Legislature(2017 - 2018)GRUENBERG 120

02/14/2017 03:00 PM STATE AFFAIRS

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* first hearing in first committee of referral
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Heard & Held
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
           HB 91-APOC REGISTRATION FEES; LOBBYIST TAX                                                                       
3:03:18 PM                                                                                                                    
CHAIR KREISS-TOMKINS  announced that the first  order of business                                                               
would be HOUSE BILL NO. 91,  "An Act relating to fees for certain                                                               
persons filing  disclosure statements  or other reports  with the                                                               
Alaska  Public   Offices  Commission;   relating  to  a   tax  on                                                               
legislative lobbyists; and providing for an effective date."                                                                    
CHAIR KREISS-TOMKINS  opened public  testimony on  HB 91.   After                                                               
ascertaining  that there  was no  one who  wished to  testify, he                                                               
closed public testimony.                                                                                                        
3:04:29 PM                                                                                                                    
REPRESENTATIVE  SAM  KITO,  Alaska State  Legislature,  as  prime                                                               
sponsor of  HB 91,  expressed his  concern that  it is  not clear                                                               
that revenue  generated from the  lobbyist tax proposed in  HB 91                                                               
would  directly  benefit  the Alaska  Public  Offices  Commission                                                               
(APOC).   He mentioned that  staff is  working on changes  to the                                                               
bill to rectify this issue and make other improvements.                                                                         
3:05:51 PM                                                                                                                    
CRYSTAL KOENEMAN,  Staff, Representative  Sam Kito,  Alaska State                                                               
Legislature, on  behalf of Representative Kito,  prime sponsor of                                                               
HB  91,  referred  to  discussions in  the  House  State  Affairs                                                               
Standing Committee meeting of  02/09/17 regarding raising revenue                                                               
for APOC  to offset general fund  dollars and doing so  through a                                                               
tax  or a  fee.   She  mentioned  that amendments  to  HB 91  are                                                               
forthcoming to respond to concerns expressed in the hearing.                                                                    
MS. KOENEMAN referred to Section 1  of HB 91, which states that a                                                               
candidate, group, or nongroup entity  is required to file reports                                                               
with APOC.   She said  that in response  to a request  from APOC,                                                               
staff will  add "persons" to  that section to broaden  the intent                                                               
to include additional groups such  as labor unions, corporations,                                                               
and   other  individuals.     She   stated  that   a  candidate's                                                               
registration fee would be for  the full election cycle instead of                                                               
just  12  months.    She  also noted  the  addition  of  language                                                               
specifying  the   civil  penalties   for  non-payment   of  filer                                                               
registration  fees,  which  was  inadvertently left  out  of  one                                                               
section of HB 91.                                                                                                               
3:08:40 PM                                                                                                                    
REPRESENTATIVE BIRCH expressed that  he doesn't support an income                                                               
tax, but wouldn't oppose a flat  rate, whether it be per lobbyist                                                               
or per client.   He opined that the flat  fee is more manageable,                                                               
and it is fair and equitable.                                                                                                   
3:09:52 PM                                                                                                                    
REPRESENTATIVE WOOL asked for the number of lobbyists.                                                                          
3:10:24 PM                                                                                                                    
HEATHER  HEBDON,   Executive  Director,  Alaska   Public  Offices                                                               
Commission (APOC),  responded that  the five-year  average number                                                               
of registered lobbyists is approximately 132.                                                                                   
3:11:02 PM                                                                                                                    
REPRESENTATIVE  TUCK referred  to  the addition  of "persons"  to                                                               
Section 1 of HB 91 and said  that "persons" is one of the reasons                                                               
we  have Citizens  United.    He added  that  the courts  haven't                                                               
differentiated  between  natural  beings and  artificial  beings;                                                               
therefore,  corporations  have  First Amendment  rights  and  the                                                               
ability to use their general funds for unlimited contributions.                                                                 
REPRESENTATIVE  TUCK offered  that the  burden of  overseeing the                                                               
finances  of lobbyists  with larger  revenue  streams is  greater                                                               
than for  the smaller  groups, so  it makes sense  to have  a fee                                                               
structure based on revenue.                                                                                                     
3:12:25 PM                                                                                                                    
REPRESENTATIVE  BIRCH cited  the  information on  page  2 of  the                                                               
Department of Revenue's  (DOR's) fiscal note:   the average total                                                               
fees paid to  lobbyists were about $17 million and  a 2.5 percent                                                               
tax would  generate about $425,000  in annual revenue.   He asked                                                               
