Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/25/2017 05:00 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB115 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 115 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HB 115-INCOME TAX; PFD PAYMENT/CREDIT;
5:59:37 PM
CHAIR COSTELLO announced the consideration of HB 115. She stated
that the committee will hear public testimony. She noted that 74
people are waiting online to testify in addition to others. She
asked for comments to be limited to two minutes.
6:00:34 PM
MIKE MILLER, Vice Chairman, National Federation of Independent
Business (NFIB), North Pole, said he is also representing
himself as an owner of the Santa Claus House. There are many
folks online, and having "once set in your chair," he
understands when you have a lot of folks online and everyone has
something to say. He said he understands that the committee
would like to get everyone's testimony and not leave anyone out.
He said he would make his testimony short and to the point. He
then thanked the committee for "taking this up." Unlike large
businesses, he said, small businesses look at every penny that
is spent. He said there are many issues that "go into when we
are spending for expansion." He gave the example that he is
looking at expanding his store, so he factors a lot of things
in. When it comes to government, there are two things to factor
in: regulatory issues and taxation. He is in the tourism
industry, so there are not many regulatory issues, but there are
issues of taxes, and the more that is put on small businesses,
such as taxes-income taxes-it has been his experience that they
want to grow their businesses. What owners do is take their
profits and put them back into business to hire more people and
"do all the things that small business people do." It has been
his experience that if those dollars go to the government, there
are less dollars to hire more people. He said he is looking at
hiring 20 more folks when he expands his business. Unlike large
businesses, small businesses cannot hire "an army of
accountants, or lawyers, or lobbyists." That is why they have
the NFIB, and "we all throw a few bucks together and we get
Danny." Those are some things to think about. Also, this bill is
projected to raise $600 to $700 million, and he said there was a
PowerPoint presentation today that said it was $680 [million],
but the problem is, this is not new money coming into Alaska.
This is money coming out of the back pockets of working men and
women in the state. He added that it is not like Alaska is
bringing this money from the Lower 48 states. It has been his
experience that the consumer is the best multiplier of those
dollars, and it has been his experience-having once set in those
chairs-that the government is the worst at multiplying those
dollars in the economy. He thanked the committee and said the
committee has a lot of hard work ahead of them. Whatever
decision it makes will be "a tough one." He said he is "glad it
is you guys and not me anymore."
6:04:34 PM
DEVON THOMAS, President, Alaska Association of Realtors (AAR),
Anchorage, said she is a realtor and a lifelong resident of the
area. The AAR has over 1,700 members, and its mission is to be
the voice of real estate for Alaska, and its vision is to
advocate for private property rights and to create an
environment that encourages real property ownership. She said
that AAR members recognize that the state faces difficult
decisions in solving the fiscal problems. Alaska realtors feel
that taking money from Alaska realtors without cutting state
spending will not solve long-term issues, and AAR strongly
opposes HB 115 as currently passed by the House. Many experts
believe that 2018 will bring higher interest rates, an increase
in foreclosures, and an increase in housing inventory across the
state. There is already uncertainty in homebuyers from the
decline in the oil industry, she stated. Passing HB 115 would
price many potential homebuyers out of the opportunity to own
their own home. Housing is one of the leading economic
indicators, and it supports many jobs outside the real estate
sector, including retail and service sectors. The association
strongly opposes anything that will jeopardize home ownership.
The omission of the mortgage interest deduction and implementing
an additional capital gains tax will discourage buyers and
sellers, she said. An income tax will depress the housing
economy, which is vital to full employment for Alaska. She urged
the Senate to reject HB 115.
6:07:10 PM
TOMAS BOUTIN, Juneau, said there is no better way to destroy
Alaska's society and its culture than to have an income tax
concurrent with the PFD [permanent fund dividend]. Taxing
Alaskans who strive, create jobs, and produce goods and services
that the world wants to buy and then handing out that same
several hundred million dollars to everyone regardless of effort
and initiative would deal an economic blow more severe than the
long-expected decline in petroleum production. He said he wants
a culture of work and one that includes self-worth. The sponsors
of HB 115 must think we have too many people working and too few
people depending on government checks, he opined. Alaska
produces less of what it consumes than any other state. The
extent of the recession will be due to the lack of productivity
and overconsumption, not the lack of taxes. Taxing productive,
working families will retard economic growth, and the timing
couldn't be worse, he averred. Alaska has three quarters of a
million consumers. Production must come back into balance, and
the road will be tougher with an income tax, he added. Those
living on government payments are held harmless. He said to
"think about the adverse selection that an income tax implies."
The bill attempts to Bernie Sanderize Alaska-a bitter pill to
put on Alaskans.
MR. BOUTIN added that other government spending is consumption
rather than production. Lost oil taxes cannot be made up by
taking in one another's washing. No other state comes close to
us, he stated, in per capita government handouts. Taxing the
private sector for government solves none of the problems.
"Would any elected official look a small business owner in the
eye and tell her she needs to pay an income tax and withhold an
income tax from her two employees while the state pays its new
natural gas guy $750,000 a year to have him jet between his
offices in Anchorage and Houston and Tokyo?" The bill is
"dishonest" and gives a seal of approval to writers and
musicians but looks down its nose at commercial fishermen,
welders, and truck drivers. "It's so typical." He noted that
Bernie [Sanders] thinks he has Alaskans over a barrel. He said
that Alaskans don't want government taking wages and then
figuring out how much to give back, and that is what an income
tax combined with a PFD does.
CHAIR COSTELLO noted that Commissioner Randy Hoffbeck joined the
meeting, as well as Senator Micciche and Representatives Tilton
and Wilson.
6:10:42 PM
MIKE MILLIGAN, Kodiak, said he supports HB 115. He said he would
like to promote a culture of responsibility in Alaska. He was in
the state when there was an income tax and when there was no
PFD, he said. He remembers the debates over moving Alaska's
capital and over the WPPSS project that went belly up, regarding
the GO [general obligation] bonds in Washington state. He said
he remembers all of this, and what came about, especially in
Kodiak, was a strict opposition to an income tax by everyone who
has grown up with a PFD who think that they shouldn't have to
pay for government. Government, like anything else, you have to
pay for, like groceries and things that a person uses. "You have
to pay for it. If you think you are going to enrich us by
cutting education more, I think you're mistaken," he added. All
these people who say they cannot afford an income tax, they are
saying that they couldn't have made it back when we had an
income tax. He said he would like to see an association with
income tax and the PFD application. The only deduction should be
for somebody making a property tax payment to a local Alaska
government. That would encourage property ownership and
participation in local government. Alaska would get money from
everybody to help pay for government services. The one thing an
income tax helps, he stated, that no other tax does is that is
starts to tax some of the wealth and wages that are leaving the
state daily. "I encourage you to support this bill."
6:12:50 PM
MARY FORBES, Kodiak, said she supports HB 115. She said she has
written everybody in the Senate and has previously testified.
She still feels very strongly and agrees with Mr. Milligan that
there is too much of an entitlement mentality in Alaska. She
noted that she has never lived anywhere where she did not pay a
state income tax. If instituting an income tax causes Alaskans
to move elsewhere, "well, more than likely they will be paying
an income tax wherever they decide to move." She said she
disagrees with Mr. Miller that a tax would not be a new revenue
stream-it is new revenue to capture some of the money that
people take and go live in other areas. She said she raised
three children who got an excellent education, and she hates to
think that future Alaska kids will not get a quality education.
"I think this is the most progressive way to spread the burden
and encourage responsible state residency."
6:14:11 PM
STOSH ANDERSON, Kodiak, expressed his support for HB 115. The
legislature and the administration has done a very good job in
making cuts to the budget in the last few years, but it is
getting to the point of diminishing returns for the benefit of
state citizens. He stated support for capping the PFD, even
though that is a regressive tax, in balance with an income tax,
which is progressive, and would share the burden between the
different classes and user groups of Alaska. He told the
committee that Alaska must address the subsidies to the oil
companies. Everyone needs to pitch in; we need to get our budget
in order. It can only diminish our bond rating, which puts the
state in a spiral for capital projects and the cost of
government.
6:15:23 PM
ADRIENNE WILBER, Sitka, said she is a commercial fisherman and
has lived in Alaska all her life. She said she is a beneficiary
of state funded public education and Medicaid. She expressed her
support for HB 115, and she would like a complete fiscal plan,
which includes some use of permanent fund earnings, empathetic
cuts to services, and repealing oil industry tax credits. "I am
not thrilled about paying an income tax, but Alaska is my home,
and closing the state budget deficit while continuing to fund
essential services like public schools, health care, and
fisheries management is worth it. She said the state financial
distress is tough for legislators, but she encouraged doing what
is right for Alaskans and pass HB 115.
6:16:26 PM
ED GRAY, Sitka, said he opposes this bill. There has not been a
genuine effort to cut government, and lawmakers seem to view the
public sector as a funding source for "this over-expensive state
government that we have." He said he does not want to deal with
a new enforcement branch to enforce a state tax. He said he has
been a business person in Sitka for about 35 years. He noted
that he has had several businesses, and recently he had some
damage from mudslides. He is currently "shut down," but he has
been looking to restart in other communities in Southeast. A
state income tax is just a non-starter for him. "I'm just going
to shut it down if it happens." He noted that he is currently
shut down, and that he is heavily regulated. He is in fishing
and he must deal with the Fish and Wildlife Service. He repeated
that he is heavily regulated, and the income tax is just a non-
starter. "I'm just going to take my business outside the state."
CHAIR COSTELLO noted the presence of Representative Reinbold.
6:18:58 PM
RICH CARLSON, Juneau, said he is a retired educator and is
against HB 115. The bill has been sold as modest that will have
little impact on the majority of Alaskans, but this is not a
modest bill. It will place an enormous burden on many Alaskans.
He said it will grow government, increase unemployment, hinder
economic growth, crush small businesses, and would drive the
state deeper into a recession. The sheer size of HB 115 shocks
him, he said. It is three and a half times the size of last
year's proposal by the Walker administration, which would have
raised approximately $200 million, and this will raise about
$700 million. The proponents proudly claim that about 1 percent
of Alaskans will pay about 27 percent of the taxes, he stated.
"I find that attitude very disturbed." Middle and high-income
earners will pay the vast majority of this tax, and that might
be good short-term politics, but it will have a long-term
adverse effect on the economy. Senator Hughes and Senator
Stevens talked about people leaving Alaska, and it is a real
possibility, he opined. He said HB 115 will crush small
businesses due to the regulations that will undoubtedly come
from this-just the idea of trying to collect payroll taxes and
do reports. He noted the threat of an Alaska IRS hanging over
people's heads-that's got to be "disconcerning," he said. The
bill seems to ignore the values and spirit of Alaska. He came to
Alaska because it was a place of opportunity that encouraged and
promoted hard work and sacrifice. "That was and still is the
spirit of Alaska," but HB 115 ignores or penalizes that spirit.
6:21:50 PM
SENATOR STEVENS asked about Mr. Carlson's remark regarding the
taxes paid by 1 percent of Alaskans.
MR. CARLSON replied that 1 percent of Alaskans will pay 27
percent of the tax.
6:22:25 PM
CHRISTINE NIEMI, Juneau, said her comments represent herself,
her husband, and her grown children, who believe that passing a
comprehensive fiscal plan this session is the top priority, and
HB 115 is comprehensive. Her family is okay with a permanent
fund dividend that ranges between $1,000 and $1,250, as
negotiated between the House and Senate. In 1983, she was happy
to receive a dividend of $386. Before that, Alaskans had no
permanent fund, and it was still a pleasure to be here.
Additionally, she favors a progressive income tax fair to people
of different income levels that would capture money from out-of-
state workers who benefit from Alaska jobs and would provide
broad-based revenue. Alaskans contribute to for-profit companies
by buying their products, and "we strongly oppose providing them
with subsidies." Lastly, she said, she supports adequate funding
for services such as public education, public transportation,
roads and ferries, public safety, public health, and pioneer
homes, just to name a few. Additional reductions to these
services is not acceptable and is dangerous to the children and
adults who depend on them. Please support HB 115, she said.
6:24:23 PM
KEVIN SHIPLEY, Kake, said he represents himself even though he
is the superintendent of a school district. He said he mildly
supports HB 115 as a vehicle to move forward with a broad-based
plan. He has concerns about the bill, he said, and normally
would oppose any form of income tax. In another state he lived
in, he vehemently opposed income taxes; however, Alaska does not
have a tax structure set up. In reading HB 115, it is not the
simple plan that the governor put out that would be easy to
regulate and monitor through the permanent fund committee, he
stated. It will create a large government organization the way
the bill is currently written. He added that he does not like
the multiple-tiered system that targets and punishes people.
Each Alaskan must pay their share; Alaska is the lowest taxed
state in the nation. Government has been cut, and he said he
knows it will never be cut enough for some people, but when you
are the lowest tax group and your government is as small as ours
is, we have to move forward. The amount this bill raises is more
than the gap, he said, and he does not agree with the Senate's
plan to reduce by 5 percent, because there have been cuts, and
school districts will suffer dramatically, and the students will
suffer. He suggested working on the bill in committee, "because
we do need a broad-based tax." He suggested indexing the
permanent fund on earnings, so people are not double-paying
taxes. This bill might be the vehicle to start getting a broad-
based tax.
SENATOR GARDNER asked where Mr. Shipley is superintendent.
MR. SHIPLEY answered Kake.
6:26:47 PM
BRIAN MCNEIL, Fairbanks, said Alaska already has a personal
income tax. He urged that an accommodation be made for those who
purchase their own health insurance. The proposed tax is based
on one's federal adjusted gross income, line 37 of IRS form
1040. At the federal level, that has already been reduced by the
cost of health insurance premiums, but only if a person is self-
employed, he explained. He said he is referring to line 29 on
form 1040, the self-employed health insurance deduction. Under
federal law, retirees, those working for employers, and others
cannot use the line 29 adjustment. At the state level, he
suggests that the adjustment be available to anyone who buys
their own insurance. This is important because of the high cost
of Alaska health insurance, which is about two and a half times
the average cost for all states. Using 2017 data for older
Alaskans with incomes just above the subsidy cutoffs, he has the
following examples of households purchasing the cheapest
available nonsmoker health insurance: A single 55-year-old would
pay $15,480 this year, or about 25 percent of the subsidy cutoff
adjusted gross income. A two-person household, both aged 64,
would pay a total of $41,616 this year, or 51 percent of that
subsidy cutoff income. He said that a state tax should expand
the adjustment to include anyone who buys their own health
insurance. If the bill goes through, then Alaska should have
some accommodation for people who have to pay their own health
insurance. For older people, it can be as high as 50 percent of
their income, and as the bill is written, there is no
accommodation for that unless the person is self-employed. The
subsidy cutoff is about $81,000 for two people, so even though
they might have the same income, 50 percent of that is going to
the very minimum health insurance plan, which is the cheapest
policy available. There is a credit for the self-employed,
because the cost of health insurance comes off prior to the
adjusted gross income, and it doesn't for anybody else. So, an
income tax should address that. "I know we have to pay for the
cost of government somehow," he concluded.
