Legislature(2019 - 2020)BELTZ 105 (TSBldg)
04/03/2019 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SJR 5 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SJR 4 | TELECONFERENCED | |
SJR 4-CONST. AM: STATE TAX; INTIATIVE
1:33:41 PM
CHAIR HUGHES announced that the order of business would be
SENATE JOINT RESOLUTION NO. 4, Proposing amendments to the
Constitution of the State of Alaska prohibiting the
establishment of, or increase to, a state tax without the
approval of the voters of the state; and relating to the
initiative process.
[Before the committee was CSSJR 4(STA), work order 31-GS1070\U,
Version U.]
1:34:34 PM
MIKE BARNHILL, Policy Director, Office of Management and Budget,
Office of the Governor, Juneau, said that SJR 4 is a proposed
constitutional amendment that would require any new tax or tax
rate increase to be approved by the legislature and the public.
He briefly mentioned other constitutional amendments the
administration has proposed and stated that these resolutions
form a foundational piece of Governor Dunleavy's plan to restore
the state to fiscal stability and to restrain state spending.
He said that SJR 4 would amend Article IX, Section 1, of the
Constitution of the State of Alaska. He pointed out that the
pieces already exist in the Constitution of the State of Alaska.
If the legislature establishes a new tax by legislation or
increases the tax rate, the people currently have the power
through the referendum process to consider and overturn the
legislature's determination. Conversely, if the people initiate
a tax measure the legislature can overturn their initiative,
after two years has lapsed.
MR. BARNHILL characterized SJR 4 as an effort to make the
process more efficient and automatic. For example, if the
legislature establishes or increases a tax rate, the people
automatically have the right to consider it at a statewide
election without going through the process of gathering
signatures to place the matter on the ballot. Conversely, the
legislature could consider an initiated tax law after two years
has lapsed. This would bring it closer in time, so in order for
an initiated tax to take effect, the legislature would need to
approve it [at the next legislative session]. He characterized
it as a simpler process than the one in SJR 6, which would
create a spending limit.
1:37:10 PM
MR. BARNHILL provided the genesis of the policy background for
SJR 4. In 1992, the State of Colorado through a ballot
initiative amended its constitution to require what is popularly
known as the Taxpayer Bill of Rights. It requires people to vote
for the establishment any state or local taxes or for an
increase to any tax rate. Three other states have adopted
similar processes. Washington amended its constitution on local
property taxes to require a three-fifths vote of a municipality
if the proposed property tax increase was more than one percent.
In 1996, California amended its constitution to require a vote
for any increase to local taxes or fees. Finally, Missouri
amended its constitution to require a vote of the people for any
tax increase in excess of $50 million or one percent of the
state revenues. Other examples of similar efforts to change the
constitution exist, he said.
1:38:40 PM
WILLIAM MILKS, Assistant Attorney General, Civil Division, Labor
& State Affairs, Department of Law, Juneau, provided a sectional
analysis for SJR 4. He reviewed Section 1.
Section 1: This section would add two new subsections
to the tax clause of the Alaska Constitution. Taken
together, the two subsections would require that any
new state tax or increase to the rate of an existing
state tax be approved by both the legislature and the
voters.
1:39:27 PM
MR. MILKS said that Section [1, subsections (b) and (c)]
encompass the key changes Mr. Barnhill has described.
Subsection (b) would require any law enacted through
the legislative process that would establish a new
state tax or increase the rate of an existing state
tax shall not take effect unless the voters approve
the proposed law in the next statewide election. If
the voters approve the proposed law, it would take
effect 90 days after the election was certified or on
a special effective date concurred in by two-thirds of
the members of each house, whichever date is later.
Subsection (c) would require that any law proposed for
enactment through the initiative process and approved
by the voters that would establish a new state tax or
increase the rate of an existing state tax shall not
take effect unless the legislature, by resolution,
approved the initiated measure by the end of the next
regular session. The legislature would have to approve
it by majority vote in a joint session. If the
legislature approved of the initiated measure, it
would take effect 90 days after the legislature's
approval.
