Legislature(1995 - 1996)
02/27/1996 01:05 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 27, 1996 1:05 p.m. MEMBERS PRESENT Representative Ivan Ivan, Co-Chair Representative Alan Austerman, Co-Chair Representative Kim Elton Representative Al Vezey Representative Pete Kott Representative Irene Nicholia MEMBERS ABSENT Representative Jerry Mackie OTHER HOUSE MEMBERS PRESENT Representative Pete Kelly COMMITTEE CALENDAR HOUSE BILL NO. 409 "An Act combining parts of the Department of Commerce and Economic Development and parts of the Department of Community and Regional Affairs by transferring some of their duties to a new Department of Community and Economic Development; transferring some of the duties of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs to other existing agencies; eliminating the Department of Commerce and Economic Development and the Department of Community and Regional Affairs; adjusting the membership of certain multi-member bodies to reflect the transfer of duties among departments and the elimination of departments; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 383 "An Act relating to reimbursement by the state to municipalities and certain established villages for services provided to individuals incapacitated by alcohol; and providing for an effective date." - PASSED CSHB 383(CRA) OUT OF COMMITTEE PREVIOUS ACTION BILL: HB 409 SHORT TITLE: DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT SPONSOR(S): REPRESENTATIVE(S) KELLY, Therriault, James, Kohring JRN-DATE JRN-DATE ACTION 01/11/96 2409 (H) READ THE FIRST TIME - REFERRAL(S) 01/11/96 2409 (H) CRA, FINANCE 01/16/96 2456 (H) COSPONSOR(S): KOHRING 02/01/96 (H) CRA AT 1:00 PM CAPITOL 124 02/01/96 (H) MINUTE(CRA) 02/03/96 (H) CRA AT 1:00 PM CAPITOL 124 02/03/96 (H) MINUTE(CRA) 02/06/96 (H) CRA AT 1:00 PM CAPITOL 124 02/06/96 (H) MINUTE(CRA) 02/13/96 (H) CRA AT 1:00 PM CAPITOL 124 02/13/96 (H) MINUTE(CRA) 02/22/96 (H) CRA AT 1:00 PM CAPITOL 124 02/22/96 (H) MINUTE(CRA) 02/27/96 (H) CRA AT 1:00 PM CAPITOL 124 BILL: HB 383 SHORT TITLE: REIMBURSE FOR LOCAL SERVICE TO INEBRIATES SPONSOR(S): REPRESENTATIVE(S) IVAN, Brown, Elton JRN-DATE JRN-DATE ACTION 12/29/95 2366 (H) PREFILE RELEASED 01/08/96 2366 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2366 (H) CRA, STATE AFFAIRS, FINANCE 01/16/96 (H) CRA AT 1:00 PM CAPITOL 124 01/16/96 (H) MINUTE(CRA) 01/23/96 (H) CRA AT 4:00 PM CAPITOL 124 01/23/96 (H) MINUTE(CRA) 01/25/96 (H) CRA AT 1:00 PM CAPITOL 124 01/25/96 (H) MINUTE(CRA) 02/21/96 2846 (H) COSPONSOR(S): BROWN 02/22/96 (H) CRA AT 1:00 PM CAPITOL 124 02/22/96 (H) MINUTE(CRA) 02/27/96 (H) COSPONSOR(S): ELTON 02/27/96 (H) CRA AT 1:00 PM CAPITOL 124 WITNESS REGISTER TOM WRIGHT, Legislative Assistant to Representative Ivan Ivan Alaska State Legislature State Capitol Building, Room 503 Juneau, Alaska 99801 Telephone: (907) 465-4942 POSITION STATEMENT: Presented changes in committee substitute for HB 383. DENNIS OAKLAND, Chief of Police Police Department City of Homer 4060 Heath Street Homer, Alaska 99603 Telephone: (907) 235-3150 POSITION STATEMENT: Referenced previous testimony in support of HB383. CRISTY TILDEN, Program Director Drug and Alcohol Services Bristol Bay Area Health Corporation; and Board Member, Advisory Board on Alcohol and Drug Abuse P.O. Box 130 Dillingham, Alaska 99576 Telephone: (907) 842-5266 POSITION STATEMENT: Supported CSHB 383. JEWEL JONES, Manager Social Services Division Health and Human Services Department Municipality of Anchorage P.O. Box 196650 Anchorage, Alaska 99519-6650 Telephone: (907) 343-4667 POSITION STATEMENT: Testified on CSHB383. C. JOE DIMATTEO, Director Alaska Council on the Prevention of Alcohol and Drug Abuse 3333 Denali Street Anchorage, Alaska 99503 Telephone: (907) 258-6021 POSITION STATEMENT: Supported CSHB 383. LOREN JONES, Director Central Office Division of Alcohol and Drug Abuse Department of Health and Social Services P.O. Box 110607 Juneau, Alaska 99811-0607 Telephone: (907) 465-2071 POSITION STATEMENT: Presented department's position and answered questions on CSHB 383. BOB BARTHOLOMEW, Deputy Director Central Office Income and Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-4773 POSITION STATEMENT: Presented department's position and answered questions on CSHB 383. RICHARD B. LAUBER, Lobbyist Anheuser-Busch Company, Inc. 321 Highland Drive Juneau, Alaska 99801 Telephone: (907) 586-3636 POSITION STATEMENT: Testified on CSHB 383. KEVIN RITCHIE, Executive Director Alaska Municipal League 217 Second Street Juneau, Alaska 99801 Telephone: (907) 586-1325 POSITION STATEMENT: Testified on CSHB 383. ACTION NARRATIVE TAPE 96-16, SIDE A Number 0001 CO-CHAIR IVAN IVAN called the House Community and Regional Affairs Committee meeting to order at 1:05 p.m. Members present at the call to order were Representatives Ivan, Austerman, Elton, Vezey, Kott