6:30:39 PM
JIM CHEYDLEUR, Fairbanks, said he is a parent and a husband. His
children have gone through public schools, where he has seen
some degradation, and he is seeing lots of cuts at the
University of Alaska in Fairbanks. He expressed his deep concern
that Alaska develop a comprehensive plan that does not just
address this year's problems. He said HB 115 is part of the
plan. Although it may need some fine-tuning, he supports the
bill. "We need to go back to recognizing that government does
cost people money." People have differing abilities to pay for
it, and an income tax is progressive and is one of the places to
go. He supports some modifications in the permanent fund, while
trying not to hit people for whom the dividend is significant.
"I urge you to support this. Fine-tune it if need be, but this
should not be taken off the table." He said it is part of the
big picture, as well as adjustments to the credits being paid to
the oil companies and modifications to the PFD.
6:32:23 PM
JEAN JAMES, Fairbanks, said she is retired and has many family
members in Alaska. She supports HB 115 and absolutely agrees
with the previous speaker. For the good of Alaska and its
communities, she strongly supports broad-based taxes. She said a
sales tax would be regressive. The chamber of commerce says that
without an income tax, the state would still have $15 billion in
savings beyond what is in the permanent fund, but fiscal
prudence requires maintaining a savings account, cutting
expenses, and increasing revenue. She noted that significant
cuts have already been made to government, schools, and the
university, which have reduced state spending but also reduced
employment. "We have had enough cuts, except maybe some of the
tax credits, legislative per diem, and travel expenses." The
next step, she added, is to increase our revenue, and an income
tax is easiest and fairest, and it addresses some of the
concerns that have been talked about with people not having
enough money to do things. Alaska had an income tax and a school
tax before the pipeline, and there were excellent schools, the
university, and music/arts programs, and "we need to do it now;
we need to have an income tax." Unlike what Mr. Miller stated,
the income tax would bring in about $80 million from out-of-
state workers. She said there are plenty of them. Alaska has, by
far, the lowest taxes in the country, and adding an income tax
would make it the second lowest. She noted that Alaska also has
the largest state landmass with corresponding issues. She urged
caution while comparing per capita costs with other states and
not compare apples with oranges. "Pass a comprehensive tax this
year and be statesmen and stateswomen and support HB 115," she
concluded.
6:34:47 PM
MARK JOHNSON, Anchorage, said he is retired and is not
representing any group. He said he has been in Alaska for 44
years and intends to stay. He has witnessed growth in the state,
some of it good, but who can forget the Delta barley project,
the Valdez grain terminal, the Pt. McKenzie dairy project, the
fish plant, and others? They were all funded with oil money by
the legislature under pressure from various lobbyist groups, and
all failed to meet even minimum expectations. Including the half
million dollars given to TransCanada, the legislature has spent
well over a billion dollars on a gasline that has never
materialized. Why not? Because, he said, it is not economically
feasible. Oil revenues have declined, but this was predicted 40
years ago. Proposing an income tax is the result of a self-
created crisis, he stated. Did legislators prepare for the
decline in production that everyone knew would happen with just
a modicum of restraint? he asked. No, they did not. In fact,
over the past ten years, they increased the operation budget by
over 100 percent in the full light of declining oil production.
"We have the mechanisms to bridge this decline in revenue; we
created that mechanism 40 years ago, and we called it the
permanent fund," he said. The budget can be reduced while the
state draws from the over $13 billion in the constitutional
budget reserve (CBR) and the permanent fund earnings reserve.
Reducing the budget will cause hardship, he said, but limiting
state programs will help find new cost-effective ways to
accomplish the required services. Hardship is the catalyst for
innovation, and the state needs to focus on the future and not
just the next election. "We need strong leadership-something
that has been lacking for the last ten years." He said he does
not agree with implementing an income tax; Alaska has the
highest cost of living in the country, and a tax will add to
that. He also questioned if the legislature is trustworthy with
regard to future tax rates since they have adjusted tax rates on
industry nearly every session. Taxes grow government, and they
would harm our economy at a time when Alaska needs to work its
way out of the recession, he opined. He said Alaskans will
remember any heroic or any reckless attempts to solve these
problems. He urged the rejection of any income tax.
6:38:14 PM
WILLIAM HARRINGTON, Anchorage, said he is retired from private
employment, but he is on social security, which is the opposite
of a public employee who volunteers to pay an income tax to stay
employed. "All of this modeling is just speculation," he stated.
The cards are marked and the deck is stacked against his group
of wage earners. He said he was at his family's beach house when
his dad grilled a "mean London broil." "The ladies" chatted over
after-dinner drinks, and his aunt discussed the problems of
health, investment, and unemployment of her brother and wondered
what they could do. His grandmother crossed her arms and said,
"He got the same as us." Through frugality, and downright
cheapness, his aunts are well off, he said, but his uncle lives
in a one-bedroom apartment next to a freeway in Seattle. As Mr.
Harrington's mother said, "you made your bed, now lie in it."
There's been 40 years of oil taxes and 40 years of uncontrolled
spending. In Juneau, a $250,000 playground [burned], and he
questioned if that screams excessive privilege and spending.
"And how about that grain silo in Delta?" He said he
congratulates the Senate on its position, but both sides are
waving a flag saying, "I want what's best for Alaska!"
6:40:1b8 PM
SARAH DAVIES, Anchorage, said she is representing herself and
that she is a teacher. The ideas that nourish the expansion of
the self are created in our homes and are explored in classrooms
of diverse settings. She said that she has taught for seven
years in Alaska and has watched a continued divestment from
those classrooms and administrations that advocate for the
teachers and students incubating inside them. Looking around
today, she said, she cannot help but notice an education system
and its composite human parts in postures of poverty and fearful
uncertainty, when we most desperately need postures of
possibility, championship, and advancement. She stated that
without investment, Alaska will stand witness to the continued
malnourishment of the social, physical, mental, and economic
health of its own communities. "We are on a growing edge today;
it is normal to not know what to do or where to go," she said.
It is normal to feel confused, frustrated, anxious, and tired,
and these are the indicators (unclear) on the right side of this
profoundly noble fight to promote an enriched education for
students of all ages, she opined. Far too many of Alaskans have
watched too many [students] walk out of this state seeking the
education they know they are entitled to but can't find here.
She urged taking action that prioritizes personal and commercial
investment in education. "I am willing to offer my own tax
dollars in support of this bill," she concluded.
6:42:06 PM
JANET MCCABE, Anchorage, said she supports a progressive income
tax. It is essential to Alaska's future to both approve a draw
from the permanent fund earnings reserve account and an income
tax this session, as a package. To be realistic, once the state
starts drawing funds for state operations from the earnings
reserve, it will be even less inclined to impose an income tax
to cover fiscal needs. The results, she added, would be
increases in withdrawals from the earnings reserve in future
years, and, upon exhausting the reserve, the PFD would be
canceled, and eventually the corpus of the fund will be
endangered. Alaska will be much poorer, and then an income tax
will come back, she surmised. She urged the committee to
consider the full scope of Governor Hammond's vision, which
included a state income tax to provide enough funding in the
future so that legislators are not tempted to balance the budget
by increasing the draw. The cuts that have been proposed instead
of an income tax would mean the loss of 700 teaching jobs. The
ripple effects on the economy would be felt statewide, she
offered. These cuts are the sort of actions that can tip the
balance of throwing a recession into a major economic downturn.
She said that there are plenty of people here to remind us of
the benefits of quality schools and universities. Alaska needs a
complete revenue package to assure Alaska's prosperity that was
identified by Governor Hammond 40 years ago: using the permanent
fund earnings for state services and a state income tax. "We
need them both, this session, in one package," she stated.
6:44:43 PM
HELEN NIENHUESER, Anchorage, said she has been an Alaska
resident since 1959 and strongly supports HB 115. It is
essential for solving the deficit. She supports the income tax
along with the House revision of SB 26. The bills are
complimentary, she said, and the state needs both. The income
tax won't solve the problem by itself, but it is an essential
part of stabilizing Alaska's finances. She noted that it has
been a great while since oil started flowing through the
pipeline, and Alaska has done a lot of good things with the
money-as well as some wasteful boondoggles-but it is not stable
as demonstrated by Alaska's present deficit. She pointed out
that everybody else in this country either pays an income tax or
a statewide sales tax, "so don't believe this stuff about people
having to leave the state." An income tax is better because it
affects those most able to pay the most, she said, and it
counters the effect of cutting the dividend, which is a
necessary part of restructuring the permanent fund but impacts
those at the bottom of the income scale the most. She and her
husband are both retired from government jobs. "We are not
wealthy but believe that a tax is the fairest way to supplement
permanent fund earnings." She said they may travel less or wait
longer to buy a new car, but they support the income tax, not
only because it's fair but because they have three
granddaughters who live in Alaska and love it. They are in
college now and will soon be deciding what they will do and
where they will live. They want to live here, but there must be
jobs. She noted that there will not be jobs if the legislature
doesn't solve the fiscal problems this year. "These young women
and those like them are essential to the future of Alaska." She
said education is also critical to the future of Alaska, and
paying income tax to avoid cutting education is something that
many, many Alaskans are willing to do. She added that she
opposes proposed cuts as there have already been deep cuts,
including cutting the job of one of her sons. "We should
continue to look for smart cuts, but I fear for what Alaska life
will be like if the legislature makes much deeper, broad,
untargeted cuts."
CHAIR COSTELLO thanked Ms. Nienhueser and said that the state
constitution does not allow for a dedicated fund, so HB 115
represents an income tax that will go to the general fund.
6:47:58 PM
SARAH MCCABE, Anchorage, stated that she is in favor of HB 115.
From what she has heard about the budget deficit, a single
strategy will not work to fund Alaska beyond the next few years.
There needs to be several sources of revenue. The proposed
income tax is progressive and reasonable, and it would tax out-
of-state workers who use services and facilities in Alaska,
including roads, state troopers, parks, government services, and
our carefully managed fishery. Some people say that the income
tax will discourage people from moving to Alaska or staying
here. She disagreed and said that several years ago she moved to
Texas, another state without an income tax, and she was
astonished how inexpensive housing and other necessities were,
but still she chose to return to Alaska. She said many of her
neighbors have decided to retire here, because there are many
reasons to stay or leave besides the cost of living, like
friends, career opportunities, climate, activities, and thriving
communities. She said she supports the income tax because
Alaskans must choose to pay for services that make Alaska a
wonderful place to live and for the sake of one another. She
requested passing HB 115 as part of a coordinated package of
revenue, (unclear), and expense reduction.
6:50:15 PM
SHANNA ZUSPAN, Anchorage, said HB 115 is a critical part of
enacting a fiscal plan to remove Alaska's economic uncertainty.
She supports an income tax because of education, economics, and
personal responsibility. She was born and raised in Alaska and
is a product of the Anchorage school district, which prepared
her for a successful career. Her and her husband live in
Anchorage to give their children the same opportunity, she
explained. "Our schools are our future," she added, and "I want
competitive compensation for our teachers." Economically, Alaska
can't keep going like this. As a part owner of a small business,
she needs a stable economic foundation. Her business employs 15
professional staff. It exports its services to communities in
the Lower 48 and reinvests its profits here in Anchorage. The
business pays well, she noted, and it offers excellent benefits.
Last year was a good year for her business, but she has not
hired anyone new because of uncertainty on what to base its
growth forecast on. A business association told the committee
that small businesses do not support an income tax; that's not
true for her. "We want to grow, but we need to know that a
comprehensive fiscal solution is in the works," she stated. A
tax is also about personal responsibility and personal
commitment to a better Alaska. She said she spends her work days
helping communities, and the work helps make Alaska a better
place. She does not spend much time in direct political
advocacy, she added, but she is here tonight because it is a
pivotal moment for Alaska. "We have to accept our personal
responsibility to each other and to Alaska," she added, and that
is why she supports HB 115.
6:52:58 PM
CHRIS BECK, Anchorage, said he is a founding partner of a
successful small business based in Anchorage, and it has grown
from two to 25 people in the last 15 years. His business
provides consulting services to other small businesses, Native
organizations, local governments, and developers. He said he is
on the front lines of where cuts to government are affecting
people. Alaska must have a fair income tax, and HB 115 is a good
place to start. He said he strongly believes that continuing
cuts to government are directly harming Alaska's economic
health. Examples include education and transportation. Another
is the Alaska tourism industry. Tourism brings almost $2 billion
each year and supports one in eight Alaska jobs. The last three
years the state tourism and marketing budget was chopped from
around $17 million to $5 million, and, "now we're not only the
49th state to enter the union, we're the 49th state in tourism
marketing." When other states outspend Alaska and get the
customers, Alaska loses the possibility to sustain what we have
or to grow. This proposed tax would bring in about $80 million
of new money from people who work here but live elsewhere, but
adjustments in the permanent fund just move around money that
starts in Alaska. He said he thinks Alaska has drifted away from
its values and spirit-the things that we like to pride ourselves
on. "So many of us talk about being self-sufficient, being self-
reliant, paying for what we use, but we don't actually do that
in Alaska." He said it is time to get back to those values and
pay a reasonable share of the services that we enjoy.
6:55:35 PM
ANDY HOLLEMAN, Anchorage, said he is newly elected to the
Anchorage school district board, but he is speaking on his own
behalf and is in favor of HB 115. For years Alaskans have faced
annual uncertainty about when the final budget will happen and
what will be in it. It may be what we're used to, but it is very
destructive and very expensive, he stated. A lot of effort is
spent revising budgets, and the uncertainty makes retention of
talented people very difficult. You need revenues that vary with
population growth and with economic activity, which will bring
some predictability and the ability to manage the state
efficiently. The outflow of dollars in the form of federal taxes
will be reduced, he stated. There are no economically successful
states that don't provide good services to citizens, good
schools, good public safety organization. "We have to grow
value; we cannot hoard or cut our way to prosperity." He urged
the committee to provide the state with a sustainable budget by
implementing this income tax.
6:56:45 PM
GREGORY ANDERSON, Wasilla, said he is just representing himself
and is against HB 115. The legislature has spent Alaska's wealth
like a drunken sailor for many years, and as soon as there is a
downturn, legislators try to seize the opportunity to institute
new taxes. An income tax will penalize productive people and
create a bureaucracy with new costs, he concluded.
6:57:45 PM
HERMAN MORGAN, Aniak, said he is from rural Alaska and would
like to provide the rural perspective on the budget and how it
is being handled. [An income tax] is not a good idea at this
time, but any other time it would be the perfect solution.
Cutting the permanent fund was like a flat tax, and an income
tax would have been good. People look for righteousness and
honesty in government, but it seems like it is wrong to cut the
permanent fund. In Aniak, the cuts took away $550,000. That
money could have been spent locally, and the state could get
some of it back in income tax. The governor, before he ran, said
he wouldn't touch our permanent fund. People like Bob Herron in
the legislature told people to be happy for what you get and
that they didn't take it all. It is like telling us that "we
have to spend your permanent fund money, so we can save it for
you." This doesn't make sense. In the scripture it says, "He who
oppresses the poor insult their maker, but he who honors him has
mercy on the needy. Righteousness exalts a nation, but sin is a
reproach to any people." People are poor in Alaska, and by
taking away their permanent fund like that, it (unclear) buy
things for your kids or store for the winter or things like
that. He said he would support an income tax bill, but only
after restoring the PFD. That would be a big boost to Alaska's
economy. Be honest with the people you represent, because when
this is all over, our maker will (unclear) somebody poor,
destitute, or hungry. If you didn't help them (unclear), that's
what the bible says. Don't put another burden on us with an
income tax; restore the permanent fund first, and then do
something to make the people who come here pay for their
services, like the fire department and roads. A lot of people
who couldn't afford to pay, they would not have to pay an income
tax. Don't send Alaska further down this road of destruction.
