a bridge.                                                                                
Number 0606                                                                                                                     
MR.  CAROTHERS  stated  that the  largest  expenditures  will  be                                                               
replacement  of  the  memorials.    This  bill  will  afford  the                                                               
opportunity to  maintain these memorials  in a  dignified manner,                                                               
and one  the veterans richly  deserve.  He acknowledged  that the                                                               
veterans who  are commemorated  did much  to honor  this country;                                                               
they  bled and  died for  this country  and for  this state.   He                                                               
affirmed that  other than Pearl  Harbor, the only medal  of honor                                                               
awarded for action in the United  States was in Adak, Alaska, PFC                                                               
[Private First  Class] Martinez.   He offered that what  is being                                                               
asked  for is  a  means  in which  to  honorably recognize  those                                                               
heroic efforts that these memorials recognize.  He said:                                                                        
     Places  of  remembrance need  to  be  maintained.   For                                                                    
     [Alaskan]  veterans who  took care  of Americans,  it's                                                                    
     high time  we took care of  them.  Now the  public has,                                                                    
     through private  contributions, ... put their  money up                                                                    
     -  $125,000.   We're  asking for  $125,000 in  matching                                                                    
     funds, ...  and we will  live off that  interest, which                                                                    
     will  come  out  to  about  $12,000  a  year.  ...  I'm                                                                    
     completely  satisfied   that  we  can   maintain  these                                                                    
     memorials in an  honorable way by using  these funds in                                                                    
     that manner.                                                                                                               
MR. CAROTHERS introduced  Joe [Sadlier], a World  War II veteran,                                                               
who was  one of  those who brought  LST-325 [Landing  Ship, Tank]                                                               
across the  Atlantic Ocean from Greece  to Mississippi.  He  is a                                                               
native of Juneau and now lives in Ketchikan.                                                                                    
Number 0830                                                                                                                     
CHAIR CHENAULT asked Mr. Carothers  if he felt the maintenance on                                                               
these memorials could be done on this money.                                                                                    
MR. CAROTHERS  replied that he  is thoroughly convinced  of that,                                                               
especially  with  his  experience  on  the  [Archie  Van  Winkle]                                                               
memorial  in  town.    He  noted there  are  other  memorials  in                                                               
[Juneau]  that haven't  been  touched.   The  USS [United  States                                                               
Ship] Juneau [memorial]  brass plaque, with the names  of all who                                                               
perished in  that, hasn't  been shined or  cleaned since  [it was                                                               
put in].   He commented  that there  is no committee  behind that                                                               
one,  and that's  what can  happen.   He said  he thinks  that it                                                               
would be dishonoring  [those veterans] if this  [bill] doesn't go                                                               
through.  He urged the committee to pass on [HB 371].                                                                           
Number 0990                                                                                                                     
CHAIR CHENAULT asked about the  tax implications for corporations                                                               
and what  may or may  not be  deductible or allowable  under this                                                               
current  bill.   He referred  to the  paragraph in  the sectional                                                               
analysis that talks  about Sections 2, 6, 8, 10,  12, 14, and 16,                                                               
the parallel sections  dealing with oil and  gas production taxes                                                               
and pipeline  transportation property taxes, and  he wondered how                                                               
that would work.                                                                                                                
Number 1070                                                                                                                     
CHUCK  HARLAMERT,  Juneau  Section  Chief,  Central  Office,  Tax                                                               
Division,  Department  of  Revenue,  explained  that  the  credit                                                               
allows  a combined  credit,  no  matter what  tax  it is  applied                                                               
against,  up to  $150,000  a  calendar year.    Similar to  other                                                               
current  education tax  credits, taxpayers  can choose  which tax                                                               
liability they  are liable for  to apply  it against.   The taxes                                                               
involved are  insurance premium taxes, corporate  income tax, oil                                                               
and gas  severance tax,  and oil and  gas property  taxes, mining                                                               
license tax,  fisheries business  tax, and the  fisheries landing                                                               
Number 1140                                                                                                                     
MR. HARLAMERT explained that they  would get a credit against the                                                               
state tax  liability and  a net deduction  on the  federal return                                                               
for their contribution, less the amount of the state tax credit.                                                                
Number 1162                                                                                                                     
REPRESENTATIVE MURKOWSKI referred  to Section 17 and  said she is                                                               
trying  to   understand  how  the   amounts  are   available  for                                                               
appropriation.   She  asked if  the 5-percent  payout is  for the                                                               
succeeding years or just in the first year.                                                                                     
Number 1260                                                                                                                     
JOHN   JENKS,  Chief   Investment  Officer,   Treasury  Division,                                                               
Department of Revenue, said that  the investment features of this                                                               
bill  set  out instruction  for  the  department to  invest  this                                                               
endowment  to earn  5  percent  after inflation  over  time.   If                                                               
inflation is 3 percent, he said  the endowment would be trying to                                                               
earn  8 percent.    There is  explicit  instruction to  inflation                                                               
proof this  endowment so that  ten years from now,  Mr. Carothers                                                               
will have  the same  economic power  to maintain  those monuments                                                               
that he has today.  The  transitional language says it will build                                                               