MR. MILKS turned to Section [2]:
Section 2: This section would make a conforming change
to the initiative process in Section 6 of Article XI,
providing an exception to the effective date
requirements for initiatives.
MR. MILKS said that this would make a conforming change to the
initiative process to provide that, except as provided in this
taxation article, an initiative would become law 90 days after
certification. He explained that in the taxation article the
process voters can by initiative establish a tax or increase a
tax subject to the legislature's consideration.
Section 3: This section would require that this
amendment be placed on the ballot in the 2020 general
election.
MR. MILKS explained Section [3] provides that the amendment
would be on the ballot in the next general election.
1:41:21 PM
CHAIR HUGHES said if a new tax is established it would take time
for the administration to set up the tax. She said it made her
wonder about the effective dates. For example, at the end of a
legislative session or after a November election, the start date
of an initiative process would fall at an odd time. Also, it
would not give the administration any preparation time. She
asked whether the administration would be amenable to change the
effective date to January 1 of the following fiscal year for the
initiative and the legislature process.
MR. BARNHILL responded that it was an intriguing proposal that
he would consult on and report back to the committee. He
acknowledged that from the administration's perspective that
making a new tax effective on January 1 made sense since most
taxes run on a calendar year timeline.
1:42:24 PM
MR. MILKS said he understood the issue raised by Chair Hughes.
This proposed resolution would address the circumstance when the
legislature passes a law that establishes a new tax or rate
increase subsequently approved by the voters. He referred to
subsection (b), which provides that the law would take effect 90
days after the election was certified or on a special effective
date concurred in by the legislature. However, a similar
provision is not included for the second way in which a tax
could be implemented. He said that the legislature could pass a
bill to change the effective date. He agreed it made more sense
to implement the new tax or tax rate increase on the next fiscal
year, he said.
CHAIR HUGHES deferred to the administration to consider and
report back to the committee.
1:43:52 PM
SENATOR KIEHL turned to the effective date. He was unsure if the
legislature would have another chance to vote to change the
effective date when the legislature initiates the process by
passing a bill, which is subsequently approved by the voters.
For example, the language following a general election [in
subsection (b)], reads "or an effective date provided for by
concurrence of two-thirds of the membership of each house." He
asked whether this vote could happen after the voter approval.
MR. MILKS asked to review the language.
1:45:25 PM
At-ease.
1:45:44 PM
CHAIR HUGHES reconvened the meeting.
1:45:48 PM
MR. MILKS answered no. He offered his belief that this language
would pertain to any law passed by the legislature.
SENATOR KIEHL stated that it was "not crystal clear" in SJR 4.
He asked whether any provision was made for the legislature to
provide an effective date during the approval process of an
initiated process. Although he did not see an explicit
provision, he thought it pertained to Chair Hughes' earlier
question.
CHAIR HUGHES asked how the effective date currently would work
for an initiative process.
MR. MILKS said the initiative process is covered under Article
XI. The effective date provision on an initiative is in Section
6 and provides that an initiative law becomes effective 90 days
after certification.
1:47:47 PM
SENATOR KIEHL restated his question. He asked whether the
legislature could adjust the effective date for an initiated tax
in its resolution.
MR. MILKS responded that if the legislature introduced a bill to
implement or change taxes, it could set another effective date
by a two-thirds vote. In terms of an initiative process, the tax
would not take effect unless the legislature, by resolution,
approved the initiative law by a majority vote in joint session
before the adjournment of the next regular legislative session.
If approved by the legislature the initiated law would become
effective ninety days after approval [per subsection (c)]. He
said that should provide clarity on the earlier question by
Chair Hughes.
1:49:21 PM
CHAIR HUGHES said the way this is written for an initiated law,
the legislature could not change the effective date. It simply
would become law ninety days after approval.