7:01:56 PM
DAVE PALMQUIST, Anchorage, said he is a veteran and a third
generation Alaskan. He stated that he is opposed to HB 115,
because Alaska already has a high cost of living. Even if one of
the end results was to grab some of the money from people who
work here and leave the state, the cost would outweigh the
benefit. He knows people who own small businesses and sees their
struggles every day. He added that the legislature has
frivolously spent a lot of his money, and the bottom line is
that there has to be deep cuts. "We need to stop this frivolous
spending immediately," he said. Services cost money, and he
works hard for his money, and he doesn't want to foot the bill
for people being frivolous. If this tax is implemented, people
will leave the state, but not as much as when people left when
the pipeline was completed. It will further harm the economy.
7:04:04 PM
GEORGE PIERCE, Kasilof, Alaska, said he is representing himself
and that it will be hard to beat William's testimony. The Senate
does not want an income tax since Alaska is in a recession.
"Well, we're in the same recession and you took the people's
PFD, and that didn't bother you," he stated. An income tax would
capture the last revenue of about 20 percent of nonresident
employees who don't contribute to Alaska's income tax, and
that's called lost revenue to the state, he explained. It's
revenue Alaska needs to survive the so-called recession, not to
mention it is in a deficit. He said the legislature should pass
an income tax and then come back and capture all the lost
revenue from the many exemptions we give to nonprofits, S
corporations, and LLCs. A survey showed 64 percent of voters
said to keep the PFD intact and collect income taxes or a sales
tax to pay for government services. An income tax makes more
sense, as it brings in more revenue to a badly needed budget.
Every analyst and expert told the committee what to do to solve
this problem, "but you never listen to this sound advice," he
stated. Listen to the voters-not special interests-and vote yes
on the income tax. Repeal these oil tax credits, he said,
because that is a big problem. He reminded the committee that
Alaska will owe the oil companies $1 billion next year, "thanks
to you." A previous caller said that 21 percent of Alaskans will
feel the effect of the income tax, but he forgot to mention that
was on a $75,000 income, "so do your job, represent the
Alaskans, and yes to an income tax."
7:06:48 PM
SUSAN OPALKA, Girdwood, said she strongly supports an income
tax. Other have stated how she feels, she said, and the tax will
capture money that goes out of the state from people who are not
taxed. "I strongly support an income tax."
7:07:25 PM
JASON JONES, Palmer, thanked god for conservative Republicans
for holding the ground on state spending and taxes. "Our biggest
problem in Alaska is our tax-and-spend governor and House
liberals." He said the schools can get all the money on the face
of this earth, and they still would be crying for more. The kids
would get a better education if the schools were privatized, he
added. Most educators are liberals, so don't worry about their
pathetic votes. No income tax, no fuel tax, fully restore our
PFD, he said.
7:08:18 PM
TRISH MCDOUGALL, Houston, Alaska, said her family is in Alaska,
and her daughter was born here and owns a small business. She
told the committee that she has a combined knowledge of pretty
much most of the issues that have been brought up, because her
son-in-law works in the oil industry, her husband works in the
auto industry, her sister works for a nonprofit, and she works
in the health care industry. Because of the recession, she does
not support HB 115. Personal responsibility "is not the
justification here," she said. This is the responsibility of
elected officials to manage over-spending. She told the
committee to "look in your own house from the top down, and then
come to us with an actual plan that is fiscally responsible
across the board equal for all Alaskans." She stated that she
does not support anything in the bill, whatsoever. It will break
the backbone of working Alaskans regardless of how much goes out
of the state. "I don't think that will offset what we are
looking at as far as our deficit right now," she concluded.
7:10:36 PM
RONALD ALLEN, Skwentna, said he and his wife live in the
wilderness and have a small farm and a very low income. He said
he is a retired naval officer and a Viet Nam veteran. He said he
is against the income tax in HB 115. From what he can figure,
there are 735,000 residents and only about 135,000 are working.
He gets social security, a pension, and a little bit of
(unclear). President Franklin Roosevelt created a program for
the baby boomers, and he said he wanted to provide social
security, so people could have pride and dignity in their senior
years. He said he went on social security in 2010 and sold
everything he had and moved to Skwentna, because both he and his
wife lost their jobs. "We've been struggling, but if you have to
take my social security away as a Viet Nam veteran, it's
disgraceful," he said, but he still has his pride and dignity.
He stated that he farmed with his grandfather in Indiana, and
that is what he and his wife are trying to do in Alaska. He
built a 50-foot high tunnel, and they are growing vegetables and
raising a few animals. He doesn't see how an income tax is going
to work. "I'm not sure what it is, but I have an idea, and you
probably don't want to hear it." He asked everyone to think
about the people who are struggling. He said he is trying to
help people with his garden and his turkeys, but it is not easy.
7:14:21 PM
MIKE COONS, Palmer, said he is speaking for himself and said
progress equals socialism and an income tax is socialism. He
calculated what his tax would be. For him and his wife it would
be $954, but each might get $1,250 from the PFD. If they both
are not given a PFD, that will cost them $3,454. They are on
fixed incomes and will have to set aside $79 per month to pay
their tax. He would set aside $90, and that is $90 that Walmart,
Lowes, and gas stations will not get. That is $90 not going into
businesses and will cause the loss of employees. That means no
flights to go see his mom, which costs $600, and at least
another two years to save for a new ATV [all-terrain vehicle],
which costs about $20,000. Testimony today stated that 16 more
state workers offset the 74 state workers that have been pink
slipped. Regulations will be about 200 pages. The president and
Congress are cutting taxes, he opined. Progressives want to add
200 pages of regulations to support government; hell no.
CHAIR COSTELLO noted that over 150 Alaskans are waiting to
testify, and she urged witnesses to be brief.
7:17:10 PM
RICH YOUNG, Eagle River, suggested putting emotions aside and
looking at facts and science. Science says any increase in taxes
reduces growth. One percentage point cut in personal income tax
raises the GDP [gross domestic product] by 1.4 percent. He noted
a website that shows studies supporting that. There is a
recession, and the testifier before him said that he will have
to wait to buy a new SUV [sport utility vehicle] or an ATV or to
spend $100 at Lowes. He said that will affect the Anchorage
economy immediately. "You want to take $300 million of the
permanent fund away from the economy, and then you're gonna take
$600 million, because I'm going to give you (unclear) of new
money, and you want to take that out of the economy-$900 million
out of the economy of the state of Alaska per year, and you
don't see that that's going to cause a recession?" Unemployment
and people leaving the state to find work-he doesn't understand
how that science is good for Alaska.
7:18:43 PM
ROSELYNN CACY, Anchorage, said that the permanent fund versus
the income tax divides Alaskans by income. "If I make less than
$1,000 per pay period, the permanent fund dividend is important
and significant to me," she noted, "especially if I have
children." If her income was doubled or tripled or ten times
that amount, the dividend becomes much less important and an
income tax becomes more important. The progressive tax structure
does the same. She suggested removing the section where some pay
no tax. It is an illusion. This group already gave up more than
this amount in the PFD reduction, she said. There are two
natural places to increase a wage withholding. The first is a
half percent increase when the state unemployment withholding
ends, she stated, "currently 198.50 of tax somewhere under
$40,000." The second is a "6.2 percent that individuals stop
paying in social security tax, about 118,000." If a 5 percent
tax were withheld at this point, a lot of wage earners wouldn't
even notice. On line 13, page 1, and lines 1-20 on page 2 of the
bill, if taxable income is under $40,000, the tax would be 2
percent of the amount. If the taxable income is between $40,000
and $120,000, the tax would be $800 plus 2.5 percent of the
amount over $40,000, and if the taxable income is over $120,000,
the tax would be $2,000 plus 5 percent of the amount over
$120,000. "Let's make it painless," she concluded.
7:21:14 PM
BRINNA WOJTALEWICZ, Anchorage, said she is a middle-school
special education teacher and currently serving as the president
of the Anchorage Education Association. She thanked the
committee and noted that since 2014, Alaska's fiscal crisis and
the uncertainty for school districts has had an adverse impact
on students and their learning. For the last three years,
students have been watching as their class size gets bigger and
services reduced. "That's why I'm asking you to pass a
comprehensive fiscal plan that includes a broad-based revenue
measure like HB 115." No educators in Anchorage have received
pink slips yet, she stated, but Anchorage has lost over 100
positions. She said she has fielded calls and emails in the past
couple of weeks from those who are distressed from being
displaced from their buildings, and this is what happens when
positions are cut. Some of these staff members have been in the
same building for years, she explained. It is detrimental and
disruptive to a classroom, and it is happening now without the
monumental cuts in the Senate proposal. "We cannot cut our way
out of the state fiscal crisis," she stated. She urged passage
of HB 115. She said she is gravely concerned about Alaska's
children; they need a strong message that they are cared about
and valued.
7:23:13 PM
ORIN SEYBERT, Anchorage, said he is speaking for himself, "but
myself also includes my seven kids, 18 grandkids, and 30-some
great grandchildren, and even a couple of great-greats. He urged
support of HB 115. For those people who have a knee-jerk
opposition to an income tax, he asked them to read the bill and
see how much it has changed in the last month or two. It is
easier and easier on the low-income people; the dividend is
exempt; there's a $4,000 exemption; and it derives the most
money from the high-income people, of which a lot of his family
are. He added that the tax will bring in revenue from people
making our money and taking it back outside. Don't let the
Senate hierarchy, particularly the finance committee, continue
the draconian cuts, which are only making things worse. He said
SB 26 is a good start and he supports it, but saying there will
be future cuts, though they don't know where, and the balance
can be made up with the CBR-that's our savings. To depend on the
CBR to fill the gap is like homeowners burning their furniture
to keep the house warm for another night. "Please support this
bill," he concluded.
7:25:35 PM
JANA PEIRCE, Fairbanks, said she is speaking for herself and for
her husband. Like many Alaskans, they support an income tax
along with a disciplined use of permanent fund earnings and oil
tax credit reform as a balanced approach for solving the fiscal
crisis. "I don't understand why people think we shouldn't have
to pay anything for the government services we use." She said
she thinks it is irresponsible to encourage this thinking by
continuing to spread the fairy tale that there is enough waste
in government that after two years of deep cuts, Alaska can cut
its way out of this without eating away at the quality of life
in Alaska. There is not $2.9 billion in waste; if there were,
the Senate majority would not be proposing deep cuts to K-12
education, the university, and even pioneer homes with no plan
for where those seniors would go. Even with those cuts, the
Senate majority's plan doesn't close the fiscal gap, she
explained. The income tax that has been proposed, she added, is
modest and would be a very small price to pay for the privilege
of living in this beautiful and culturally rich state. Several
have warned that some people would leave the state because they
don't want to pay for the government services they use. That
would be their choice, she said, but she expressed more concern
for the people who will be forced to leave if they lose their
jobs to the economic impact of continued deep and reckless
budget cuts.
7:27:24 PM
MARYLEE GUTHRIE, Fairbanks, said she has been in Alaska long
enough to enjoy the full complement of dividends and to enjoy
the even larger financial benefit to my family of the (unclear)
provided by the petroleum industry, and she supports HB 115 or
an improved version. After following state budgets and revenues
closely for many years, she sees that the alternative, the
Senate majority plan, is to downsize Alaska by downsizing its
fiscal capital, human capital, and infrastructure, which is
downsizing the future, she said. Public capital is a uniquely
Alaskan legacy, and it is a uniquely Alaska need. "We're kind of
like Lake Wobegon, where all the kids are above average." She
noted that all the costs as a state are way above average, the
tax base without petroleum is way below average, and the
investment reserves are crucial to Alaska's future. The premise
is that a lot of people are meeting this huge ambition in Alaska
where surely government can be cut another 20 percent without
serious harm; surely, we have enough savings that we can
liquidate some of our capital, and surely the future will refill
those coffers. "Those premises are unsound and fiscally
reckless," she stated.
7:29:21 PM
BILL WARREN, Nikiski, said he is a 66-year resident and retired
from the pipefitters local 357. Alaska has been very good to
him, and he favors HB 115. The head tax on the PFD is a tax on
babies through seniors, he added, and it is terrible. There is a
$3 billion budget crisis that needs to be fixed. Alaska needs a
state income tax, because the two taxes would tax the low and
high-income citizens and the state would receive $85 million
from nonresident workers. In other words, "you would tax the
poor folks and the fat cats and the people in between-it would
be fair." He added that without balancing the budget this year,
the legislature will instill fear and uncertainty among
Alaskans, resulting in very high anger.
7:30:39 PM
DAVID BRIGHTON, Kenai, said he is the father of three students
and is a special education teacher and president of Kenai
Peninsula Education Association. He thanked the committee and
encouraged members to pass HB 115. It is controversial, and no
one like taxes, but Alaska is the only state that has neither an
income or a sales tax. "I enjoyed the days when oil revenue paid
for services that we all enjoy," but it is now time to act. Some
senators have said that they prefer the sales tax over an income
tax, but there is no sales tax bill, and the legislature has
taken too long to address the budget deficit, he cautioned. He
congratulated it for cutting the budget; the reductions were
substantial and an important step. While sensible reductions and
efficiencies should be sought, the big cost savings have been
found, and Alaska needs to increase its revenue and diversify
it. He said he supports the POMV [percent of market value] as a
big step in the right direction, and he has enjoyed the years
that he got a dividend, but "we can't afford them, and $1,000
per year is enough." He said he does not want further reductions
in services. A 5-percent cut in schools would affect his
children's education, as the Kenai school district would be
forced to cut 50 teachers-over 8 percent of current staff. It
would force the board to consider cutting programs or
drastically increasing class size, and that would harm the
education of the children. "My youngest son will never have a
second chance at second grade," he stated. Get it right the
first time by fully funding the budget for K-12.
7:32:50 PM
RACHEL NEUENDORF, Soldotna, said she testified last year against
an income tax and still opposes the burden of a tax on working
people. She asked how much it will cost to implement a tax. It
will create another inefficient bureaucracy and makes no sense,
she stated. She has not heard how much it will cost, but adding
more government is never the answer to a budget deficit. "If you
really want to stifle the already struggling economy, then add
this income tax," she opined. People would leave. Why stay in
this state with a high cost of living, high unemployment, and an
income tax? How can you ask people to live on less? She said to
continue to make cuts. "Let me be very clear; they need to be
dramatic," she said. It is crazy that Alaska is asking Alaskans
to do with less but can't seem to make tough choices. She told
the legislature to have the courage to cut all programs not
guaranteed by the Alaska Constitution. The constitution
guarantees public education, safety, and welfare, and this broad
definition has allowed for Alaska to be a social welfare state,
and the state cannot afford it. It is time to assess the need
and funding of programs. "If you must take money, then continue
to consider the PFD like you have." She said she is tired of
hearing that Alaska has the lowest tax burden in the country,
while it has the entitlement of the PFD. All Alaskans should
have to shoulder the responsibility to fund the government. She
told the committee to consider taxing nonresidents and tourists
as a start, but don't ask for money from working Alaskans.