up to  that three years.   The first fiscal year  starts out with                                                               
the monthly market  values and then it builds  to that three-year                                                               
rolling average.  He explained  that the three-year average is in                                                               
there to provide  some "smoothing."  Markets go up  and down, and                                                               
over time this  will smooth things out so that  the veterans will                                                               
have a  fairly stable expectation  of how much  resources they'll                                                               
have year to year  by having a stable payout over  time - that is                                                               
5 percent of the average market value of the endowment.                                                                         
REPRESENTATIVE  MURKOWSKI said  her question  was whether  or not                                                               
the 5 percent of the market value is what it is capped at.                                                                      
MR. JENKS said yes.                                                                                                             
Number 1360                                                                                                                     
REPRESENTATIVE  MURKOWSKI  asked  what he  anticipated  would  be                                                               
available to Mr. Carothers and his group on an annual basis.                                                                    
MR.  JENKS   replied  that   approximately  $12,500   in  current                                                               
purchasing power  each year would  be available.  A  great market                                                               
could certainly grow it, or if  people donate to the fund and the                                                               
fund gets bigger because of  that, then that money would increase                                                               
as  a result  of  the  subsequent donations.    For the  original                                                               
$250,000, he  indicated that he  doesn't anticipate  that growing                                                               
to some large amount.                                                                                                           
Number 1433                                                                                                                     
CHAIR  CHENAULT  asked   if  this  was  modeled   after  the  PFD                                                               
[permanent fund dividend].                                                                                                      
MR. JENKS  replied that this  legislation is really  very typical                                                               
of  current  endowment  language  used by  individuals  or  other                                                               
states.   He  agreed that  it's  thought to  be the  best way  to                                                               
provide for the  most efficient investment and  stable payout for                                                               
these endowments.                                                                                                               
Number 1470                                                                                                                     
REPRESENTATIVE  MURKOWSKI asked  how  many  other endowments  the                                                               
Department of Revenue manages.                                                                                                  
MR.  JENKS  answered  that  this  would  be  the  sixth  specific                                                               
endowment  managed by  the department.   He  explained that  this                                                               
language  is  the model  language.    Something similar  to  this                                                               
language was used for the  power cost equalization fund, which is                                                               
thought  of as  an endowment  also.   In reply  to a  question by                                                               
Representative  Murkowski, he  answered  that  because there  are                                                               
these endowments and the other  funds managed by the state, there                                                               
is  a real  scale of  efficiency  that allows  the department  to                                                               
invest these  very efficiently, yet  still have the  liquidity to                                                               
provide  on an  annual basis  for the  payout, so  it works  very                                                               
Number 1565                                                                                                                     
REPRESENTATIVE  GREEN  asked  if   the  other  five  [endowments]                                                               
averaged in the 8-plus percent [interest] in the last two years.                                                                
MR. JENKS answered  that they have done fairly  well, and several                                                               
of the other endowments don't have  this language.  He noted that                                                               
Senator  Therriault has  sponsored  some  legislation that  would                                                               
change the "rules of the road"  as they're set out in statute for                                                               
investment of  the children's  trust and  public school  trust to                                                               
make  them  as  efficient  as  this.   Over  time,  he  said  the                                                               
department thinks this endowment,  absent that bill becoming law,                                                               
would actually achieve superior  long-term returns because of the                                                               
flexibility incorporated here.                                                                                                  
Number 1625                                                                                                                     
REPRESENTATIVE  MURKOWSKI asked  if the  people who  have already                                                               
donated to the  fund will be able to avail  themselves of the tax                                                               
credits that are being talked about.                                                                                            
MR.  HARLAMERT replied  that no,  the contributions  were already                                                               
made.   In  order to  qualify  for the  credit, the  contributors                                                               
would have to be made in a  year in which the bill was effective.                                                               
He responded  to an earlier  question of how much  could possibly                                                               
accumulate.    He explained  that  in  the Alaska  education  tax                                                               
credit program,  the taxpayer only  gets 50 percent of  the first                                                               
$100,000 as a credit, but 100  percent of the second $100,000, so                                                               
people  tend  to contribute  the  entire  $200,000 for  the  full                                                               
150,000 credit.  At least 90  percent of all the tax credits they                                                               
get in  terms of dollars are  "maxed out" at the  $150,000 level.                                                               
It's  a very  tight-knit  group  of taxpayers  who  tend to  have                                                               
strong  charitable  giving  programs  in their  own  right.    He                                                               
implied it  was likely that the  fund, if it grows,  will grow in                                                               
substantial steps, $150,000 at a "pop."                                                                                         
CHAIR  CHENAULT commented  that this  is set  up more  for bigger                                                               
contributors than for people like himself.                                                                                      
Number 1744                                                                                                                     
CHAIR CHENAULT announced that HB 371 would be held over.                                                                        

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