MR. MILKS agreed.
1:49:44 PM
SENATOR KIEHL offered his belief that Alaska's voters used the
initiative process several times in the past. He asked for
further clarification on what part of a proposal would go to the
voters for approval if the legislature made statutory and
regulatory changes related to the operation of a legal industry
[such as a marijuana law], but it also included a tax. He asked
whether voter approval would be limited to the tax portion or if
it would apply to the entire proposal.
MR. MILKS said that if the legislature sought to create or
change a tax, the portion regarding the tax change would go to
the voters for approval.
1:51:02 PM
CHAIR HUGHES said she believes Senator Kiehl was referring to
the marijuana initiative. She said a lot more was involved than
just the tax piece. She asked for further clarification on how
the marijuana initiative would have worked if this resolution
had been in place.
SENATOR KIEHL clarified that his scenario indicated that the
legislature passed a law, and it was not passed by a voter
initiative.
MR. MILKS answered that if the legislature passed a marijuana
tax, it would go to the voters for approval. He referred to
language, "the law shall not take effect," which really means a
portion of the law. He asked why this language was selected. In
further response to Senator Kiehl, he reiterated that the voters
would vote on the tax portion, and not the other issues since
the legislature is a law-making body. A law that would increase
or change taxes would not take effect unless the voters approved
it.
1:52:57 PM
SENATOR KIEHL said that the proposed language says that the law
shall not take effect, what it really means is that a portion of
the law shall not take effect. He asked for further
clarification on the choice of this language.
MR. MILKS said that the subject of this resolution is taxes so a
law that would increase or change taxes shall not effect unless
the voters approve it.
CHAIR HUGHES referred to the marijuana initiative in which the
legislature passed multiple laws, she said. She asked whether
the legislature would subsequently approve only the tax
provision of an initiative passed by voter approval.
MR. MILKS answered yes, that is correct.
1:54:13 PM
SENATOR KIEHL pointed out the voters created the cruise ship
initiative, including a gambling and head tax. He asked how that
would apply under SJR 4, whether the legislature would vote on
those separately or together.
MR. BARNHILL responded that if the resolution was phrased in
terms of a bill, Senator Kiehl's concern would be well taken
since a bill contains multiple laws. He said in terms of the
marijuana initiative, the bill had laws pertaining to criminal
provisions, tax provisions and other things. However, SJR 4
applies to the law specific to establishing or increasing a tax.
He offered his belief that the language is quite clear.
1:55:47 PM
CHAIR HUGHES asked whether a bill that touches on multiple
things would be considered a single law or if would be
considered passing a group of laws.
SENATOR KIEHL directed attention to the second sentence in
Article II, Section 14 of the Constitution of the State of
Alaska.
Section 14. Passage of Bills. The legislature shall
establish the procedure for enactment of bills into
law. No bill may become law unless it has passed three
readings in each house on three separate days, except
that any bill may be advanced from second to third
reading on the same day by concurrence of three-
fourths of the house considering it. No bill may
become law without an affirmative vote of a majority
of the membership of each house. The yeas and nays on
final passage shall be entered in the journal.
1:56:26 PM
MR. MILKS clarified that a bill can include many changes before
it becomes law as long as it meets the same subject rule
requirement. However, a constitutional amendment that refers to
a law to enact a state tax or increase the tax is addressing
that issue. He said that the intent is to put one subset of the
various public policies on a general topic. However, only the
tax change would go to the voters, which is the intent of this
provision. When the Alaska Supreme Court considers
constitutional amendments it uses a common, plain understanding.
He clarified that this resolution is about a change in tax law.
CHAIR HUGHES said when something becomes the law, it means
something becomes the law of the land and is codified. A bill
could contain multiple features, which is important for the
record to reflect.
1:58:30 PM
SENATOR KIEHL asked how the legislature would vote on an
initiative that institutes multiple taxes.