7:34:49 PM
FRED STURMAN, Kenai, said he is against this tax. Kenai city
said that it was "$500,000 short of sales tax," and that is
approximately $20 million that was not spent in the city limits
this last year. He said he spoke with a business owner who cut
his work force by 20 percent. He didn't lay anybody off but put
them on four-day work weeks, a good policy to consider for
government employees. He spoke with another man in Kenai who cut
his force by 20 percent, and as soon as the summer is over, he
would cut another 10 to 12 percent. He said he talked to someone
who was packing up to leave as soon as school was out, and her
husband has already left to find a job. They have seven kids and
are going to be leaving. "And you talk about taxing the out-of-
state people; we just lost 9,000 jobs on the North Slope," he
said, and "half of them people lived outside, or more." He noted
that 60 percent of the people on the Slope live outside, and
they got laid off too. It wasn't just Alaskans that got laid
off, he explained. He said to cut taxes, "and I don't think you
should consider giving another 3.5 percent raise to the
employees this year, and make them pay their own health care."
CHAIR COSTELLO noted that there are many who are waiting to
speak, and some have already left. She said that people can
provide written testimony.
7:37:05 PM
MICHAEL ILLG, Homer, said he supports HB 115, symbolically, the
"education funding act." The tax is about the future of Alaska
and putting kids first. "We need this income tax to pay for
education," he said. He said Alaska cannot just focus on what is
happening inside the classroom, but the roles of schools go
beyond standardized tests. It is more about the relationships,
the people they connect with, he stated, and the opportunity for
betterment. To continue to kick the can down the road with less
money for schools is going to be a hardship for many families.
"We're talking hardship for children; we simply cannot afford
not to implement this tax," he added. He encouraged the
committee to look at public education from a different point of
view, rise above party affiliation, and ask themselves what they
believe is the best thing for the kids and the future of Alaska.
"Look at public education as a public safety issue," he urged.
The better kids are in the classroom, the better they will be as
Alaskans, he concluded.
7:39:30 PM
KATE FINN, Anchor Point, said she agrees with the previous
speaker to focus on education. There is no dedicated fund, but
this is an education tax. She said she just returned from China
where there is a 95 percent literacy rate. The United States has
86 percent literacy, with 32 million people who cannot read, she
reported. The Literacy Council of Alaska reports that 43 percent
of the lowest literacy people live in total poverty, and 17
percent receive food stamps, and 70 percent have no jobs or only
part-time jobs. There is nothing more critical than the
education of Alaska's children, she opined. Russia has 99.9
percent literacy; Cuba has 99.8 percent literacy. "What are we
doing when we don't focus our attention on education?" Education
is not Socialism, it is just socially responsible, she added.
She urged passing HB 115, capping the PFD at $1,000 or $1,200,
and repealing gas tax credits-all in the name of balancing the
budget, which must be done now.
7:41:46 PM
DUANE CHRISTENSEN, Anchor Point, noted that he is either in an
alien universe or still in Anchor Point. He said he is opposed
to HB 115, and he has heard the same arguments about education
every year. He has lived in Anchor Point from the time when
Alaska wasn't a state to the time it did not have an income tax.
Last year, 9,100 jobs were lost, and the projection is 12,000
this year. The projected income from the tax at $8 million is
not going to balance the budget, "so you're going to have to
look elsewhere anyway." He said he has not heard anything about
cutting this stupid boondoggle gasline project, which is not
going to go anywhere. It doesn't pencil out, he explained, and
it has never penciled out. He received a letter from "one of you
senators," and the context of the letter was ludicrous, claiming
that this is sustainable, "and it is not." He has been trying to
work his way to retirement for years, "and if this goes through,
then that just shoots that in the foot." He encouraged senators
to stand ground. Government doesn't create wealth. The senators
are the thin line against tearing apart the future, he said.
7:44:08 PM
DAN BOONE, Homer, said Alaska needs to broaden its tax base so
everyone has skin in the game. Everyone appreciates well-
functioning and efficient government, good schools, public
safety, and well-maintained roads. We just don't like paying for
it. Not paying, he said, has worked for nearly 40 years, but now
we must start bearing part of that burden. First, he said,
Alaska needs to revise oil taxes so that there is a positive
cash flow from every barrel of oil that flows down the pipeline.
Second, there needs to be a cap on the PFD; $1,200 is a little
more than the historic average and is a nice $100 per month.
Third, Alaska should implement a statewide income tax, and the
easiest means would be a small percentage of one's federal
income tax. That would capture money from those who earn an
income in Alaska but choose to live outside and, consequently,
don't spend much of their income here. He suggested a few small
adjustments, such as increasing fuel taxes and changing senior
exemptions, such as free auto and hunting licenses. He noted
that he is a senior and would be impacted. None of this tax
restructuring is particularly pleasant, he pointed out, but it
is absolutely necessary for the long-term fiscal stability of
the state. He urged the committee to pass HB 115.
7:45:47 PM
CLYDE BOYER JR., Homer, said he represents himself and his wife,
Vivian. He is a retired certified public accountant and had a
small business and saw no real problems suffered by small
business clients during the time that Alaska had a state income
tax. He said he is in favor of an Alaskan income tax to fund the
important services provided by the state. "Our citizens need to
step up and help," he added. Alaskans currently pay nothing to
finance the state, and with the income tax, Alaska will still be
close to the state with the lowest taxes on citizens. He said
Alaska needs to continue to have excellent education and to not
let its bond rating drop again. He supports adjusting the PFD as
an interim measure and hopes that the tax credits offered to the
oil industry will be reduced to help balance the budget. He
reiterated his support of HB 115.
7:47:15 PM
AMY BOLLENBACH, Homer, said she agrees with Mr. Boyer's
testimony and is very much in favor of HB 115, because it is
fairer to low-income citizens and provides money for important
services, like education. She opined that Kate Finn had great
comments on Alaska's poor reading rates in comparison to some
much poorer countries. "We can't hurt children because we're
afraid to have an income tax," she added. She lived in Alaska
many years when there was an income tax, and one year, 1964, she
was living in a basement with her husband and "theoretically
building a house." Part of the structure was damaged in the
earthquake, and the well quit giving water, so they were in bad
straights. "We were worried about doing our federal income tax,
but we had so many deductions from my illnesses that it wasn't
so bad, and then we suddenly thought, oh, we forgot the state
income tax." Well, it was only about $250. Almost all middle-
income people and upper-income people can afford $250, so let's
not throw away our children's future for a few hundred dollars.
CHAIR COSTELLO said there are still over 100 people waiting in
various locations across the state.
7:49:24 PM
GARVIN BUCERIA, Palmer, said he is opposed to HB 115 and top-
down economics that involves government funding and excessive
social programs. Governor Walker has irresponsibly cut the
government-funded PFD program and rewarded state workers with
salary increases when there have been reductions in the oil
industry when the government failed to pay the incentives in SB
21, by promoting an untimely rail link with Canada, by promoting
a gas pipeline and its offices and staff, and by perpetuating
the funding of the Knik Arm crossing. "Obviously, I support the
bottom-up economic view that supports private enterprise," he
averred. He thanked the committee for not supporting "House bill
majority legislation." He doesn't relish sharing his limited
income with a growing workforce. The objective of the committee
should be to maintain current Permanent Fund Corporation returns
without changing its present structure. The folio was up 4.5
percent for the first half of FY17, and between April 21 and
April 25, the permanent fund gained $497.5 million, he stated.
Passage of SB 21 increased production on the North Slope. He
said to accelerate new discoveries where the government provides
incentives to make them two to three years away from linking to
the trans-Alaska pipeline. "Reduce this budget," he said. He
urged the committee to use the constitutional budget reserve to
fund a reduced budget. So far, it is not sustainable, but use
it, and, yes, numerous special legislative slush funds to fund
government. Don't cave to the House majority, he added.
7:51:43 PM
STEVE ST. CLAIR, Wasilla, said he opposes HB 115; it is
dishonest to put education anywhere in the title, but it seems
that everyone is talking about education. The intent of the bill
is to generate new revenue to continue wasteful spending of
government. "If you want to find revenue, there are many places
in the budget to find them, such as $300 million of funded and
unfunded positions," funded positions that are not filled, and
$250 million of optional Medicaid services. He referred to a
budget he produced a couple of years ago. He said he found 85
percent of the revenue that the committee says they need, and it
took him less than a 90-day session. He said no teachers were
fired. An income tax deters people from working. His family has
decided that it is too expensive to work. A family of four with
an income of $50,000 will see its income reduced 8 percent,
which includes the loss of the PFD and a $210 state tax. He
explained that he is willing to pay his fair share if the
government cuts its budget less than 1 percent. These people who
are saying deep cuts, not happening. Most people who support an
income tax work for the government or are suckling on the
government udder, he stated. Looking at fiscal note number 2 on
this bill, it shows that four employees will be hired this year
and 37 employees in 2019 and 60 employees in 2020. "For all of
you sitting there that wanted to reduce the size of government,
if you support this bill, you're not reducing the size of
government." He urged a no vote.
7:53:48 PM
ABBY ST. CLAIR, Wasilla, said she opposes HB 115. She said
legislators have been elected to keep her best interests at
heart, not to increase the government's bank account. "You
should be paying the bills required by the state constitution,
then prioritizing the additional bills," she stated. A way to
cut costs would be to stop funding "those unfilled positions
throughout the entire state," which is wasting $300 million
annually, which she learned about from a Mission Critical
meeting. Another option to save money would be to eliminate some
Medicaid services, she said. "We cannot afford the Cadillac
plan." These cuts would provide the same money equal to an
income tax. One out of every ten Alaskans are veterans and many,
like herself, live on a fixed budget and would be required to
pay additional taxes, even though she lives below the poverty
line. She reminded the committee that many other states have
tried this and lost revenue and lost a significant number of
residents, because they can't or won't pay it. "Is this what you
want for Alaska?" She said Alaska is suffering from the
recession, and there are other options. She told the committee
to listen to the experts like United for Liberty and Mission
Critical.
7:55:28 PM
PETER MORGAN, Palmer, said he represents himself and his wife,
who does not know that he is testifying. He said he does not
want to pay three to four hundred dollars a month when he
shouldn't have to. He said he doesn't want to pay when he is
retired. He doesn't want to pay taxes on his social security. He
doesn't want to pay taxes on his IRA, Roth, and 401K. He added
that he doesn't want his children to be paying any taxes on the
things that are left to them when he is gone. "It is totally
unfair." The money is there now to take care of this. "Jay
Hammond, everybody said, he's a great guy and he did a great
thing, and he did." He said he has spent every dime of his PFD.
He asked if anyone thought, at the time, that 20 to 30 percent
of that PFD would be shoveled back to the federal government.
What a waste! Federal money never did anything to help the
state. The coolest thing about the PFD is everyone shared the
same amount, and things are different now, and we should all
share the weight of the burden of government. Cutting needs to
happen, but this should not be put back on people who have
earned money in this state. There is plenty of money in the
permanent fund. Although unpopular, why not direct that money,
just like we would do if it were a PDF check, to taking care of
these bills, he said, and we would stop wasting 20 to 30
percent, and the rest of us would be able to make it. He said he
applauds his majority in the Senate for hanging on for dear
life. The majority in the House is just acting like lemmings, he
told the committee. They are not thinking about what is going
down. He urged the committee to not pass HB 115. He said
Governor Hammond did not think about the money Alaskans would be
shoveling to the federal government out of the PFD.
7:58:19 PM
BETH RIVEST, Juneau, said she is a mother of three and worked
for the Coastal Management Program, stayed home, started a
business, and now works for a charter school. Long-term fiscal
planning requires changes to Alaska's revenue and spending. She
said she supports HB 115, with some work, as it will help all
Alaskans. A family she knows is moving; one member of the family
works at the mine and plans on working two weeks and flying
south each time. That income earned in Alaska will not support
the state. She said she believes in humanity, and there are
people who need to be cared for. It is the most vulnerable: the
youth who need education, the elderly, all sorts of folks need
our support. She noted that she has two people staying at her
house for the summer working in tourism. They are from North
Carolina, and they actually pay North Carolina state taxes on
the money earned in Alaska. "That just doesn't make sense."
There needs to be a revenue source and it should include an
income tax. She said she has kids in the public school, and some
kids don't fit the school system and need more visual learning.
The uncertainty of a stable fiscal plan is difficult for the
most vulnerable kids.
8:02:26 PM
At ease.
8:03:06 PM
CHAIR COSTELLO called the committee back to order. She thanked
everyone for their civility.
PAUL KENDALL, Anchorage, asked for his stolen permanent fund
money with interest and damages, and he asked the committee to
travel to Anchorage to deal with the public employee unions. "It
seems to me they keep bringing up services," he said. There is a
thing called essential services and a thing called priorities.
"If you think I'm going to pay a school teacher 40 grand a year
to come up here, plus bennies, to hang out for nine months so
that I can raise her kids while she's not a mommy, and they can
teach my children other things that are of more value, you're
dead wrong." He challenged the committee to a public discussion
about services. Many economies are being sustained by the shared
wealth of the state, he said, and there needs to be a discussion
about whose money is a shared resource. "They've constructed
economies due to the richness of the oil companies. They've
constructed false economies, and the minute you pull one of the
economies out, the whole thing tumbles," he explained. Right
now, there are two things ready to fall, which are PERS and TRS.
It has to stop now, he said. "You have to buy them out. You have
to stop the public employees' union. That's communism. You have
to reconstruct your public employee payroll. We do not pay you
to retire; we pay you if you work, and then you purchase those
other things." Public education is embarrassingly detrimental to
our children, he noted. The state can no longer sustain the
opportunists who are mobilizing the resources given to them.
They are using their skills to go against the public, he added,
and "we cannot sustain that." He thanked people for testifying,
but he wants to get back to unhurried, engaging discussions
instead of compressed pop-up government moments. He said he is
disappointed because he thought Alaska would be different than
the Lower 48 and the San Francisco boys.
8:07:26 PM
KEVIN MCCABE, Big Lake, said he is retired from the military and
(unclear audio). If any income tax is imposed on him, especially
the one in HB 115, he will (unclear) leaving the state, because
over $7,000 will be removed from the coffers by the tax. The PFD
is money constitutionally provided to the people (unclear). This
is redistribution of wealth on a rather large scale. He stated
that HB 115 is not, by any definition, a broad-based tax.
Alaska's problem, he opined, is that neither legislative body
nor the governor proposed significant cuts. The state has enough
money without removing the peoples' PFD or instituting a tax.
The policy of many departments is to fund positions that are not
filled, otherwise known as a slush fund, he explained, and other
niceties such as the Knik Arm Bridge Toll Authority, the
legislative chef, and the mail room, which are unnecessary. The
departmental mission creep is huge and has not been addressed by
any legislative body or the governor. "Consider the Anchorage
school district where 44 percent of the budget apparently goes
to the administration." He asked if the legislature had any
control over the use of state funds. There is a spending problem
and not a revenue problem. House Bill 115 is not an education
funding act, it is a progressive income tax by the rogue section
of the legislature and a governor with a pipeline dream. The
loudly proclaimed budget cuts are smoke and mirrors, he stated.