and Nicholia. Absent was Representative Mackie. HB 409 - DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT Number 0073 CO-CHAIR IVAN explained that HB 409 had been the subject of extensive hearings during the past month. The committee had heard from numerous people throughout rural Alaska and the rest of the state. The committee had given the bill close scrutiny and listened to testimony about the impacts HB 409 would have on rural Alaska and those dependent on services provided by the Department of Commerce and Economic Development (DCED) and the Department of Community and Regional Affairs (DCRA). In addition, the impacts had been discussed with the bill's sponsor, Representative Pete Kelly, and other members of the majority caucus. CO-CHAIR IVAN said that should the bill have made it through both legislative bodies and been sent to the Governor, there was no assurance it would not be signed. The Administration, according to the bill sponsor and testimony provided to the committee, had remained neutral on the legislation. Number 0159 CO-CHAIR IVAN expressed admiration, understanding and respect for the effort and time put into the legislation by Representative Kelly, whose intent was to prevent further cuts to services. However, Co-Chairs Ivan and Austerman, with concurrence of the majority members of the committee, Representatives Kott and Vezey, believed that HB 409 was not in the best interests of rural Alaska or the rest of the state. CO-CHAIR IVAN stated the intention of holding HB 409 in the House Community and Regional Affairs Committee in order to protect those persons in both rural and urban Alaska who would have been affected had this bill been signed into law. Number 0256 CO-CHAIR ALAN AUSTERMAN affirmed his agreement with Co-Chair Ivan's statement. He believed the bill was best left in committee. If there were a savings to be made as far as DCED or DCRA was concerned, he thought that could best be made through the budget process, rather than by totally revamping the two departments and creating "the heartburn" that would have been generated in rural Alaska. He indicated he hoped the bill would not be seen again. Number 0324 REPRESENTATIVE KIM ELTON said he was making "a short statement on behalf of the minority." He expressed appreciation for the opportunity given by Co-Chair Ivan to the people of Alaska to testify on all elements of the bill. "I appreciate the latitude that you gave to those people who did testify, whether it was here in person or over the teleconference, and the courteous way in which you treated those people who were testifying," he said. "If I had been asked about this, I would have encouraged you to do exactly what you're doing." He added, "I think you've handled this issue in a manner that has been fair to the sponsor, to the members of the committee and to the agencies - and to the people who testified on it. I just commend you for your decision." Number 0390 CO-CHAIR IVAN replied, "That commendation, of course, belongs to the rest of the committee with us here." REPRESENTATIVE PETE KOTT extended his appreciation for the great amount of effort put into the bill by the sponsor, Representative Kelly. He emphasized that he had gone into the original hearing open-minded. After the second or third hearing, he was not convinced that the consolidation was in people's best interests. He thought spending time to evaluate the process, to ensure the right thing was being done, was better than stepping ahead "off the deep end" and finding out the cost savings were not as great as hoped but that the disruption to lives and programs was more than intended. Representative Kott acknowledged that in many cases, programs would have continued to operate in the existing form. However, he applauded Co-Chair Ivan for taking a close look at the issue and holding the bill over. Number 0587 REPRESENTATIVE AL VEZEY had no comment. REPRESENTATIVE IRENE NICHOLIA voiced her appreciation for Representative Kelly's work on HB 409 and for his statement that he would work hard to keep the Head Start program funded. She indicated willingness to work with him to keep it funded. Representative Nicholia expressed appreciation for the testimony received from people throughout the state. She believed that HB 409 would dissolve the existing bridge to rural Alaska and applauded efforts to keep the bill in committee. HB 383 - REIMBURSE FOR LOCAL SERVICE TO INEBRIATES Number 0657 CO-CHAIR IVAN noted that HB 383 had been heard previously by the committee and been discussed by a subcommittee chaired by Representative Austerman. It had undergone substantial change. Co-Chair Ivan asked for a motion to adopt the committee substitute for HB 383, draft 9-LS1447\F, for discussion purposes. Number 0715 CO-CHAIR AUSTERMAN moved that the committee accept work draft CSHB 383, version