for  an explanation  of the  discrepancy between  the amounts  of                                                               
anticipated revenue - $425,000 listed  on the DOR fiscal note and                                                               
$244,000 listed  on the sponsor  statement.  He offered  that 130                                                               
lobbyists, each  paying a  $2,000 fee,  would generate  an amount                                                               
like that proposed.                                                                                                             
REPRESENTATIVE  KITO explained  that  the  sponsor statement  was                                                               
based on  APOC information  from a  year and a  half ago  and DOR                                                               
used current  information.   He stated that  the DOR  estimate of                                                               
$425,000  does  not  acknowledge  the  removal  of  the  existing                                                               
lobbying fee proposed by HB  91, which amounts to about $106,000.                                                               
He said  deducting $106,000 from $425,000  yields about $380,000.                                                               
He  promised  a  revised  sponsor statement  with  the  committee                                                               
substitute (CS).                                                                                                                
3:14:37 PM                                                                                                                    
REPRESENTATIVE KNOPP offered that  besides passing legislation to                                                               
raise  revenue,  it  is  the  responsibility  of  legislators  to                                                               
examine how departments conduct  their business and then consider                                                               
modifications.   He asserted  that the  legislative body  has not                                                               
had that discussion, nor has it  taken a balanced approach to the                                                               
budget  process.   He  suggested  that  APOC fees  and  reporting                                                               
requirements discourage  candidates and appointees of  boards and                                                               
commissions from seeking public office.                                                                                         
REPRESENTATIVE  KNOPP referred  to the  sponsor statement,  which                                                               
states  that  APOC's budget  was  reduced  from $1.3  million  in                                                               
fiscal year 2015 (FY 15) to $866,000  in FY 16.  He asserted that                                                               
the reduced amount  occurred only in that one year.   He referred                                                               
to  the APOC  funding document  in the  committee packet,  titled                                                               
"Multi-year Allocation  Totals with Funding -  Operating Budget -                                                               
FY 2017 Conf Committee Structure,"  and noted funding for 2017 at                                                               
$1.033  million, with  $1,050  million in  the  FY 18  governor's                                                               
budget.  He  reiterated his belief that the  legislature needs to                                                               
have  discussions  about  conducting   business  and  a  balanced                                                               
approach  to the  budget,  not  just for  APOC  but  for all  the                                                               
state's agencies and departments.   He asked if those discussions                                                               
have taken place.                                                                                                               
REPRESENTATIVE KITO  asserted that APOC's budget  was reduced and                                                               
the agency is  struggling to meet its statutory  obligations.  He                                                               
said that the legislature  authorized additional program receipts                                                               
- the  $1,033 million figure  on the document -  which represents                                                               
what the  legislature considered to  be the appropriate  level of                                                               
funding for APOC.  He went  on to say that his primary motivation                                                               
for  introducing HB  91  is to  create a  mechanism  for APOC  to                                                               
collect  receipts  more than  $106,000  and  up to  the  $240,000                                                               
authorized  by the  legislature.   His  secondary motivation,  he                                                               
said, is  to increase  APOC staff in  Juneau to  provide adequate                                                               
oversight of lobbying activities.                                                                                               
3:18:21 PM                                                                                                                    
REPRESENTATIVE KNOPP  expressed his  concern that there  would be                                                               
additional  oversight  requirements  for   APOC  and  fees  would                                                               
REPRESENTATIVE  KITO responded  that  APOC operated  at a  stable                                                               
staffing level before  reductions put pressure on  its ability to                                                               
do some  of the  audits.   He mentioned that  he did  not foresee                                                               
uncontrolled  growth for  the  organization.   He  said that  the                                                               
legislature would continue  to review the APOC  budget and assess                                                               
APOC's   performance   annually   through   the   Department   of                                                               
Administration (DOA).   He added  that the legislature  may audit                                                               
the  agency to  determine  if it  is  performing the  statutorily                                                               
designated functions.   He emphasized the  importance of allowing                                                               
APOC to  collect revenue up  to the receipt authority  amount and                                                               
the  need   for  additional  support  to   perform  its  lobbying                                                               
oversight activities.                                                                                                           
3:20:15 PM                                                                                                                    
CHAIR  KREISS-TOMKINS asked  what oversight  activities APOC  has                                                               
been unable to fulfill.                                                                                                         
REPRESENTATIVE KITO replied that his  understanding is there is a                                                               