The cuts are not enough; there needs to be another $200 million
in cuts this year alone, he stated. (Unclear.) He reminded the
senators he voted to move the capital to Anchorage or closer to
"the people." He wants the same access to the capital as
lobbyists, he said.
8:10:49 PM
LAURA BONNER, Anchorage, said she is retired and plans to stay
in Alaska and has never been employed by the state or any
school. Economist Gunnar Knapp said Alaska will experience
impacts of lower oil revenues, and not making significant
progress toward closing the deficit will have significant
negative consequences. Last year the legislature made progress
with cuts only, she noted, cutting 40 percent since 2014. There
are not many places left to cut, and the negative consequences
are already occurring, she said, with the reduction of troopers,
job losses, costs shifted to local governments, services cut for
vulnerable Alaskans, less maintenance of the roads, and less
funding for education. Cuts to public education will have
impacts for generations, she added, including the quality of
future employees, innovation, research, and more challenges for
public safety personnel. Now is the time to consider revenues,
including a progressive income tax. Restructuring the PFD,
changing the tax code, prudent cuts in the budgets, and
implementing an income tax will give Alaska fiscal stability for
years to come. "We need all four parts," she added.
8:13:21 PM
DAVID NEES, Anchorage, said he is testifying for himself, his
son, and his wife. In 2002 Tony Knowles introduced an income tax
that was similar and was rejected by the Senate, 19-0, he said.
A progressive income tax is the worst, because it seeks to
distribute money from the rich to the poor. A flat tax, like in
North Carolina, taxes every resident. A 1982 ISER report pointed
out that Alaska's high income means that Alaskans pay more than
its fair share of federal income tax. Earning so much means
Alaskans pay 25 percent more, he stated. In 2015, the median
family income in the state was the second highest in the nation,
which leads to higher taxes, and this bill will add to that
burden. The name of the act violates Article 9, Section 7, of
the Alaska Constitution, which prohibits dedicated funds, he
explained. "If they want a dedicated fund for education, they
can do it like we did with the PFD," he said, with an
initiative. He said he is opposed to HB 115, "no matter what you
call it, because it's lipstick on a pig."
8:15:54 PM
ELLIE GOTTSTEIN, Anchorage, said she is representing herself and
is one of Senator Meyer's constituents. Alaska needs to find a
way to fund what matters. For her, she said, education is a top
priority, but the bottom line is that to sustain Alaska, there
needs to be a long-term plan. That is why she supports HB 115.
"We need to diversify state revenue to fund vital health,
safety, and education needs, which is mandated by our
constitution," she said. You get what you pay for, and it is
time to step up and pay for it, she added. Income tax is the way
to ensure continuous funding for the things that matter, and the
Senate fiscal plan of using only the permanent fund earnings
leaves a deficit of hundreds of millions of dollars and
disproportionally hurts lower income and rural populations. An
income tax will help balance the impacts of new revenues and
will ensure that nonresidents contribute to the solution, she
added. Without a diversified tax, the state cannot support
future growth and expansion. As the economy grows, so does the
population. Without a broad-based tax, the state will not be
able to support the future we want. This is about the longevity
of Alaska, she concluded.
8:17:44 PM
BEN MULLIGAN, Anchorage, said he feels that Alaska is not ready
for a broad-based tax. He said he understands, probably more
than the average person, that the legislature has cut the
budget, but the government is inefficient. There are ways to
become more efficient and free up money to do the things that
are a priority, he stated. To have faith in government spending,
he would like to see a spending cap. "Having that sort of
control on government spending through the years would give me,
I would say, a little more faith in knowing that money is being
well-spent wisely, knowing that you couldn't just increase the
budget exponentially given the sort of income that's coming in."
He said, until he sees that, he will oppose HB 115.
8:19:00 PM
CURTIS THAYER, President, Alaska Chamber of Commerce, Anchorage,
said his group is opposed to HB 115. The chamber was founded in
1952 and is the voice of small and large businesses. Alaska is
blessed with the resources needed to fix its problems, and the
financial reserves are under strain, and, he said, "we can't
live off savings forever." The resources are considerable, and
by working together Alaska can close the fiscal gap by cutting
the cost of government, living within its means, restructuring
the permanent fund to protect the dividend, using the earnings,
and establishing a statutory appropriation limit. Currently, the
chamber feels that until those are done, it is premature to tax
Alaskans, which will exacerbate the situation, he stated. A
recent survey of 808 Alaskans shows most oppose an income tax.
Alaskans overwhelming realize that taxes will have a negative
impact on the state's economy. That opinion will not change, he
added, until the governor and the legislature have a mechanism
to control future spending. He quoted the Tax Foundation as
saying this proposal will make Alaska one of the states with the
highest taxes in the country, like California and New York.
8:21:39 PM
DAVID LANDRY, Anchorage, testified that he is a construction
contractor and has had a business out of Anchorage since the
1980s. He fully supports HB 115. He said that he read the op-ed
by the chamber of commerce, and he is wondering what world they
are living in. He suspects that there are not a lot of business
people running the chamber. There is no possibility that his
business will be killed by this income tax-quite the contrary,
he added. There is a real feeling of instability among customers
right now, and he deals with people who have money. Most of them
are informed enough to know there will be a broad-based tax, and
they want to know what it will be and that there will be
stability before they start spending money. As a business
person, he explained, "you need to get this cleared up." It has
been many years since the price of oil fell, and the state has
not had stable income. He stated that a predictable state budget
based on the permanent fund earnings and the income tax will be
a blessing. The tax will be a very good thing for the state and
will eliminate the ping pong budgeting based on oil revenue. "I
strongly urge you to pass this," he concluded.
8:23:46 PM
MICHAEL CHAMBERS, Anchorage, said he is a Viet Nam veteran,
former public schoolteacher, and starving artist. "I stand in
direct opposition to HB 115." He asked why the legislature is
restructuring the permanent fund and implementing an income tax.
He said it is because the legislature refuses to lower the
operating budget. "I could care less how many misrepresentations
have been made." The truth is, the budget has not been cut. It
is obvious, he said, that the legislature prioritizes the
government worker over the private worker, because there is a
higher probability that the government worker will vote to
protect his or her own paycheck. These actions are about tending
your own beans for reelection, and nothing more, he explained.
The governor has the distinction of being the only governor in
America who taxes children 50 percent of their income, and now
legislators wish to join him in this theft at 75 percent, he
said. Incorporating the income tax will give Alaskans the
distinction of having the highest cost-of-living index in
America. "If this legislation is passed, this will be your
legacy," he cautioned. He said he is a fan of legislation that
calls for no income tax and no restructuring of the PFD, and he
would like to see that plan advocated, because many legislators
are saying it doesn't pencil out. "It does pencil out."
8:25:44 PM
JASON GUSTAFSON, Anchorage, said he represents himself and his
wife and children. He said he is here today because of money,
which the state doesn't have enough of. "So what next?" The
easiest answer is to cut, but the state could cut every employee
and still run a deficit, so it can't cut its way out of this.
Some fellow Alaskans are talking about an income tax damaging
the economy, but he does not hear how they will close the budget
gap. "I hear them saying hell no to taxes, as if somehow the
budget crisis will go away." One way or another, Alaskans are
going to pay. Last year the governor vetoed a substantial
portion of the PFD, and folks might argue that that's not
income, but Alaskans see that it is income on their federal
income tax. What people are really saying is that they will pay
more for an income tax than what they lose from the dividend.
Most Alaskans can't say that; most Alaskans stand to lose more
from the loss of the dividend than from the income tax, which
means that the damage to the economy will be exacerbated without
the income tax-it's either/or and not nothing, he stated. A
state income tax can be deducted from the federal tax, so it
costs Alaskans less to raise the same revenue. It is just math.
"It's that same math I learned in Anchorage public schools, the
same public schools that are getting hit with budget cuts." His
children attend those schools, and those schools trained his
employees, and they are the single most important investment in
Alaska's future. Don't eat your seed corn, he added. Education
funding pays interest as the children grow up, get jobs, and
become the economy of tomorrow. He urged going forward with the
one option that raises more money than it costs.
8:28:06 PM
DAVID BOYLE, Anchorage, said he is the executive director of the
Alaska Policy Forum and part of a mission critical team but is
testifying as an individual. He said everyone would agree that
the last thing to do during a recession is impose taxes. He
repeated himself. Taxes will drive the economy into a deeper
recession, he opined. Before the state redistributes wealth
either through an income tax or a PFD cut, he urged the
legislature to reduce the budget, including K-12 education. It
takes courage to resist, and for those who want to spend more
for education without accountability, "guess what? Alaska spends
more for students than all but two other states." He said that
before his social security is taxed, and his mortgage interest
is taxed, and before the active military is taxed, "I want you
to cut the 3.5 percent merit pay for state government employees.
I want you to tax your per diem at $265 a day, which is not
taxable under the federal code." He also would like the
legislature to cut money for promoting a gasline. He does not
want to pay for the gasline, he clarified. "Thank you for my two
minutes of democracy." Kill this bill, he concluded.
8:30:19 PM
MARNIE HARTILL, Anchorage, said she is speaking as an individual
in support of HB 115. She is a school teacher and the vice
president of school programs. In 2009, she started teaching a
multimedia class, but was not provided any computers. In 2011,
there were cuts to the school social worker, and she was working
with a student who did sleep on a bed and with students who were
not living with parents, but the school still lost its social
worker. In 2014, hundreds of teachers were pink slipped, and
there were cuts to school business connections. In 2015, she
witnessed increases in class sizes again, and programs
benefiting students in career and college resources were reduced
to a skeleton staff. "Are you using a 10-year-old computer every
day to work or learn?" she asked. Each year, she witnesses more
cuts to education, and two weeks ago her school did not have
adequate staff to deliver the state assessment while water
leaked through the ceilings. Education costs have climbed due to
the rise in health care costs, she said, and she surmised that
the committee was supportive of HB 123, which will help Alaskans
get buying power to reduce health care costs with transparency.
The high cost of health care and the lack of a defined benefit
plan has teachers churning in and out of Alaska but not sticking
around, she added. Opponents to HB 115 say that small business
owners will leave the state, but where will they go? Washington
has a broad-based sales tax and Oregon has an income tax. A June
6, 2016, article in Forbes magazine lists the states with the
best and worst economies, and leading the top is Utah,
Washington, and California. Utah has a great income tax and a
great economy, she pointed out.
8:32:34 PM
DARIO BORGHESAN, Anchorage, said he and his family support HB
115, but not because he wants to pay taxes, but because he wants
good schools for his son, safe streets, and healthy communities.
He noted that some people conclude that an income tax will make
people leave Alaska. He said every other state has either an
income tax or a sales tax, but the legislature should ask what
happens if Alaska tries only to cut its way to a sustainable
budget. Will cutting the university, cutting programs, and
reducing professors keep Alaska youth from leaving the state for
college? If they leave, will they come back without the
knowledge economy and social network that they need to create
businesses in the 21st Century? He questioned whether young
families will want to come to Alaska when there are 33-35
students in K-12 classrooms. The reason there are legislators is
the need for knowledgeable and thoughtful people to take the
long-term view of what is healthy for our future and our state.
Looking at places around the country that are prosperous, where
people want to live, those aren't places that try to cut their
way to prosperity; they are places that invest in their
community. "The way to do that is for all of us to chip in and
pay a little bit of income tax to support our schools and our
community," he concluded.
8:35:11 PM
DEENA MITCHELL, Anchorage, said she strongly, strongly supports
HB 115, and there has been wonderful testimony, so she doesn't
want to be repetitive. She has an MBA in finance and a master's
degree in economics, and having listened to testimony, there is
no doubt that Alaska needs to solve this problem this year. The
state needs fiscal certainty, she said, and after cutting $700
million out of the operating budget over the last two years,
government spending per capita on a real dollar basis is the
lowest it's been in decades. Many businesses need certainty to
make future investments, and she has heard that companies are
doing work from out-of-state offices, because they lack enough
confidence in Alaska's economy to hire locally. Alaska has a
generous spirit that cares for neighbors and strangers, and that
is what government services do for its most vulnerable, like the
elderly and children. "That is why we pay taxes," she stated.
The Alaska disconnect has been talked about a little this
session in that as its population grows, revenues do not grow.
Having a progressive income tax is a counter to the regressivity
of the PFD cuts and ensures stability in funding, which schools
desperately need. It also ensures that when there is growth in
population, there will be growth in revenues to support the
services those people need.
8:37:26 PM
PATTY LINVILLE, Seward, said she recalled sitting around the
campfire in 1976 and discussing her future with other 20-
somethings who had recently arrived in Alaska. Someone stated
that he was going to stick around long enough to milk Alaska and
then move on. "Little did he know that those of us who stayed
would be able to milk the system for quite some time."
Inevitably now, we must give back, and HB 115 is the way to do
so. Universally, people with families put down roots where
education is valued and supported; however, in today's world it
is possible for breadwinners to travel to their jobs in Alaska
and maintain a household Outside for the sole purpose of good
education for their children. She said she has friends who have
done that, and she knows young families contemplating doing so.
As her son says, "It's just a plane ride." House Bill 115, if
implemented, will show all Alaskan families that we want them to
settle in for the long haul. An income tax designated for
education will show educators that we are serious about creating
an environment where children will be challenged to be part of
Alaskan's future. Paying a tax will also remind us to be a
participant in the government we pay for. She encouraged the
committee to pass HB 115.
8:39:05 PM
BRUCE JAFFA, Seward, said he is 70 and has been a welder for 50
years. He worked for a company that employed between 12 and 50
people, he added. He said he pays property tax in four boroughs
and owns property in other boroughs, and he fully supports HB
115 as a fair and valuable way to solve Alaska's revenue crisis.
People should be responsible and conservative with expenditures,
individually and as a society. "We decide what things we need
and what things we have to have and the means to acquire them."
As a society, we determine that certain things in an advanced
civilization are necessary and should be willing to pay for
them. "It is our responsibility to pay for these," he added. It
has been over 20 years since Alaskans have had the PFD, and
everyone forgets that we have to support ourselves. Alaskans
have forgotten that this is our obligation. An income tax, along
with reduced expenditures, partial application of permanent fund
revenue, and modification of resource extraction tax structures,
would provide certainty and is the fairest way forward, he
stated. An income tax would be offset by deductions from federal
taxes and would force nonresident wage earners to contribute to
the state economy. Nonresident wages are often from the
extraction of state resources, and it is fair that there be a
collection from these wages before they leave the state. Income
tax is partially balanced by the PFD program, he stated, which
is fairly distributed to all legal residents.
8:41:40 PM
MATT STEELE, Wasilla, said he is a small business owner in the
Mat-Su, and he has had to take some big income hits over the
past couple of years. He added that $18,644 is what the state of
Alaska spends every year, including the federal portion, for
every man, woman, and child. He opined that the budget is out of
control. When his income declined, his family had to make budget
cuts to his cable TV. He explained that he drives an 18-year-old
car and maintains it himself. If the state took the same
approach, it would not be "up against this wall." The income tax
is going to be devastating to his business and to most small
businesses that he knows. "It is insane!" He said he is a fan of
Senator Hughes. He begged the committee to get the budget in
control. "I beg you, beg you, to consider a plan, if we had to
do anything, like Michael Dunleavy's plan." He said he thought
that plan was sound and secure, and that plan would not affect
his family. He said he wanted to tell testifiers still waiting
to talk that this notion that people have to pay income tax as a
civic responsibility is insane. Ten percent of his adjusted
income goes to borough taxes in addition to a gas tax and
everything else that he pays.