F, for discussion purposes. There being no objection, it was so ordered. Number 0773 TOM WRIGHT, Legislative Assistant to Representative Ivan, sponsor of HB 383, explained the intent of finding a way to reimburse municipalities for the cost associated with the Title 47 public inebriates. One of the problems with the first draft of HB383 had been that the Mental Health Trust Fund was the source of funding. There had been discussions among Representative Austerman and his staff, Representative Ivan and his staff and the Mental Health Trust Fund representatives to try to find solutions for undertaking the program. Although the Mental Health trustees expressed interest in the program, they did not see how they could fund it, since it only earned approximately $2 million per year and had to fund other programs. Number 0816 MR. WRIGHT continued, saying in order to try to fund the program without using general fund revenue, they came up with the alcohol excise tax to fund the program under HB 383 and generate revenues for the state. He referred to CSHB 383, Section 1, and pointed out that HB 96 and HB 97 were incorporated into the new draft. Those bills were sponsored by Representative Kay Brown, who had concurred with incorporating them into HB 383. One of those two bills was the municipal tax bill, under which a municipality may impose an alcoholic beverage sales tax equal to, higher than or lower than the applicable sales tax in the municipality. Number 0834 MR. WRIGHT referred to Section 2, addressing the alcohol tax, and said the numbers inserted in CSHB 383 were those recommended by the Long Range Financial Planning Commission. He said Section 3 allowed the Department of Revenue each year to "adjust the tax rates imposed under (a) of this section to reflect increases in the Consumer Price Index for all urban consumers for all items for the Anchorage metropolitan area compiled by the Bureau of Labor Statistics". Mr. Wright referred to Section 4 and Section 5, which he said were really the meat of the original bill, the reimbursement program to municipalities. He indicated representatives were available from the Department of Revenue and the Department of Health and Social Services to answer questions. Number 0929 REPRESENTATIVE ELTON asked Mr. Wright about Section 5, page 3, relating to municipalities or traditional village councils seeking an offset to services provided to incapacitated individuals. He wondered if consideration had been given to broadening the language so prevention and education programs would also be eligible through this revenue source. "That way, you're not just treating a symptom at the end, but you're also doing some prevention at the beginning," he added. Number 0979 MR. WRIGHT responded that it had been discussed, although probably not at as great a length as for the reimbursement program. Some of those programs were already established, funded either through Mental Health Trust funds, general funds or program receipts. What CSHB 383 was trying to accomplish was establishment of the new program. The legislature could then decide where to dedicate the other revenues. Number 1009 REPRESENTATIVE ELTON thought this area was important to the state. He was concerned about just supplanting general fund dollars with a new revenue source, instead of increasing treatment or prevention services. He asked if that had been discussed as the committee substitute was put together. Number 1035 MR. WRIGHT replied he would defer to Co-Chair Austerman for that aspect. He mentioned another piece of legislation, HB493, which dealt with involuntary commitments of people who were "going through a revolving door process." He noted that HB 493 was currently in the House Judiciary Committee and said, "that's another piece of the puzzle." He explained that with so many pieces to it, it had been difficult to ascertain what existed just for the program under consideration. Number 1086 CO-CHAIR AUSTERMAN, in response to Representative Elton's question, said, "Mr. Wright is correct. We did talk about this quite extensively." He explained part of the problem was lack of a cohesive, overall, umbrella-type structure in Alaska that encompassed alcoholism problems all together, directing education, prevention and other aspects. Co-Chair Austerman suggested that was the direction towards which they were leaning, for future legislation, in the hopes of addressing alcoholism on a statewide basis. He indicated that HB 383 was a stop-gap measure but that it was a step in the right direction. Rather than taking on the whole, broad issue of alcoholism this late in the session, they had decided to push through legislation on one part of it. Number 1162 CO-CHAIR IVAN pointed out the problem addressed by HB 383 had initially been recognized in the Dillingham area, where the municipality paid a