need  to hire  a professional  who can  understand and  interpret                                                               
statute  and   provide  advice   to  lobbyists   filing  reports.                                                               
Currently there is just a clerk performing those duties.                                                                        
3:21:11 PM                                                                                                                    
REPRESENTATIVE JOHNSON  asked if Representative  Kito anticipated                                                               
that taxes on  other professions would be  "imbedded" in statute.                                                               
She expressed  her concern with maintaining  simplicity regarding                                                               
taxes in state law.                                                                                                             
REPRESENTATIVE  KITO  responded   that  the  lobbying  profession                                                               
regulated under APOC  is a unique function and is  not related to                                                               
other  professions that  are regulated  under  the Department  of                                                               
Commerce,  Community &  Economic  Development (DCCED).   He  said                                                               
that   the  professions   performing  licensing   activities  and                                                               
investigations  under DCCED  are already  required to  "pay their                                                               
own way,"  and the fees are  adjusted every other year  for those                                                               
professions.  All  the activities associated with  the boards are                                                               
paid for  by the licensees  and registrants.   He said  that APOC                                                               
has  been supported  by general  fund  revenue and  the $250  per                                                               
client  fee,   which  has  generated   a  little   over  $100,000                                                               
historically.    He  asserted that  nothing  requires  that  APOC                                                               
operations are  supported entirely  by the professions  that they                                                               
regulate.   He  offered  that such  a  requirement would  greatly                                                               
increase APOC  fees.  He  maintained that  HB 91 was  proposed to                                                               
raise revenue  just to the  level of program  receipts authorized                                                               
by the  legislature and  to provide for  better oversight  in the                                                               
lobbying office.   He speculated  that requiring  the professions                                                               
regulated  by APOC  to pay  their own  way would  result in  much                                                               
higher fees than those proposed in HB 91.                                                                                       
3:24:17 PM                                                                                                                    
REPRESENTATIVE WOOL cited the  financial disclosure reporting fee                                                               
of $50 in HB 91 and asked  what the current fee was for financial                                                               
REPRESENTATIVE KITO responded  that there is not  currently a fee                                                               
for financial disclosure reporting.                                                                                             
REPRESENTATIVE WOOL asked what the  current candidate fee was for                                                               
filing with APOC.                                                                                                               
REPRESENTATIVE KITO replied  that there is currently  not an APOC                                                               
candidate fee.  The $100 filing fee in HB 91 would be a new fee.                                                                
REPRESENTATIVE  WOOL  suggested  that other  professional  groups                                                               
with similar  membership size are  self-funded, and  fees include                                                               
investigations;  whereas,  APOC's  expenses  are  higher  because                                                               
investigations  are  ongoing.   He  offered  that  investigations                                                               
involving the other boards are performed as needed.                                                                             
REPRESENTATIVE  KITO responded  that he  does not  believe APOC's                                                               
oversight of  regulation or licensing functions  is comparable to                                                               
the   Division  of   Corporations,  Business,   and  Professional                                                               
Licensing (CBPL).   He  stated that there  are two  components to                                                               
APOC  activity:     one  is   oversight  of  the   132  lobbyists                                                               
representing the 400-plus clients  accessing the legislature; and                                                               
the other  is oversight  of the group  of candidates  running for                                                               
political  office.    He  said  that for  oversight  of  all  the                                                               
registered candidates  and groups, the estimated  revenue is less                                                               
than $20,000.  He attested that  APOC would not have enough money                                                               
for  candidate review  and would  still need  general funds.   He                                                               
offered  that through  HB 91,  there would  be an  opportunity to                                                               
generate  funds  from  professional   lobbying  to  pay  for  the                                                               
oversight of their reporting requirements.                                                                                      
3:27:45 PM                                                                                                                    
CHAIR KREISS-TOMKINS opened public testimony on HB 91.                                                                          
3:28:21 PM                                                                                                                    
PAM GOODE  testified that she opposes  HB 91.  She  expressed her                                                               
belief  that APOC  should  be downsized,  as it  has  a very  bad                                                               
reputation  among anyone  running for  office.   She opined  that                                                               
APOC  discourages "good"  people from  running for  office.   She                                                               
mentioned  that when  APOC  was  formed in  1976,  there were  no                                                               
computers, and now  it is in violation of Article  I, Section 22.                                                               