MR. MILKS asked if he was referring to an initiative that would
enact multiple tax laws, such as the cruise ship initiative. If
so, he responded that the legislature would need to approve each
tax separately. The resolution refers to a state tax and if two
taxes were on a ballot, the legislature would need to approve
each one.
SENATOR KIEHL asked who would prepare the resolution the
legislature would need to create and approve.
MR. MILKS answered that the legislative counsel [in Legislative
Legal Services] would do so.
SENATOR KIEHL asked for further clarification on the type and
form of resolution, and if it would be subject to three
readings, and hearings in substantive committees. He said he was
unsure the role the governor envisions for the legislature.
2:01:08 PM
MR. MILKS answered that it would apply the Constitution of the
State of Alaska, which refers to, "shall not take effect unless
the legislature by resolution approves the initiated law." He
said the legislature's rules would need to comply with this,
such that a resolution would be presented for the legislature to
consider. He characterized the process as somewhat similar to
the one used on executive orders. The governor can issue an
executive order and under Article III, Section 23, "? unless
disapproved by a resolution by the majority of the members
meeting in joint session," the executive order would become law.
He envisioned the legislative counsel would consider as a guide,
but what would be intended, if approved by the voters, is that a
resolution would be before the legislature to approve the action
of the voters or not.
2:02:44 PM
SENATOR KIEHL thought the example was good, that with an
executive order, the Constitution of the State of Alaska assumes
the governor has the power to use executive power and the
legislature must act to stop it. He said that SJR 4 assumes that
the voters don't necessarily know what they are doing when they
use their power of initiative, that they need a check by the
legislature. He asked whether the voters were entitled to a vote
in joint session.
MR. MILKS responded that the proposed language says that "the
law shall not take effect unless the legislature by resolution
approves the initiated law by a majority vote in joint session
before the adjournment of the next regular session." He said the
bill drafter's intent is that a mandatory action by the
legislature would be required.
2:03:45 PM
CHAIR HUGHES said it appeared it would be mandatory that a joint
session's intention was to approve the people's initiative. She
asked whether she was reading it correctly.
MR. MILKS offered his belief that she is looking at it
correctly.
CHAIR HUGHES asked whether that was the administration's intent.
2:04:54 PM
At-ease.
2:04:54 PM
SENATOR MICCICHE joined the meeting.
2:05:56 PM
CHAIR HUGHES reconvened the meeting.
2:06:04 PM
MR. BARNHILL, after consultation, explained that it was the
intent of the administration to allow the legislature the
discretion on whether to take up a resolution in joint session
to approve the voter's action. If the legislature chose not to
take up the initiated law, the tax would not become effective.
SENATOR KIEHL expressed concern since six senators could make
the decision not to take it up. He also questioned more broadly
what tax would trigger this process.
MR. MILKS answered that a tax is a charge levied by the
government for a public purpose to force contributions of wealth
to meet the public needs of government. He said the term he used
was one used when the constitutional framers passed Article VII,
Section 1, whereas a user fee or a license, which is a
permission to do something such as professional fees or fishing
license. He said that an income tax or a sales tax would be
subject to a vote of the people.
2:09:59 PM
SENATOR KIEHL asked whether the Division of Motor Vehicles (DMV)
constitutes a fee or a tax since it raises about two-and-a-half
times more than what it costs to run the DMV.
MR. MILKS said a driver's license is a fee for purpose, so it
would be a user fee.
SENATOR KIEHL related a scenario in which the legislature
doubled its fees for the DMV, or five times what it costs to
administer the program. He asked whether it would still be a
fee.
MR. MILKS responded that a tax is an effort to raise revenue for
general government spending as opposed to a user fee to finance
a particular service. He said if the question is whether a fee
could be raised so high that it could be interpreted to be
considered a tax, the answer is that it is conceivable it could
be interpreted in that way. When the courts review
constitutional amendments, it uses what would be considered "the
plain understanding of the public." For example, if commercial
license fees are sustaining a program, the court would not
interpret the fees as constituting a tax. However, the scenario
previously described in which generated revenue was used to
sustain government, arguably could be considered a tax. He
clarified that the intent of this resolution is to follow the
traditional meaning of tax.