quarter of a million dollars per year for services to inebriates. There had been a debate between the community of Dillingham and the regional health corporation that provided services under contract with the Indian Health Service. Co-Chair Ivan expressed he had first thought it was a simple solution; the first draft of HB 383 had targeted Mental Health Trust funds to pay for those costs. However, he now realized they were just scratching the surface of a problem that existed statewide. He mentioned there were other bills, including the one relating to involuntary commitment, HB 493, brought up earlier by Mr. Wright. There was also a resolution asking for establishment of a task force to take a close look at these problems across the state. Co-Chair Ivan noted that taxation was the second source of funds that the committee had looked at for reimbursement to municipalities. Number 1283 CO-CHAIR AUSTERMAN stated that the people with whom they had met, in reference to the Mental Health Trust Fund, had been highly supportive of the concept of trying to come up with a concrete, statewide plan. They recognized their responsibility, as well, he said. By next year, he suggested, a fairly decent plan could be arrived at if they could get started in the interim. Number 1330 MR. WRIGHT pointed out that the Department of Revenue had prepared a fiscal note for the blank committee substitute that had been provided to committee members. REPRESENTATIVE NICHOLIA moved that CSHB 383 move with attached fiscal notes and individual recommendations. Number 1346 CO-CHAIR IVAN expressed that he wanted to take further testimony on the bill and provide opportunity for discussion. REPRESENTATIVE NICHOLIA withdrew the motion. Number 1376 DENNIS OAKLAND, Chief of Police, Police Department, City of Homer, testified via teleconference. Although he had no new comments, he wanted to reference previous testimony by himself and William Walters, Judicial Services Officer in Homer, in support of HB 383. He hoped that testimony, presented January 16, 1996, had been incorporated into the new draft, which they had not had the opportunity to review. Number 1424 CRISTY TILDEN, Program Director, Drug and Alcohol Services, Bristol Bay Area Health Corporation, and Board Member, Advisory Board on Alcohol and Drug Abuse, testified via teleconference from Dillingham. "We are still in support of the bill and even more so," she said. She noted that the regional advisory committee, the opinions of which guided their program, had one source of discomfort with the original bill, which was using the Mental Health Trust Fund as a source of revenue. They therefore believed this version was much improved. She drew the committee's attention to state of Alaska Bulletin Number 6, dated February 5, 1996, which concluded that increases in alcohol taxation had been associated with decreased alcohol consumption, cirrhosis mortality and motor vehicle injury rates. Number 1497 JEWEL JONES, Manager, Social Services Division, Health and Human Services Department, Municipality of Anchorage, testified via teleconference that this was the first opportunity to see the committee substitute. Therefore, the municipality had not yet taken an official position related to the sales tax. She noted that the tax had been discussed by the municipality for some time. She indicated she would take the committee substitute to the municipality and ask that something be forwarded to the committee. Number 1537 MS. JONES said in general, the municipality spent a considerable amount of money on, and was very much in favor of, reimbursements for this particular service. Under the Title 47 statute, they picked up people who were incapacitated or otherwise of danger to themselves or to others due to alcohol. They provided what they called a "minimal humanitarian services," which included picking people up, taking them some place safe, performing occasional medical screening, and letting them sleep off the intoxication. Often, she said, treatment was not available. It was a vicious circle and not very cost-effective. For just the service they did provide, it cost the municipality over half a million dollars per year, not including money expended by the community nor funds for police services. Ms. Jones explained that Anchorage had, through the years, attempted to address the problem of public inebriation through task forces. She expressed interest in participating with the legislature and pointed out that the municipality had compiled data and information that was available. Number 1744 C. JOE DIMATTEO, Director, Alaska Council on the Prevention of Alcohol and Drug Abuse, testified via teleconference from Anchorage, saying, "I am very supportive and I echo everything that my colleagues and friends from around the state have talked about." With the funds coming through