Legislature(2005 - 2006)SENATE FINANCE 532
04/04/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB93 | |
| SB155 | |
| SB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 141 | TELECONFERENCED | |
| += | SB 93 | TELECONFERENCED | |
| *+ | SB 155 | TELECONFERENCED | |
| + | SB 112 | TELECONFERENCED | |
| + | TELECONFERENCED |
10:32:09 AM CS FOR SENATE BILL NO. 112(CRA) "An Act imposing a tax on residents of regional educational attendance areas and relating to permanent fund dividend applications; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Senator Bunde presented this bill saying it relates to discussions on the previous bill. The Committee has heard testimony that school districts need more money. This legislation would generate approximately $13 million. The intent is that this money would be used for education purposes as "new funding" rather than supplant existing funding. Residents of cities and communities governed by home rule contribute some money for operation of the schools in their communities. This is an "important expression" of a community's investment in their schools both fiscally and psychologically. Residents who have a local investment take a greater interest in protecting that investment. This legislation would generate additional revenue as well as local responsibility for schools. 10:34:47 AM Senator Bunde relayed an incident told by a school superintendent in the Bristol Bay region. School supplies would be received in small communities and left unprotected from the weather without concern by local residents. Once those residents began contributing financially to the operation of the small schools in their communities, the supplies were better cared for. This is not a reflection solely on rural residents, but rather of human nature regardless of location. 10:36:46 AM Co-Chair Green noted a proposed committee substitute. Senator Bunde moved for adoption of CS SB 112, 24-LS0505\L, as a working document. Co-Chair Green objected for an explanation. 10:38:02 AM Senator Bunde outlined the committee substitute. Language beginning on page 1, line 12 provides that individuals aged 21 through 65 would be liable for the tax. This mirrors the requirements of many organized communities. 10:38:36 AM Senator Bunde noted language beginning on page 2, line 8 lists exemptions for those whose income is less below the poverty line, disabled veterans, and those owning real property, but also pay property tax in another Alaskan jurisdiction. Senator Bunde deemed this legislation a "fairness bill" that would "allow" contribution by those not paying taxes. Residents of unorganized areas would pay the proposed tax. The intent is not to "double tax" residents and therefore the exemption is given to those who are levied a tax in an organized area. 10:40:06 AM CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department of Revenue, testified the Department had some technical suggestions to make the tax "administratable". 10:40:33 AM Co-Chair Green asked if those suggestions are included in the committee substitute. 10:40:38 AM Senator Bunde affirmed. 10:40:41 AM Mr. Harlamert stated that Section 2, on page 2, line 16 relates to paying the tax in the event an employer did not withhold the tax. 10:41:34 AM Senator Bunde furthered that if the tax was not withheld from a paycheck, the individual must file the tax. 10:41:58 AM Mr. Harlamert continued that the language contained on page 2, line 22 through page 3, line 21 simplify and clarify the provisions for withholding the tax. 10:43:01 AM Co-Chair Green, Senator Bunde and Mr. Harlamert established that similar technical changes are included through line 21 of page 3. 10:43:37 AM Mr. Harlamert next addressed the refund provision on page 3, line 26. Refunds would be issued the calendar year after the tax year to avoid redundant claims during the year. This corresponds with other administrative procedures. 10:44:00 AM Co-Chair Green asked if the provision relating to the Office of Administrative Hearings was new to the committee substitute. 10:44:24 AM Mr. Harlamert affirmed and explained this provision is intended to avoid frivolous appeals. These appeals would be subject to adjudication in the same manner as other State administered programs. 10:44:56 AM Co-Chair Green asked for an explanation of the language on page 7, line 14. Mr. Harlamert was unable to answer. 10:45:17 AM Senator Bunde informed that the legislative bill drafters inserted this language, although he was unsure the reason. 10:45:31 AM LAUREN WICKERSHAM, Staff to Senator Bunde, elaborated that the drafter stated this language was necessary for "upkeep". She would obtain additional information. 10:45:57 AM Co-Chair Wilken asked if the fiscal note amount would be adequate to cover the provisions inserted in the committee substitute, such as increased enforcement. 