2:13:14 PM
SENATOR SHOWER asked if the intent of SJR 4 is to cover the
generic income tax or sales tax. He characterized the desired
language as clear, concise, and correct. He said the goal is to
be as simple and clear as possible. He asked whether it would
simplify the issue to further define a tax or if it would make
it more complex.
MR. BARNHILL answered that the intent of the administration is
"tax" be interpreted as the common people would understand to be
a tax and as the Constitution of the State of Alaska uses it and
not to complicate it. A potential rule of thumb is that most
taxes in Alaska are placed in Title 43.
2:15:12 PM
SENATOR SHOWER asked for further clarification on the definition
of a tax.
MR. BARNHILL said that Mr. Milks gave the definition earlier,
which could be restated.
CHAIR HUGHES commented that the tax is a levy collected to
provide for general government services and a fee is a levy to
provide a service that benefits the group of people from which
the money is collected.
MR. MILKS said that accurately describes the difference between
a tax and a license fee. The Constitution of the State of Alaska
already envisions these are different things because Article IX,
Section 1 refers to tax, and Section 7 refers to tax or license.
He explained that the types of taxes vary, including personal
income tax, corporate income taxes, sales taxes, excise taxes,
alcohol taxes. However, fees are paid for liquor licenses. Mr.
Barnhill mentioned other states establish taxes.
2:17:54 PM
SENATOR MICCICHE said that it is clear that if the committee
wanted to limit the type of tax it should be defined in the
resolution, which it has the authority to do. The resolution
does not apply to fees, such as hunting and fishing fees or
motor vehicle fees. This resolution applies to all taxes,
including corporate taxes, fuel taxes, fish taxes, alcohol
taxes, cannabis taxes, oil and gas taxes, estate taxes and other
taxes. He questioned whether that is the intent of the
administration, but the committee must decide if it wants SJR 4
to stay in this form.
MR. BARNHILL agreed.
2:19:05 PM
SENATOR KIEHL suggested that the proposed language raises dozens
of questions. The committee could decide to revise the
resolution to address the easy cases since the hard cases would
likely end up in court.
CHAIR HUGHES said at first blush that she would prefer to clear
the matter. She asked whether Senator Shower would be amenable
to clarifying the definition of a tax.
2:20:07 PM
SENATOR SHOWER answered yes. He offered his belief that this is
a necessary discussion.
MR. BARNHILL acknowledged a willingness to engage in
conversations with members to consider ideas.
2:20:54 PM
SENATOR KIEHL asked whether the intent is for this to apply to
political subdivisions in the state.
MR. MILKS answered that SJR 4 refers to a state tax.
MR. BARNHILL pointed out that other states have amended their
constitutions to explicitly indicate if it applies at a local
level or a local level and at the state level. He clarified that
SJR 4 does not indicate it would apply at a local level.
2:21:42 PM
SENATOR MICCICHE explained one advantage some members who serve
on other committees have is that they can review bills several
times and consider policy. He said he struggles with whether the
current system of electing or not reelecting representatives
based on their actions suffices and whether the legislature
should be able to trump the voter in the initiative process.
He said that the Constitution of the State of Alaska allows the
public to disagree with legislative actions through the
initiative or referendum process. If successful, an initiative
would become law for two years before the legislature could
change it. Although the people would give up substantial rights
in this resolution, they gain some. However, he fundamentally
believes it is the people's right to overrule the legislature.
He struggles with SJR 4, because he is unsure of how it would
change behaviors of legislators and the public.
2:24:01 PM
CHAIR HUGHES explained that the first part of SJR 4 would give
the people ability to overrule the legislature. She asked for
further clarification on how it has typically worked in other
jurisdictions and if the voters routinely turn down proposed
local or state taxes.