the state, there was no way all the problems could be solved. "I certainly support any new revenues that we can bring into our communities to help the communities get a start to combat this," he said. MR. DIMATTEO expressed approval of the prevention and education aspects mentioned by Representative Elton. He referred to the idea of an umbrella agency and said he thought some of that was already in place with the Division of Alcohol and Drug Abuse, which was the state agency with experts in the field. That, he said, would be the ideal starting place for this. He mentioned his own council's statewide prevention effort but indicated Alaska's size made it difficult. The council's approach, he said, included sending people into communities to help persons there take ownership of their own problems and to provide technical assistance, locate resources and so forth. However, that needed expanded. He thought the umbrella approach was good, but he hated "to see the wheel reinvented." Things were in place but the amount being expended only took care of a certain portion of the problem. He referred to a recent study, but did not specify what it was, that showed the success of the statewide treatment programs. "Don't forget us out there," he added. LOREN JONES, Director, Central Office, Division of Alcohol and Drug Abuse, Department of Health and Social Services (DHSS), said the Administration was supportive of the tax increases included in CSHB383. He noted that the Long Range Financial Planning Commission had recommended those taxes, as well as tobacco taxes, as a means to raise revenue to shorten the fiscal gap; on that basis, the Administration supported them. Number 1938 MR. JONES said that DHSS's concern was with public health and ameliorating issues around alcohol and drug abuse. Therefore, DHSS supported the tax, as well. The department felt increasing the tax would affect availability of alcohol to young persons, who were sensitive to economic costs. Mr. Jones acknowledged that was a debate that "everybody is positive of" on the tobacco tax. However, there was dissention as to whether price affected alcohol consumption; Mr. Jones said he would argue that it did. He referred to a packet provided to the committee that showed some of the research that had been done, as well as some of the impacts this tax could have on consumption. Number 1974 MR. JONES stated support for the ability of municipalities to have a differential sales tax. He explained that the City and Borough of Juneau was the only community that had passed a differential tax prior to the law being changed. Although the amount of experience with it was not great, it worked in Juneau and was a source of funds that the local community contributed to prevention, education, early intervention and treatment services. It was a way for local communities to have revenues available to address the issue. Mr. Jones reaffirmed that both the Administration and DHSS were supportive of the tax increases. Number 2033 MR. JONES said, "We are not, however, supportive of the last part of the bill that, in essence, without a cap or without any discussion of how, simply allows communities to bill for what they feel is the amount of expenses they pay for the public inebriate. We are not in agreement that this is an unfunded mandate. We feel that even without Title 47, communities would deal with citizens that were having problems with alcohol and drug abuse." Mr. Jones indicated there was funding available through DHSS for some services. In addition, some communities contributed local revenues. He emphasized that it was hard to get a handle on how much money a community thought it was spending on incapacitated persons and what that definition was. He did not want to just "open a checkbook" for people submitting bills. Number 2083 MR. JONES stated that if the intent of the legislation was, as he thought it was, to find a way to provide income or a revenue stream to a community, so that the community had ownership over how they addressed their problems, that was something that DHSS supported. One possible way to do that, he suggested, would be looking at a mechanism to share back the revenues collected to the communities. That way, the communities would have a source of money. They could, then, through their desires, design how they wanted to spend that money on the problem. Mr. Jones requested that if that were taken under consideration, that there also be some responsibility placed on the municipalities to show that they were using those funds for the problem, rather than just have them, at the end of the year, submit a bill to the Department of Revenue. Number 2126 MR. JONES provided a brief recap, saying, "We are supportive of the tax increases in here. We are not supportive of the method of payment in the back of the bill." He added that the bill discussed adjusting the tax based on the Consumer Price Index (CPI) every year. Although they agreed it should be adjusted, they recommended thinking about doing so every two or three years instead. Number 2177 CO-CHAIR AUSTERMAN requested that Mr. Jones submit his suggestions in writing, so that the committee could use them to put together a committee substitute to present to the House State Affairs Committee. REPRESENTATIVE ELTON said he also appreciated some of Mr. Jones's suggestions. He asked Mr. Jones if, for example, a local person who was inebriated broke his arm and went to Bartlett Hospital, the hospital could then seek reimbursement for the medical services provided for the broken arm. Number 2229 MR. JONES replied that if he were to look at the language of CSHB 383 to make that decision, he could not do it. "That's part of our objection," he said. He pointed out that there was a specific definition of "incapacitated person." "The section of statute it references is a person that is incapacitated that has been put in protective custody by a police officer," he explained. If, for example, an intoxicated person broke his arm and was brought in by a relative, the hospital probably would not be eligible for reimbursement. On the other hand, if he was brought in by a police officer, he would be in protective custody and would fit that narrow definition. While CSHB 383 hinted at that, the rules were not written. "I think that complicates the issue for the Department of Revenue as a CS bill, as to how you figure out who's billing you for what and is it an appropriate billing," Mr. Jones stated. "And that kind of thing costs some money." Number 2286 REPRESENTATIVE ELTON asked if Mr. Jones was talking about a "shared revenue kind of tax, so that municipalities could then make the decision on their own on which costs would be reimbursable." MR. JONES replied there were various mechanisms used in statute to share revenues back. For example, for the fish processor's tax, there was a certain percentage of the tax collected shared back with the communities affected by offshore processing. In Title 4, for individuals having licenses for alcohol sales, including bars and package stores, a portion of those fees were turned back to local communities for enforcement of liquor laws. Number 2333 REPRESENTATIVE ELTON referred to sales taxes collected on the local level and asked if the sales tax was also collected on the tax being assessed through this bill. MR. JONES said he would assume that was correct. He believed the current excise tax was collected at the wholesale level. Number 2384 REPRESENTATIVE KOTT asked Mr. Jones if he was aware of other states with similarly adjusted taxation rates on alcoholic beverages and, if so, what the consumption rates had shown after the adjustment. MR. JONES replied that taxing alcoholic beverages was not a popular thing and did not change a lot in most states. He referred to materials provided to the committee and said he believed the last tax increase in Alaska was in 1983. Beginning about 1984 and 1985, the consumption in Alaska started to drop and had dropped steadily every year since. In the last year, he said, they had seen "a little flattening of that and going back up." He felt that because the tax was not indexed to inflation, liquor was becoming relatively inexpensive compared to amounts of disposable income. Unlike tobacco, he pointed out, this relationship had been discussed and researched more in theory than in practice, because tax rates on alcohol in many states had not changed often. Number 2454 MR. JONES explained that one of the main concerns and main targets was kids. For them, it was price-sensitive. If it cost more for them to purchase something, it would decrease their use of it. REPRESENTATIVE KOTT suggested there may have been other reasons for the reduction after the last tax increase. It could have been tougher DWI laws or greater public awareness, for example. TAPE 96-16, SIDE B Number 0004 REPRESENTATIVE KOTT referred to a 10-cent-per-glass increase for a 12-ounce glass of beer. "I could hardly believe that those adjustments would do anything at that level," he said. MR. JONES responded that in Alaska, beer was the beverage for which consumption had continued to rise, whereas consumption for wine and distilled spirits had decreased in Alaska and the rest of the country. "I don't believe that a person that sells 4 ounces of wine is going to raise their price 4 cents because that's the increase in tax. More than likely, they would raise it 10 or 25 cents," he said. He believed that would have an impact. Number 0046 REPRESENTATIVE KOTT expressed agreement with Mr. Jones's assessment. "I've talked with a number of establishments and they've indicated that if there was anything less than a 25-cent increase, it's