8:43:49 PM
RYAN MCKEE, Americans For Prosperity, Wasilla, said that cuts
alone will not solve the problems, but hearing other testifiers,
there seems to be agreement that the budget has been cut as much
as it possibly can be. He said that is not the case, and a lot
more needs to be cut. The legislature needs to prove to Alaskans
that is can operate efficiently with the money it has before
asking for more, he stated. The legislature has spent way more
than it should have during times of high oil prices, and that
can't happen again. He added that a lot of Alaskans are a little
bit leery of giving more money when a lot of people in the
legislature say that they have already cut to the bone. The
House majority should follow the Senate majority and implement
spending caps to control, or at least adjust, the one that
currently exists to really control the growth of government,
"especially in times like this when the price of oil is low and
probably even more importantly when oil is high, so we don't
have more wasteful spending like the past," he explained. It has
been mentioned that the cost of living is high in Alaska, and he
is opposed to implementing an additional cost of an income tax,
especially on just a certain group of people. People say that
everyone will pay their fair share, but the way that the tax is
set up, that is not the case, he stated. Once again, about 27
percent of Alaskans will pay the majority of this, and that is
not a fair share, he said. He told the legislature to rein in
the out-of-control spending instead of thinking of new ways to
tax Alaskans to fix the bloated budget.
CHAIR COSTELLO said there are 54 people waiting to speak and
asked that comments be brief.
8:46:27 PM
BETH FREAD, Palmer, said she is not excited about the fact that
the legislature can't figure out how to cut the budget, except
when it comes to the undesignated general funds, which is the
money "that we most directly feel as long as they aren't
(unclear) of programs, like education." Alaska has the highest
costs of per capita education and the lowest result, she said,
and she can't imagine why people think the schools need more
money and not more streamlining. Thank goodness Senator Hughes
is working on accomplishing those two goals, she added. "The
silos for our seed corn, the school system, is letting mold and
mildew form and run rampant throughout the silos." Alaska's
children are still going out of state for college and jobs, so
don't think that UAA or UAF are the nation's best. Education has
to be improved and Alaska has proven that money doesn't fix it,
she added. She stated that she can tell who the public employees
are when they are testifying for HB 115, "as well as all the
other money raids that are going on." She added, "You all know
that a sustainable budget is one based upon revenues and
sustainable by those dollars. You are not taking revenues, you
are taking out of the pockets of Alaskans." The legislature, she
said, is not following through on their jobs as supposed
conservatives. She read a poll where 64 percent of Alaskans do
not approve of an income tax, so she can only presume that the
people in favor of coming into her home for money are people who
are employed by government. She asked the committee to stand
with their commitment to not pass HB 115.
8:48:57 PM
GARRETT ABBOTT, Ketchikan, said he was born in Ketchikan in 1986
and graduated from the University of Alaska, Ketchikan. He
supports HB 115 and said that the budget cuts that the Senate
majority has proposed will only deepen the recession, further
the uncertainty, increase inequality, and lower the quality of
life. The cuts amount to stealing from Alaska's future, he
stated, in order to escape pain at the present. He said HB 115
will allow Alaska to pay for its present and preserve its
future, and it is a fair, progressive income tax. Alaska has
many wealthy residents, and the state has been good to them. In
this time of need, it is only right that high-income Alaskans
pay their fair share to support infrastructure, education,
healthcare, social safety nets, and the elderly. There is talk
of substituting a sales tax for an income tax, but sales taxes
are regressive since low and middle-income Alaskans would pay
more in taxes as a percentage of their income. Smaller
communities that depend on local sales taxes would suffer a
disproportionate burden. Ordinary Alaskans have already borne
the brunt of the fiscal crisis from the recession and cuts in
state and local services and a reduction in the PFD. He said it
is unconscionable that the Senate would contemplate closing the
fiscal cap with a sales tax. Advocates of a sales tax like to
paint it as a small alternative, but consumption taxes are
greater facilitators of government growth than income taxes,
because under a sales tax ordinary people experience the tax
burden as less than it really is. Income taxes are open and
honest, while sales taxes trick people by spreading their costs
over a year's worth of purchases. For those who seek to avoid
unnecessary increases in the size of government, the income tax
is clearly superior. The income tax in HB 115 is the best
possible means for resolving Alaska's fiscal crisis, he said.
8:51:18 PM
TERRI ROBBINS, Ketchikan, said she is in favor HB 115. She noted
that she was born and raised in Alaska, and she has enjoyed
paying no income taxes and she wished it could continue, but she
would enjoy knowing that there is a future that involves an
educated and competitive work force to sustain the lifestyle
that is uniquely Alaska. Cuts to school funding, severe
downsizing of government services, abandoning our elders,
ignoring nonprofits, and neglecting our infrastructure threatens
us all, she said. The financial and ethical costs of allowing
this to happen would be catastrophic. She noted that Alaska is
the only state that does not have either a state sales tax or a
state income tax, and residents are taxed at a far lower level
than any other state, and it is not sustainable. This very
modest and equitable income tax will still keep Alaska's tax
lower than almost any other state, but that is not what we need
to focus on, she said. Our children and the consequences of
failing in the responsibility to educate them should be Alaska's
focus. To be competitive in this increasingly global and
technical economy, Alaska needs to invest in youth,
infrastructure, sustainable industries, and citizens. The days
of relying on oil are over, she said. It is time for the people
who live in this magnificent place to start, again, making it
fiscally secure, she said, and she urged passage of HB 115.
8:53:19 PM
BRENDA LOUGHMAN, Board Member, Tongass School of Arts and
Sciences, Ketchikan, said the costs of the charter school have
increased, and it has had to cut and cut its budget. The members
support HB 115 to help with education funding. She said she and
her husband own a construction company, "and I can assure you we
will not be leaving the state." She expressed concern about the
state's fiscal uncertainty and whether customers will continue
to hire them, so please pass HB 115 to help Alaska as a whole.
8:54:21 PM
WALT COULTER, Fairbanks, said he is not opposed to paying taxes
for government services-a necessity of responsible citizenship.
He said he is opposed to making only wage-earners pay. Expecting
the so-called rich to pay more of their fair share should sicken
any American, he stated. "Who is rich? "Somebody that makes more
than you do, 'cuz you ain't rich." He spoke of the convoluted
U.S. tax code that allows legislators and bureaucrats to line
the pockets of lawmakers and lobbyists. They do favors for their
preferred groups, he stated. He suggested taxing everybody
through a sales tax. He is adamantly opposed to any socialist
income tax that punishes productivity.
8:55:35 PM
DON GRAY, Fairbanks, Alaska, said he and his wife came to Alaska
in 1970 when there was an income tax. They raised two daughters
and now have two grandsons in Anchorage. He said the education
in Anchorage and Fairbanks has been excellent, and he hopes that
is true throughout the state. There have been about $3 billion
cut from the budget in the last three or four years, and there
is still a $2.7 billion deficit. He said a diversified approach
is appreciated, including SB 26, which would use part of the
earnings from the permanent fund for the deficit. This proposal
for a modest income tax, where those making over $60,000 will
only pay $500, those earning $80,000 would pay about $990, and
those with an income of $200,000 would pay $5,200, is not a huge
amount. It is not going to end businesses, he explained. It is
important that Alaska maintains its bond ratings; we can't
afford to diminish it. Most important is the vital connection
with citizens and what is spent in the state, and a tax will
keep their eyes on the ball.
8:58:06 PM
GERALD BROWN, Fairbanks, said he supports HB 115; it is high
time Alaska has a balanced approach to funding government. The
cuts in education, the university, and other programs dismay
him. He said HB 115 does not go far enough, and he would like to
see a sales tax to help spread the burden over a great number of
people. There are a lot of people living outside Alaska and work
here but don't contribute to it, including those who work for
fisheries, oil production, and others. They benefit from the
infrastructure that the government provides. Through a sales
tax, visitors will provide some income, and that could be
tailored to alleviate costs on food and medicine, he said.
8:59:59 PM
TERRENCE COLE, Fairbanks, said he represents himself and good,
logical thinking people everywhere. The vast amount of testimony
has shown ignorance of Alaska history; Alaska would not be a
state without the original income tax passed in 1949. Jay
Hammond has said that his failure to veto the income tax repeal
in 1980 was the single greatest failure of his political life.
Governor Hammond told him that he didn't have the guts to do it,
but that he would have slept better if he had. "Of course, we
have to have an income tax," he said, "this is an open and shut
case." He urged the committee not to listen to Senator Pete
Kelly; he's just off his rocker, he added.
9:01:19 PM
JOAN FRANZ, Fairbanks, said she is a pediatric occupational
therapist, a small business owner, and a long-term Alaskan. She
supports a progressive income tax as presented in HB 115; we had
an income tax in the past and it should be reinstated. She
explained that an income tax is a much fairer tax on Alaska's
residents than a sales tax. Nonresident workers should be taxed
who have incomes from either Alaska's natural resources or other
businesses. Commuters taking Alaskan jobs and leaving the state
without any taxation is an unreasonable loss of revenue to the
state. The revenue is needed for education, which is essential
to building a better life for future generations, she added. She
thanked the legislators who have the courage to support HB 115.
9:02:41 PM
PRINCESS LUCAJ, Fairbanks, thanked the committee and commended
Representatives Seaton and Foster for having the political will
to put forward HB 115. She is a lifelong Alaskan, an Alaskan
Native, and this is her home, she said. She and her husband have
three sons and make a modest combined income, and she absolutely
supports HB 115. When she was 16 at Lathrop High School,
Governor Cowper was in office, and an article in the New York
Times reported that the oil was going to run out and Alaska
needed to diversify its economy. She said Alaska should have
implemented an income tax then. "We should have been preparing
for harder times," she added. She noted that she used an
interactive spreadsheet provided by the legislature and found
that "we've got to have this broad-based approach." She called
for stability even though she is not excited about another tax,
but there is no way around it. She told the committee that SB 21
was the worst thing that could have happened for the state. "I
am tired of profits over people." She added that the only sales
tax she would support would be a luxury sales tax.
9:04:23 PM
WOLFGANG FALKE, Fairbanks, said he is a natural citizen of
Alaska and arrived in 1969. He urged the committee to defeat the
bill. The people of Alaska decided not to have any income tax-
progressive, flat, or otherwise. He said Alaskans don't want the
bureaucracy associated with a tax. "We don't need an income tax
to take care of the state's business," he stated. It would be
rational to tweak permanent fund dividend contributions to
individuals since federal income tax is paid twice-once by the
state and then by the individual. It was the PFD program that
put Alaska in this financial dilemma. He pointed to the federal
courts requiring that beneficiaries reside only one year to
qualify for the dividend, which attracted welfare recipients and
criminal elements to Alaska to get free money. He stated that
those people have overwhelmed Alaska's social services,
education, and judicial system. "To solve this problem, you must
cut state welfare and social services contribution to the point
of the money provided for by the federal government," he said.
9:06:34 PM
DANIEL LYNCH, Soldotna, said he is opposed to a $1,200 or $1,500
tax on children who don't have jobs, senior citizens, and broken
people who have worked their whole lives already. He said he is
referring to a cap on the PFD. He stated that he is in favor of
an income tax; 43 other states use an income tax to balance
their budgets. He noted that much has been said about out-of-
state workers from the North Slope, the oil and gas industry,
the tourism industry who are mostly working for Princess Cruise
lines, the fishing industry, and nonresident construction
workers. Before he put down roots in Alaska, he was an out-of-
state worker, working the construction season. As a "guest
worker/bandit," he used state and municipal airports, marine
ferries, highways, troopers, snowplows, libraries, gymnasiums,
and parks-to name a few. "My only contribution was through
tobacco, alcohol, and gas tax." He said his home state would ask
him where his income tax was, but he had no wages and no taxes
in his home state. "It was very profitable for me, but not for
the people of Alaska or for the Alaska resident that didn't have
a job because I had theirs." Current out-of-state workers
contribute nothing, and they occupy jobs that residents could
use, he added. He urged "no" on dividend cuts that stem from the
recession caused by the vote on SB 21 in August of 2014, and
"yes" on income taxes. "I'll contribute more and not be a
freeloader or welfare queen." Maybe your raffle will solve the
problem, he concluded.
9:09:00 PM
PENNY VADLA, Soldotna, said she is a Kenai Peninsula school
board member; however, she is testifying as a parent, community
member, volunteer, taxpayer, and as a fiscally responsible
citizen. She came to Alaska 40 years ago and payed an income tax
and a school tax. Her husband is a contractor and he wants to
pay an income tax, because he wants services. She said she is
retired and on a fixed income. She supports both HB 115 and HB
111, the oil tax bill. She wants a sustainable fiscal plan that
ensures a healthy future for all Alaskans. We cannot cut our way
out, she stated. She urged Alaskans to not spend down their
savings and delude themselves by relying only on rising oil
prices. There have been many cuts, but a fair income tax and oil
tax is needed for a sustainable budget. She said she is more
than willing to pay her share. "Please listen to our many
voices." She applauded members for this hearing and for the
House majority plan.
9:11:41 PM
TIM SCHRAGE, Anchorage, said, as a small business owner, he
graduated from the University of Alaska and got a great
education from the Anchorage school district. "I can tell you
that the way to grow the economy is not to institute taxes," he
stated. He added that he is not opposed to the concept, but it
is not yet the time for an income tax. When he looks at the
health care costs for his employees compared to those of public
employees, "it's absurd." He paid $36,000 last year for a family
of four, and the dollar-for-dollar wage and benefit packages
that public employees are enjoying is disgusting. He and his
employees are discouraged by that, he added. The state has to
cut spending; it has to make government accountable for its
services. He said everyone wants great services and there is no
doubt about that, but he has seen a cut in the capital budget
and not the operating budget, so Alaska is cutting its future
operating budget, not the actual one. He urged the committee to
table HB 115, cut more, use the POMV plan, and move Alaska
forward. He noted that if his business had $13 billion in
savings, he would be laughed at if he went to the bank to borrow
more. He is not the bank. He is in the minority of Alaskans
testifying, but he is in the majority with his peer group.
9:14:03 PM
CHRIS NELSON, Anchorage, said he is retired from the army and
noted that HB 115 is going to impact people serving in the armed
forces in Alaska. He said he only heard one comment on that
issue, "and I really don't think the House or the Senate has
fairly addressed this particular issue and the problem it will
create, particularly for junior enlisted members of the army and
the air force that are serving in my neighborhood." He said a
member with three years of service makes $25,509 base pay. There
is nothing progressive about taxing these people, he stated. The
out-of-state workers will be taxed, and every member of the
armed forces in Alaska did not come voluntarily; they were
assigned to Alaska. He did not regret being assigned to Alaska,
and he stayed after he retired. They all receive a cost-of-
living allowance in this state, and he asked if HB 115 will tax
it. They also receive a housing allowance and a subsistence
allowance. Pilots and paratroopers at Fort Richardson receive
hazardous duty pay, and he asked if those benefits will be
taxed. He noted that in the next few days, 2,000 will deploy to
Afghanistan, and those people will receive pay for being in
imminent danger. He asked if it is right to tax that pay. He
doesn't think it is right. Unless the bill defines the burden on
the military in Alaska, he asked that the bill be tabled. It is
not enough to just say, "thank you for your service," he added.