MR. BARNHILL answered that he cannot speak exhaustively on the
experiences in other states. However, he has reviewed Colorado
since it was the inspiration for SJR 4. He related his
understanding that Colorado, which amended its constitution in
1992, has had a dozen new taxes or increases to taxes put to a
direct vote since then, approving several. Colorado voters
approved an increase to the tobacco tax in 2004, the marijuana
tax in 2012, and an increase to the marijuana tax in 2014.
2:25:41 PM
CHAIR HUGHES pointed out that the legislature could call a joint
session, but if the legislature chose not to hold one it would
be a de facto disapproval. However, in doing so, the public
would not know individual sentiment.
2:26:50 PM
SENATOR KIEHL asked whether changing "who or what" products
would be subject to an existing tax and if that would trigger
provisions in SJR 4. For example, currently a bill before the
legislature would expand who must pay the other tobacco products
excise tax.
MR. MILKS pointed out that Senator Kiehl is describing what
seems to be a change in exemption from a tax. The
administration's intent is that changes to the tobacco excise
tax would trigger a vote since it is an existing tax.
SENATOR KIEHL said that the marijuana industry has asked to
restructure the industry's tax, which should result in a net
neutral tax. In addition, the legislature could alter the
effective rate of a tax, such as an oil tax, through the
appropriation process and while that might not nominally change
the rate, he wondered if it would trigger a vote.
2:29:09 PM
MR. BARNHILL reiterated Mr. Milk's testimony that the intention
of SJR 4 would be to trigger a vote when the legislature creates
a new tax or a statutory tax rate increase. Nothing else would
trigger a vote. Further, Colorado set recent precedent when it
decided that an indirect tax rate increase on a certain class of
people did not trigger the provisions.
SENATOR MICCICHE said he was not sure that he agreed. He offered
his belief that changing exemptions could dramatically change a
tax rate by including a whole new class of taxpayers. He said it
would need to be on a case-by-case basis and not a boilerplate.
MR. MILKS said he understood Senator Micciche's statement. He
reiterated that a new tax or a change in the statutory rate
would trigger the provision for a direct vote, but not a change
in deductions or exemptions. Naturally, the language in SJR 4
could be modified, he said.
CHAIR HUGHES wondered whether the administration would be open
to amending SJR 4 to include something that would effectively
impact the tax rate, such as changing deductions. She asked
whether SJR 4 needed to be fixed.
MR. BARNHILL expressed a willingness to discuss it. He explained
that the administration was trying to strike a balance between
specificity and generality that works constitutionally. Loading
up the constitution with a lot of detail would make it more like
a statute. He clarified that he and Mr. Milks were present to
explain what the drafters intended. He acknowledged the anxiety
about lack of precision in constitutional terms.
2:32:39 PM
SENATOR SHOWER agreed that the Constitution of the State of
Alaska provides more of a 60,000-foot view while the statutory
language provides considerably more detail. He characterized the
constitution as more of an idea document and laws provide the
specificity. He affirmed the goal is to protect the rights and
power of the people.
2:34:52 PM
MR. BARNHILL said that members' comments were fair comments.
2:35:11 PM
SENATOR MICCICHE said that currently people have the right to
strike anything the legislature does except for appropriations
through a referendum process. He clarified that SJR 4 would make
that process automatic.
He further clarified that Alaskans have a right through an
initiative process to pass a law that the legislature cannot
strike. This resolution would allow the legislature to strike a
law by the people. He characterized the overall change would be
for people to lose a significant right. Although it sounds fair
because it allows people to collect signatures and put it on the
ballot, it is not. Essentially six senators could prevent an
initiated law from occurring, he said. He maintained that the
people would be giving up a pretty substantial right under SJR
4.
[SJR 4 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SJR4 Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| SJR4 Transmittal Letter.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| SJR4 Sectional Analysis Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM |
SJR 4 |
| SJR4 Explanation of Changes Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |