Legislature(2001 - 2002)
03/05/2002 03:22 PM MLV
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 tax. 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 well. 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.