If members pass this bill, they should instead say, "Haha, we
gotcha."
9:17:30 PM
CYNTHIA HENRY, Fairbanks, said she has been waiting over three
hours to testify because she feels so strongly about this
subject and is opposed to HB 115. Implementing an income tax
would be a big mistake, and she has concerns about job losses
and uncertainty about small businesses like hers. Every business
owner she has talked to has had to lay off employees, so this is
not the time for an income tax. She said Alaska cannot tax its
way to prosperity, and it is not a crisis situation. Alaska has
huge financial reserves to fill the budget gap for many years,
she added, by using the earnings from the permanent fund and
perhaps taking money from the CBR. This will fund the government
and preserve the PFD program while not exacerbating the
recession. She stated that many people are dismayed that the
House passed HB 115. Taxing the hard-working people of Alaska
would further cripple the economy, she added.
9:19:10 PM
BOB GRIFFIN, Anchorage, said he is a retired air force fighter
pilot, a small business owner, and a commercial pilot. He said
he is opposed to HB 115. "I don't mind paying income taxes at
some point," he offered, but he wants to fix the oversized state
government first. He advocates for education, but if there is
information showing that bigger government produces better
student outcomes, he would support HB 115. He noted the high
literacy rates of China, Russia, and Cuba and said that Cuba
spends about five times less on education than Alaska. According
to the NEA estimates, Alaska spending is the highest in the US,
143 percent of the national average relative to median incomes.
Alaska is expensive, but it is not 2.5 times more expensive than
the Lower 48. In 1962, Alaska's spending was the sixth highest
in the nation, 30 percent above the national average, and 29
percent below the first state, he reported. Since 1960, the GDP
in Alaska increased 19-fold, but state spending per capita has
increased 52-fold. He said his family has been in the state
since 1899, and they receive excellent education and services
with much smaller government. He supports a spending cap.
9:21:59 PM
LUANN MCVEY, Douglas, urged the committee to pass HB 115. She
said she is a retired teacher and believes in reliable funding
for Alaska schools that allow parents, administrators, and
teachers to plan ahead to accommodate fluctuations in student
populations. She said she is opposed to the Senate's proposed
budget cuts. Every year, when cuts happen, teachers are yanked
this way and that way, and some don't make it back. Classrooms
are swelling with students, she reported, and higher student-to-
teacher ratios render teachers far less effective. The House
fiscal plan offers a multi-pronged avenue to support services
that Alaskans need, including schools. It is not just for
schools, she stated, but helping children develop their highest
potential is the job of thoughtful and skilled teachers. It is
the foundation for a sustainable democratic society. Using part
of the permanent fund reserve earnings, eliminating the oil and
gas tax credits, and reinstituting an income tax will provide
for a solid fiscal plan, she said. Schools are not an example of
bloat or wasteful government spending, neither are health
clinics that have been eliminated around the state, nor the
university programs. No more budget cuts, she concluded.
9:24:06 PM
JOAN O'KEEFE, Chair, Operations Board, Foraker Group, Juneau,
said the Foraker Group is Alaska's nonprofit association. The
group has strongly stated that public policy priorities include
the passage of a comprehensive fiscal plan. It is essential, she
said, and an income tax must be part of the package. She
supports a plan that does not depend on a single sector, but is
fair and equitable. Short-term budget cuts only create long-term
challenges for Alaskans. The nonprofit sector is an important
economic driver in the state and provides critical community
services that are otherwise unavailable. "Our sector will only
thrive when the state's fiscal challenges are met," she stated.
Nonprofits help ensure vibrant and healthy communities across
Alaska. The Foraker Group has heard loud and clear from the
nonprofit sector that fiscal stability is critically important
in delivering essential services across the state. As an
individual, "I am prepared to share the tax burden." On behalf
of the Foraker Group, she urged the legislature to pass an
income tax that is part of a comprehensive plan that supports
rural and urban communities and protects Alaska's most
vulnerable.
9:26:19 PM
MARJORIE HAMBURGER, Juneau, said she supports the income tax in
HB 115. She said she is speaking for her husband and herself and
for her three children who are on the cusp of adulthood. They
will be deciding if they can stay in Alaska and have jobs and
education for their own families, she said. She cannot accept
any further cuts to essential government services. "I am willing
to be taxed," she added.
9:27:36 PM
CLAIRE HOLLAND LECLAIR, Anchorage, said she supports HB 115 as a
comprehensive response to Alaska's budget shortfall. "I hope
you're taking note of all the everyday working Alaskans-young,
old, and in between-who are urging you to tax them." It is time
to end the entitlement culture and pay for government services,
not just education, she said. She has two young children in
public schools, so she is worried about education funding, as
well as transportation, public safety, and people who fall
through the cracks and need help from all of us. "I am willing
to pay for that," she stated. She pointed out that the Institute
on Taxation and Economic Policy reported that HB 115 would
translate into lower federal taxes for Alaskans. Collectively,
Alaska would be spending about $133 million less in federal
taxes under this bill.
9:29:01 PM
ROBIN SMITH, Anchorage, noted that she and her husband own a
small business, and she has never worked for the state. "I don't
even have kids in the education system," she added. Her business
has been negatively impacted by the low prices of oil, but she
is still in favor of an income tax. The legislature has already
cut the operating budget by $700 million, and Gunner Knapp,
Alaskan economist, said Alaska is draining its savings by $10
million per day. That should tell everyone that Alaska needs a
long-range fiscal plan, she stated. We can no longer be
dependent on the ups and downs of the energy market.
Representative Seaton made three important points this morning:
Closing the deficit just by cutting state jobs would cost the
economy the most jobs, so we have to stop cutting. A progressive
income tax will have a smaller impact on job losses, and it will
be partly paid by nonresidents. Dividend cuts would have the
greatest short-term impacts on income. Everyone is going to pay
with HB 115, including herself who is in the highest tax
bracket. Those of us who have had these great opportunities are
lucky. We are fortunate to live in Alaska. When we cut the PFD,
it is a tax, and it impacts the poorest individual the most.
"Please, please pass HB 115; it's time for Alaskans to take
responsibility."
9:31:37 PM
TERRIE GOTTSTEIN, Anchorage, said she supports HB 115 and
instituting an income tax. It is not possible to cut Alaska's
way out of the deficit. She said it comes down to what kind of
communities we want to live in. She said she is clear about her
priorities, which include education. There is a constitutional
responsibility. "I have watched as you have cut and cut and cut
public education to a point where there is really nothing left
to cut without seriously impacting our kids." She added that it
is time to look at the revenue side. It is not surprising to
hear people whining like stuck pigs about having to pay their
own way. Alaskans have become spoiled. What is remarkable to
her, she noted, is that there are droves of people here tonight
who are stepping up to ask you to tax them to help pay for the
kind of communities that they want to live in. Education for
kids boils down to hope-that's what education is. People are
willing to pay for that, and she said she hopes that the
committee has heard that. She heard a testifier talk about
giving a tax credit to people who pay their own health
insurance, and that makes sense. It seems simple to pay a state
income tax based on federal income taxes; a person just figures
out a percentage and then it's done, she explained. Lastly, she
encouraged the committee to "grow a pair," and she is not
discriminating against women, because the pair she is referring
to is courage and a conscience.
9:34:49 PM
JEREMY PRICE, State Director, Americans for Prosperity,
Anchorage, said he started at nine a.m. today reading to his
daughter's kindergarten class. "I love Alaska's children," he
said. He stated that he wants the best future for them, and the
best future is no income tax. The best future is a balanced
budget and a focus on children's outcomes, not funding of
administrators and pensions for state workers. House Bill 115 is
the mother of all tax increases! It will raise $700 million
while the state is in a recession. "Nine thousand jobs last
year," and more will be lost this year, he stated. Alaska has
the second highest unemployment rate, 6.4 percent. These are all
terrible economic indicators, and the legislature wants to raise
taxes on Alaskans. He asked Chair Costello to please save him
from these rogue legislators who slept through their economics
classes. The tax has been characterized as an income tax, but it
is not. "It's the mother of all tax increases." It is
progressive like taxes in California and New Jersey, he said. It
taxes income from capital gains, corporations, pensions, and it
taxes working Alaskans, he added. He suggested dealing with
reality when talking about education. School funding has been
jacked up for years, and arguing that this issue is about
education misses the mark. "This is about Alaska's future." Most
Alaskans want a spending cap, 66 percent. Over 60 percent don't
want HB 115. He urged killing the bill.
9:37:15 PM
JACKIE CASON, Anchorage, thanked the committee and said, "I know
that you and all Alaskans want a healthy economy with good
schools that will prepare young people for jobs in the state."
The committee understands that the university is a driver for
economic growth, and she knows that because members have taken
time to respond to her letters. The House majority's plan to
institute an income tax to help pay for education and other
services is part of a broad-based solution that will not spend
down Alaska's savings, she added. The bill also draws on
permanent fund investments, reforms oil taxes, and cuts
spending. People earning higher incomes will pay more tax, but
these earners have benefited most from state infrastructure. She
said she is not discounting their hard work, but many sectors of
Alaska's economy would not function as well without the state
services that support labor and commerce. The Institute of
Social and Economic Research (ISER) at the University of Alaska,
Anchorage, concluded that cuts on the scale contemplated by the
Senate would have twice the negative impact on jobs and the
economy than a broad-based tax. She said she believes in
Alaska's schools, and Anchorage schools are full of choices.
Three of her sons attended Montessori school, and because of the
multi-aged classrooms, one teacher was a part of her family for
ten years. "That's right. My children enjoyed the same teacher
for ten years," she said. The teacher was truly part of their
family. The school is in a diverse neighborhood and provides a
positive learning space for all students, no matter the income
or the ability to give extra time. She would like to see more
optional schools located in diverse neighborhoods. Every time
she attends school functions, she comes away with a greater
appreciation for how teachers strive to help her children learn.
"They know their students and they put a lot of time into
creating lessons that will engage and challenge them," she
added. In two years, she will no longer have children in school,
but she wants the same opportunities for others and is willing
to help pay with an income tax.
9:40:40 PM
THEA AGNEW BEMBEN, Anchorage, said she supports HB 115. Her
family moved to Alaska in 1973, and she attended Anchorage
schools. Her parents, brother, and she are self-employed, and
they are not government employees as some people have claimed.
She said she went to college and graduate school and came back
and started a business. She employs 18 people in professional-
level jobs. She is a small business owner, and she pointed out
that the chamber does not represent her, nor do some others who
testified claiming to represent small business owners. Her
business is doing fine, but what has limited its investments
over the last few years is the uncertainty of Alaska's economy.
The uncertainty is due to the drop in oil prices and the lack of
a clear plan to fund Alaska government. She said it is flat-out
dishonest for Alaskans to think that they are not consuming
government services every day. Every time you get in your car;
every time you go to the airport; every time you pick up the
phone; and every time you look outside and see people suffering
on the street and feel glad that there are public safety
officers willing to be there. She noted that today she saw
officers peacefully resolve a dispute. Alaskans all use public
services and all need to pay their share, she added. The amount
being contemplated by HB 115 is modest and shared broadly. She
urged the committee to support the bill as part of a fiscal
plan. She noted that she is the president of an elementary
school PTA, and a recent survey of the teachers and families
asked what is needed most, and it was snacks and clothing to
help with children's basic needs. Children need a strong school
to give them a good start in life, she stated. She urged the
committee to move forward with a broad-based approach.
9:43:20 PM
JULIE NIELSEN, Juneau, said she is a sole proprietor and she
supports HB 115. She said she has been in Alaska long enough to
witness crises caused by oil prices, which then evaporated when
prices went up. A stable solution is needed, she stated. The
income tax is the least regressive option. The proposed Senate
cuts go too far and will cut to the point where government is
not effective. She noted that she doesn't have children, but
taxes would go to the children in her community. She does not
have loved ones that are suffering with drug addiction or out on
the street, "but I would gladly pay an income tax for a
government that would support people having those troubles." The
benefits from government are not always direct, but those
benefits increase everyone's quality of life, she concluded.
9:45:16 PM
JOSEPH ROTH, Juneau, said he was born in Palmer 57 years ago and
raised in Sitka. He said he has worked in Southcentral Alaska
and in Juneau, where he is now a private business owner with
about 40 employees. He stated that a state income tax is not
going to make his job any more complicated than it already is.
He has paid a state income tax in the past and is willing to pay
it again if it will assure intact education funding. He urged
the committee to support HB 115.
9:46:37 PM
KARLA HART, Juneau, said she is a lifelong Alaska resident and
remembers paying a school tax on her first earnings as a teen.
"I was proud to do it, and I felt like an adult paying for my
education in a small way." She said she strongly supports HB
115. So many people have expressed support of the bill, and she
is with them.
9:47:38 PM
JEB STUART, Wasilla, said there are many facets to the bill. His
wife home-schools their four children. "It's been entertaining
hearing the people spouting scripted talking points." This isn't
necessarily an "educational bill." He said he has some ideas
that are unlikely to be politically correct but would allow
people to live within their means. He said throughout the world
a boom always leads to a bust, "and we're following in the exact
same footsteps." A Jay Hammond manuscript gives a play-by-play
of what is happening in Alaska as the state continues to not
want to hurt anyone's feelings and supports endeavors that have
no economic basis for existence, he stated. He said Alaska
continues to ignore the bloated cancer of big government with a
welfare system run amuck, which is a recipe for disaster. It is
stupid to look around at all the other states and countries that
have made the same choices by taking away the constitutional
right to benefit from natural resources. "They destroyed our tax
base by taxing businesses and the middle class until they
leave." Alaska's responsibility is to its children, he added,
and it needs to make hard choices to cut welfare "way back." For
example, a person should not be helped if on drugs. "If you
can't get your stuff together and take care of your kids,
there's options." For those who live in a complex with other
people, he added, and who buy their food at the rice and bean
store, "you reattach a stigma to being on welfare and help
people who truly need it." No welfare for people who make
$80,000 a year who know how to work the system, he said. There
should be no people with new houses and new cars buying pieces
of candy for their kids. If the community can't make it on its
own, "we don't subsidize it," he stated. "Nobody we know
supports using the dividend, which, as Jay Hammond said, is a
discernable share, which is our portion of the natural resources
that the legislature is to use for the maximum benefit of the
Alaskan people or an income tax to support a bloated
government." He said he supports the Dunleavy plan.
9:51:28 PM
MARY KATASSE, Juneau, said she is originally from Hoonah and
moved to Juneau for work. She noted that she is part of a family
of eight, including two employed parents, an elder, a caregiver,
and three adopted special needs children. She questioned HB 115
and noted a comment by the chair saying that it is not earmarked
for education. Her concern is that her kids' special needs money
goes to the school, and it makes it hard to use those funds for
what is needed. She said, "We make moderate money; we have
supported local businesses and Alaska businesses in Petersburg
and Juneau … with homes, boats, and cars." The one thing that
she is against is removing funds from education and the elderly.