She  asserted that  APOC requests  information that  is not  even                                                               
required  by the  IRS  and publishes  it on  the  Internet.   She                                                               
opined that  "the reason  APOC is overloaded  is because  they do                                                               
petty things."   She mentioned that  APOC has wasted her  time on                                                               
very simple  matters, and  it audits filings  that are  less than                                                               
$100.   She  offered that  instead of  looking for  ways to  fund                                                               
agencies, the  legislature should look  at ways "to  release them                                                               
of the  pettiness."   She asserted  that APOC  is supposed  to be                                                               
"going  after  the  bad  guys"  and  not  deterring  people  from                                                               
participating.   She opined  that people  running for  office and                                                               
commissioners "won't  step up" because  of what is  required from                                                               
APOC.  She mentioned that  her husband warned her against running                                                               
for office because  of what APOC is doing.   She relayed that she                                                               
let APOC  "violate" her privacy so  that she could "do  the right                                                               
thing" and run for office.                                                                                                      
3:31:14 PM                                                                                                                    
CHAIR KREISS-TOMKINS closed public testimony on HB 91.                                                                          
3:31:34 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON commented that  his experience with APOC                                                               
has  not been  unfavorable,  nor did  he  think the  commission's                                                               
requirements  unreasonable.   He  expressed  his  alarm over  the                                                               
level of funding for APOC in  the budget that was before him last                                                               
March [2016] and  said he appreciated that some of  the money was                                                               
restored.  He  opined that it would be impossible  for the agency                                                               
to perform  its work  successfully with  that [reduced]  level of                                                               
REPRESENTATIVE JOSEPHSON  cited the U.S. District  Court decision                                                               
of 2016  upholding the constitutionality of  Alaska's $500 annual                                                               
personal  campaign   contribution  limit,  which  has   now  been                                                               
appealed.  He  mentioned that the presence of  money in campaigns                                                               
is  only going  to increase  and  "soft" money  is growing  every                                                               
election cycle.   He stated the importance of  information to the                                                               
public.    He  suggested  that  there  be  a  waiver  system  for                                                               
candidate  filing fees  in the  case of  a plea  of poverty.   He                                                               
contended that  in such  a case,  the money  could not  be raised                                                               
prior to filing.  He expressed  the need for creative funding and                                                               
for a fiscal plan.                                                                                                              
3:34:17 PM                                                                                                                    
REPRESENTATIVE BIRCH  stated that  $17 million in  average annual                                                               
fees  paid to  lobbyists comes  to $266,000  per legislator.   He                                                               
asked for the number of lobbyist clients.                                                                                       
MS. HEBDON answered  that there are 480 clients,  and APOC raises                                                               
about $120,000 per year through  the $250 per client registration                                                               
REPRESENTATIVE BIRCH asked if the client pays the $250 fee.                                                                     
MS.  HEBDON responded  that lobbyists  pay the  $250 for  each of                                                               
their clients.                                                                                                                  
REPRESENTATIVE BIRCH asked if lobbyists pay an additional fee.                                                                  
MS. HEBDON responded no.                                                                                                        
3:36:24 PM                                                                                                                    
REPRESENTATIVE  WOOL  asked if  "$250  per  client per  lobbyist"                                                               
means  that if  a client  hires four  lobbyists, then  four times                                                               
$250 is paid.                                                                                                                   
MS. HEBDON responded that is correct.                                                                                           
REPRESENTATIVE  WOOL  asked if  HB  91  and  a state  income  tax                                                               
together would result in the "double taxing" of lobbyists.                                                                      
REPRESENTATIVE KITO conceded that to  be one of the complications                                                               
of two  taxes.  He stated  that the gross receipts  that would be                                                               
taxed  at  2.5 percent  would  be  independent  of the  income  a                                                               
lobbyist  claims on  his tax  form,  which is  subject to  income                                                               
adjustments.  He asserted that  a forthcoming CS will address the                                                               
issue  of the  2.5  percent income  tax  in HB  91  to avoid  the                                                               
perception of double taxation.                                                                                                  
[HB 91 was held over.]                                                                                                          

Document Name Date/Time Subjects
HB003 ver D 2.7.17.pdf HSTA 2/14/2017 3:00:00 PM
HB 3
HB003 Sponsor Statement 2.7.17.pdf HSTA 2/14/2017 3:00:00 PM
HB 3
HB003 Memo of Changes 2.7.17.pdf HSTA 2/14/2017 3:00:00 PM
HB 3
HB003 Fiscal Note DOLWD 2.7.17.pdf HSTA 2/14/2017 3:00:00 PM
HB 3
HB003 Fiscal Note MVA 2.7.17.pdf HSTA 2/14/2017 3:00:00 PM
HB 3
HB003 Supporting Document-Letter Dept of Defense 2.7.17.pdf HSTA 2/14/2017 3:00:00 PM
HB 3
HB003 Supporting Document-Dept of Defense One Pager 2.7.17.pdf HSTA 2/14/2017 3:00:00 PM
HB 3