10:46:44 AM Mr. Harlamert replied that the fiscal note was written to the original version of the bill and assumes the "best case scenario" for administrative purposes. The fiscal note also assumes the Division would "take business decisions for third party data" and "administer tax from our desks". The fiscal notes would change according to the committee substitute. 10:47:46 AM Co-Chair Wilken asked if the Department would issue a new fiscal note for the committee substitute. 10:47:55 AM Co-Chair Green affirmed this would occur. 10:47:58 AM Co-Chair Wilken relayed he has heard some support of withholding a portion of permanent fund dividend payments for those residents living in unorganized boroughs who do not already pay taxes supporting local schools. 10:48:25 AM Senator Bunde affirmed this suggestion has been discussed with the Permanent Fund Dividend Division. The Division is "hesitant" to support this, as it would be cumbersome to administer and expensive. In addition, garnishment for this purpose would be prioritized with garnishment for child support payments and other obligations. The likelihood of garnering revenue from this source for education would be limited. 10:49:24 AM Co-Chair Wilken reminded the Committee that organized communities have contributed $177.9 million to schools. Senator Bunde is attempting to "level the playing field a bit". Co-Chair Wilken supports this legislation and is a co-sponsor. 10:50:01 AM Senator Hoffman suggested that if this legislation is a fair proposal it could be made universal to all areas of the state and subsequently, organized communities could reduce property taxes for their residents. Contrary to statements that this tax would be fair, there are many inequities because while residents in one school district pay the maximum allowable tax, other school districts impose a lesser tax. The tax rate proposed in this bill is based on the average amount paid by those who currently are taxed. The fairest system would be a statewide tax. 10:51:16 AM Senator Bunde explained current State statute requires that organized communities contribute "some local support" for schools. How that funding is generated, whether through property tax, sales tax or other sources, is the decision of the community representatives. The legislature sits as the assembly for unorganized boroughs. A statewide head tax would be a progressive income tax, which he did not support. 10:52:32 AM LESTER LUNCEFORD, resident of Whittier, testified via teleconference from an offnet location to applaud Senator Bunde's courage in sponsoring this bill. Mr. Lunceford heard complaints about the fairness or unfairness of taxation for schools and surmised this proposal would be implement fairness. 10:53:33 AM DAN BOCKHORST, staff, Local Boundary Commission, Division of Community Advocacy, Department of Community and Economic Development, testified via teleconference from an offnet location that the Commission unanimously supports this bill. 10:54:03 AM Co-Chair Green asked whether the Commission has provided written documentation of that support. 10:54:09 AM Mr. Bockhorst replied that a letter of support was written on April 1 and submitted. 10:54:22 AM KATHY WASSERMAN, Alaska Municipal League, testified in Juneau to the need to address and resolve this issue. However, she questioned the use of the individual average amount paid in property taxes as the method for establishing this tax rate. The average property tax assessed for education purposes in organized communities is four mils and equals approximately $426 per person. However, lower income citizens presumably live in homes of lesser value and subsequently pay less than those living in higher valued homes. Additionally, property values in unorganized boroughs tend to be significantly lower than properties located in organized boroughs. She furthered that schools located in Rural Education Attendance Areas (REAA) serve as a microcosm to the community. Funding these schools would result in less money available for other community needs. Ms. Wasserman suggested that community members of both organized and unorganized boroughs should meet and find a solution to this issue. More information is needed to ensure the tax is fair. 10:57:28 AM Senator Bunde was aware of the different costs of living in organized and organized boroughs but pointed out the combined income of residents of unorganized boroughs is $505.5 million. For this reason he supported a head tax over a property tax. He reminded that Alaska had a head tax in the past with those proceeds going toward education expenses. 10:58:16 AM Co-Chair Green directed that any additional questions be submitted to Senator Bunde. Co-Chair Green withdrew her objection to the adoption of the committee substitute and Version "L" was ADOPTED. Co-Chair Green ordered bill HELD in committee.
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