Her family has always believed that those who can help, should
help. Alaska's situation took 40 years to make, she added. It
cannot be fixed this session, and she appreciates the time and
effort to correct an error that's been building for 40 years. "I
don't mind paying my own, because we do pay our own," she said,
in terms of federal and local taxes. She said her worry is about
the people who can't pay. The PFD cuts affected many families
who are in poverty, and the income tax would affect seniors on
fixed incomes. She said she is neither completely in support or
against HB 115. She said not to further cut education or the PFD
for those in need, and then she can support of HB 115.
9:55:47 PM
DARRELL SMITH, Juneau, said he is a disabled, retired operating
engineer union member, and in 2008 the legislature asked him to
take a voluntary wage and benefit cut to help with this crisis.
"We voted that in ourselves, without any pressure from anybody
else." He said Click Bishop can verify that. He hears teachers
whining and whining and whining, but he doesn't see the
teachers' union offering any cuts to wages or benefits. There is
a school administrator in Anchorage making a million dollars a
year. He said he has a friend who just orders food "up there,"
and he makes $150,000 a year from the school district. He said
there needs to be a stop to stealing children's money. He stated
that he is against HB 115, and he will do his part by not filing
for the PFD. "That's my part," he said. His daughter has five
children and just bought a house, and she is maxed out on her
income. House Bill 115 will ruin her credit, make her lose her
home, and his grandchildren will also lose their home, "so cut
your bloated government some more, and if the public employees
union don't want to give anything back, cancel their contract
and send them to arbitration, and cut their wages anyway, and
let them deal with it in the courts." He said that is what he
would do if he was the governor.
9:58:03 PM
DAN DUNAWAY, Dillingham, said he supports HB 115 and urged the
committee to pass it. There have been some good suggestions on
how to improve it, including from a Juneau man and from Jason
Gustafson, and he hopes the committee took note. He said he is
totally opposed to the attitudes of Senators Dunleavy and Kelly.
They are unrealistic and do not contribute to a solution. As a
resident of Dillingham, he hears people from bigger communities
asking for cuts to bloated government, but they can't see the
impacts of the cuts out here in his rural community, which are
very real and happening right now. Road maintenance has
significantly declined, and the city is down to bare bones and
turning the heat down. "We barely have a viable library; our
schools are cutting back on projects," he explained. His
community is seeing it daily. The boat harbor is struggling to
stay functional, even though fees have been raised. Dillingham
tried to tap some of the nonresident income by expanding its
borders, but that effort was defeated. "We can't bootstrap
ourselves," but an income tax would work. He sees thousands of
workers in the area packing their money home without
contributing, and some are very vigorous about avoiding spending
any money in the state, from low-paid processor workers to some
very, very wealthy commercial fishermen, he noted. Improvements
can be made, he added, but he urged the committee to move the
bill forward.
10:00:18 PM
KURT SCHMIDT, Delta Junction, said he is opposed to HB 115 at
several levels. The legislature has failed to cut spending to
match revenue, and members have been deceptive about applied
cuts and obscure with the facts. "You disregard the (unclear)
suspending the incoming revenues indicative that the facts that
motivate your decision-making processes," he said, "and these
aren't the same facts and realities that the voters must contend
with in their homes." Citizens don't get bribes and kickbacks
from lobby groups for fiscally irresponsible decision-making, he
explained, and many legislators shamelessly do. To impose such a
heavy tax on Alaskans will create a measurable hardship on
families that reside here. The tax grossly favors the wealthy
and punishes the poor and middleclass, he explained. The
exponential disparity in the proposed tax is very discouraging,
if not punitive, to the poor and middleclass. A person earning
just under $50,000 pays 2.5 percent of their income, or $1,250.
A person earning $100,000 will only pay 2.9 percent, which is
only 0.4 percent more, yet they earn twice as much money. He
pointed out the disparity between disposable income versus the
amount of tax. A person earning just under $200,000 pays only
3.9 percent, which is only 1 percent higher than the last
bracket, but as wealth increases, so does the amount of
disposable income, so the poor will pay a great proportion of
their disposable income. A wealthy taxpayer will pay a mere 1.9
percent higher tax while earning five times more money, and the
loss to their disposable income will be negligible. Assuming an
income of $30,000 is the minimum for a comfortable living in
Anchorage-enough to rent an apartment, pay utilities, and have
mediocre health care and modest clothing-that would mean that a
person who earns just under $50,000, can consider 40 percent of
their income as disposable; however, 70 percent of the income of
a person making $100,000 is disposable. A person who earns
$200,000 means that 80 percent of their income is disposable, so
it is disproportionate. The tax impacts the poor unfairly, he
concluded. He said a sales tax would be better, because there
are no loopholes and corporations that buy supplies would be
kicking in to the tax, instead of sheltering an income tax.
10:04:05 PM
CORINNE ROLLMAN, Eagle River, said she is a third-generation
Alaskan. Her and her husband own multiple businesses, including
a commercial fishing business, an accounting business, and
multiple rental properties, with 18 employees. An income tax
would be detrimental to her. Alaska has a Denali-sized budget
and is above the national average on a per-capita basis. She
noted that 185,000 people are on Medicaid, and the state spends
$10 million on legal fees outside the state. Alaska has the
highest education costs, but the legislature has not done its
job to trim fat. She opposes an income tax, because she does not
want to pay taxes on her retirement income and on her capital
gains. She pays far more in property taxes, and they pay 10 to
11 percent in unemployment taxes, which is more than most people
pay. She is opposed to being taxed, because she is a lifelong
business owner. She said she will not be inspired to work harder
and longer, and she does not want to subsidize the tax deficit
and the budget on her shoulders any more. She noted that the
constitution "says we should ensure the fruits of our labor and
not be punished by our government." She asked her representative
to vote no.
10:06:18 PM
MICHELLE WHITE, Palmer, said she is a single mom, a substitute
teacher, and working on a second degree to pursue better
employment, and she is against HB 115. She noted comments by
Gabrielle LeDoux: "If the Senate thinks they are going to get
out of (unclear)." She said she works for the people. (Unclear.)
She asked the committee not to compromise with the spend-crazy
House that refuses to make one single cut. "Do not succumb to
the tantrums of our governor, who has not only one, but two
(unclear)," and who wants to throw more money at schools.
Schools that are among the worst in the nation and don't prepare
students for college, she said. That is why she sends her
children to private schools, she said, and one daughter went to
college in the Lower 48, because the university in Anchorage
can't compete. The governor has the audacity to push an income
tax. "This debate is a farce in light of our bloated government
and failing schools." She said fiscal responsibility begins with
lawmakers, the governor, and school districts, but Alaska spends
more per student than any other state and has pitiful results.
She said to not cut the PFD or tax people to offset "your past
overspending." Taxes do not produce growth, she opined. She
suggested the committee members take a class by Dave Ramsey, a
"financial guru." She said there will be a mass exodus from
Alaska if legislators pass an income tax, an oil tax, or cut any
part of the PFD. She moved to Alaska 11 years ago for a job, and
she has sacrificed a lot to stay. Over that time, the government
has ballooned, and the legislature has made the state unlivable
in terms of the cost of living and job prospects. She has read
about job losses, and six of her friends lost their jobs and
left the state, because it is an expensive place to live. She,
herself, will leave if the legislature taxes her or taxes oil
companies or if she cannot get all her PFD. Her daughter has
known only Alaska as her home, and that breaks her heart. She
told the committee that if it ran a household like it is running
the state, "you would all be divorced and have runaway
children." If the legislature passes HB 115, "Alaska will
divorce you." Taxes will go up, and there will be fewer people
to tax. "You work for us," she said, and "don't pass an income
tax, or an oil tax, and keep your (unclear) hands off our PFD."
10:10:51 PM
CRYSTAL SCHOENROCK, Kenai, said she is against an income tax,
because [legislators] decided that they would take a raise every
two years, "and now we are paying for it, because the oil fields
took a loss, and all of this, just so they could have a job."
But now, she said, we are paying for it and they still get a
raise. They make $50,400 for three months, and she lives on
$12,000 per year. She is getting $746 a month from social
security, which "is like giving a squirrel nuts after it's lost
its damn teeth," she added. "So, now I'm going to have to pay
more?" She said she does not understand, and it bothers her that
legislators are making more money, "and we have to pay. It's not
right."
10:12:59 PM
PHILLIP GRAY, Juneau, said he and his wife are senior citizens,
their taxes are high, and they oppose an income tax, because
they are just able to get by. He noted that the Juneau Empire
reported that oil companies made a profit of $17 per barrel last
year in Alaska, while in most countries they make only $1 to $5
on a barrel of oil. Had Alaska kept $12 per barrel, it would
have had $2.2 billion more. Alaska needs to tax oil companies
far more heavily. He noted another article that stated that
benchmarking, or comparing Alaska with other states, was the
answer. In previous years, Alaska spent 5.4 times the national
average per capita on capital and operating costs. In 2014,
Alaska spent 3 times the national average. The total agency
operating budgets have been reduced by less than 1 percent.
Alaska spends 5.3 times the national average on administration,
1.7 times the national average on public welfare, and 2 times
the national average on education. It is clear, he said, that
Alaska is spending too much and should cut the 1 percent for
art. "When we spent $40,000 of public money on the bent piece of
green sheet metal in front of the Juneau museum, it was too
much." He said Alaska should let artists get off the public
welfare wagon. He said, cut the state budget, tax the oil
companies a fair rate, and do not tax the public.
10:15:22 PM
MIKE ALBERTSON, Fairbanks, said he supports HB 115, but it is
not the best. Overall, Alaska needs an income tax. "I don't
think the oil industry can solve all of our issues," he added,
and the industry is underpaying in Alaska. He refuted an earlier
comment that service members would be taxed on their housing
allowance, nor would they be taxed on imminent danger pay. The
only service members who would pay an income tax would be those
who declare residency in Alaska, he explained, and they should
pay their taxes just like anybody else. He said he is heartened
by the civil and positive comments of most witnesses, but he
noted that some people referred to others as Communists or
Socialists, and I don't take (unclear) from anybody, anywhere.
The Senate has probably made up its mind, and sometimes these
hearings don't go anywhere. He appreciates Alaskans who work in
the state (unclear). He said he appreciates the hard work of
Alaskans who have lived here for thousands of years and are
taxed on their land. Indigenous people, he clarified. He finds
it unfortunate that business people are talking about packing up
and leaving because they aren't savvy enough to operate a
business in a state with an income tax. Businesses in other
states have no problem operating. It is disingenuous that
business people who have done well in the state seem to holler
the most when it comes to stepping up to the plate, he added. He
said that if leaving the state because of an income tax is true,
there would have been a mass exodus of low-income people who
have lost half their dividends. The logic is not there, he
stated. The person representing the chamber of commerce stated
that Alaska would have the twelfth highest income tax in the
nation, but we would have the fourth lowest. He said he has seen
a lot of polls as well and heard one where most support an
income tax. In 2014, there were 2.5 nonresidents hired by the
oil and gas industry for every Alaskan hired, and for every
nonresident laid off by the industry, there were three Alaskans
let go. There are a lot of out-of-state workers that should be
contributing. He questioned why legislator per diem is
increasing, because the federal per diem rates for Anchorage for
lodging and meals have dropped.
10:20:49 PM
WENDY BRINGHURST, Eagle River, said she, her husband, and her
six children came to Alaska twelve years ago because of its "tax
structure." Kill this bill, she stated. It is a lazy way to
control spending. She tells her children to get another job if
they want more money. The government takes money away from the
citizens, she claimed, and she wants it to stop taking her hard-
earned money for wasteful programs. Everyone who is for this
tax, "go ahead and volunteer your own money if you're so
convinced that it will get us out of the hole the government has
put us in, but don't volunteer my money. Spend your own."
10:22:26 PM
KRISTIN BELLONIO, Anchorage, said she supports HB 115. American
author John Greene said public education does not exist for the
benefit of students or their parents; it exists for the benefit
of the social order. Everyone benefits every day from public
education, she added. Alaskans have been fortunate to pay no
income tax, but it is responsible to move forward with HB 115 to
fund education. Schools don't make money, so its value isn't
monetary, but it creates citizens with knowledge and skills to
become contributors to Alaska's economy. That is priceless, she
opined. She asked the committee to prioritize education and pass
HB 115.
10:24:13 PM
CATHY MOSHER, Willow, said the bill should be a no vote. Steve
St. Clair and Michael Dunleavy had a good proposal. Michael
Chambers has, Brad Keetly has. "You have heard a lot of good
suggestions tonight on how to fix the budget, and I hope that
you will listen to them and do it."
10:24:53 PM
JESSICA PRICE, Anchorage, said she works every night to pay for
groceries for her husband and three children. The passing of the
bill would cut into her disposable income. She said she is a
property owner, and more tax on her family would create more
devastation for her family, and she wouldn't be able to pay for
clothes and food, and she would end up depending on the
government. An increase in government decreases the money she
can spend. She asked the committee to kill HB 115.
10:26:06 PM
ALAINA CLARK, Wasilla, asked the committee to stand firm against
HB 115. She is a single mom with two children and no child
support. "I work full time and often struggle to balance my own
budget," she stated. She has two choices: painful cuts or
additional sources of income, and she starts by cutting all
nonessential spending by not getting a haircut or not watching a
movie. "It might even mean that I make less expensive grocery
choices, cut driving down to necessary trips only." If she still
needs more money, she said she looks for a second job. The last
thing she would do is raid her children's piggy banks. A surplus
for her is incredibly rare, and it goes to the next month, she
explained. The state needs to cut pork and not see hard-working
Alaskans, even very rich ones, as cash cows to be milked.
Wealthy Alaskans often supply jobs for other Alaskans who will
just get by. "If we must have a tax, let it be a sales tax that
everyone pays." Not everyone works, but everyone shops, she
said. Then everyone will have skin in the game. House Bill 115
would foist a tax only on working Alaskans. The rule of use-it-
or-lose-it has led to wasteful spending by public schools,
including unnecessary sound system upgrades just to use up extra
money, she stated. The Mat-Su school district is currently
gunning for charter schools, and they do a lot more with a lot
less. She suggested eliminating the use-it-or-lose-it policy and
allow schools to save for a rainy day. An income tax would make
it harder for everybody who works, she concluded.
10:29:38 PM
ED MARTIN, Cooper Landing, said he is watching via the internet
from Hawaii, "but I care about my state." The revenue problem
exists because of out-of-control state spending. He said he has
been listening to single mothers and small businesses, "and you
folks have an obligation to these people to do what is right,"
which would be to sell some of Alaska's land to create new
wealth by private individuals. The country was founded on
protection of property rights, and the constitution says
basically the same thing: maximum benefit to the people. He said
his dad gave up mineral rights when homesteading so other people
could have homes, and then he sold it. He passed on land that
was swindled out of him for his mineral rights, he explained. He
filed for his homestead land before statehood, and he voted for
statehood. In the end he was swindled out of his mineral rights.
"You folks don't understand this, apparently." The economic
experts at ISER never use selling Alaska as a matrix for solving
some of its problems. "We need fast cash," he said. He said it
was terrible that the legislature robbed the permanent fund.
"The offer that I made you that gives you all political cover
for the wrongful deeds you've done in taking the PFD away, you
can give back to the people simply in a land voucher." He said
that is what Alaska needs, an expanded tax base and a way to
create wealth. Do not pass HB 115, he stated.
10:32:56 PM
CHAIR COSTELLO closed public testimony on HB 115 and held the
bill in committee.
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