going to 25 cents." Number 0089 BOB BARTHOLOMEW, Deputy Director, Central Office, Income and Excise Audit Division, Department of Revenue, explained that his division was responsible for administering the alcohol tax program. He referred to the fiscal note and affirmed that the last increase to the alcohol tax rate was in 1983. The proposed legislation would change the rates effective July 1, 1996, and would raise $15 million in the first year. The bill required annual increases, according to the CPI, every July 1st. Mr. Bartholomew expressed support for indexing or some kind of regular mechanism to increase the tax, in order to keep up with inflation. However, he recommended that adjustments not be made annually, because of the burden that would create from changing tax rates and communicating changes to the taxpayers. He suggested doing something every two or three years, catching up to the CPI for that number of years, which would make the tax easier to administer. Number 0148 MR. BARTHOLOMEW referred to the issue of whether price would affect consumption, which in economists' terms was called the "elasticity factor." As Mr. Jones had indicated, for fiscal notes prepared on tobacco taxes, it was much easier to find information on what factors to use. In the current fiscal note, however, the Department of Revenue had not yet included elasticity, although they had requested information from numerous agencies and were planning to come up with a recommendation on what the reduction would be. "And there would be a reduction in the fiscal note for that," he stated. Number 0184 MR. BARTHOLOMEW referred to "the other part of the fiscal note," and said, "we do have personal service costs of $20,000 and contractual of $1,000 to deal with communicating out to the taxpayers." He explained the Department of Revenue was not asking for a new position. However, the proposed legislation would more than double the taxes collected, with a total of nearly $30 million per year. Currently, the department had "a little over one-and-a- half full-time equivalents" that dealt with the alcohol tax program, including monthly filings and following up to ensure that people were making payments. Because of the large increase, extra compliance work would need to be done by the department to address the potential for finding loopholes or looking at other ways to bring alcohol into the state. The money would fund part of a Tax Examiner II position. Number 0238 MR. BARTHOLOMEW referred to Section 5 of the bill, which required the Department of Revenue to administer the refunding of costs back to local governments. As previous testimony reflected, the Administration did not feel that was an effective or appropriate way to refund the money. He pointed out that the bill originally asked DCRA to perform that role; that department had a fiscal note on file requesting $42,000 to administer and run the cost- reimbursement program. "Our feeling is, we don't have anyone that could administer that program currently," he said. "If the thought was for the Department of Revenue to do it, the fiscal note that Community and Regional Affairs has put in would be similar to what we would do." He suggested that if it moved forward, they would even discuss which agency was the most appropriate to do that, as it might not be the Department of Revenue. He added, "we would hope to come up with a different solution than that." Number 0306 RICHARD B. LAUBER, Lobbyist, Anheuser-Busch Company, Inc., indicated he was only addressing that portion of the committee substitute concerning tax increases. "I think it should be made very clear that what you're doing is imposing a tax on a large portion of the citizens of the state of Alaska that consume beverages of an alcoholic nature in the form of beer, wine and hard liquor," he said. If the bill passed, Alaska would have, by far, the highest taxes in the United States on alcoholic beverages. He asserted that the Department of Revenue would find that substantial tax increases would reduce consumption. However, he said, it would not reduce consumption by the people with problems with alcohol. Instead, it targeted the average person who consumed a few drinks per day. "A person goes in for a weekly case of beer; they may reduce that to a couple of six-packs," he said. Persons who were addicted, however, would drink anything they could. Number 0440 MR. LAUBER discussed drinking by youths and suggested a dollar or two would not make the difference if young people wanted to drink. He discussed the high prices charged by bootleggers. An alcoholic or person who really wanted that drink would be willing to pay that price, whereas the average citizen would not pay exorbitant prices. He suggested that the tax would increase the risk of illegal activities. "You'll think you're reducing consumption, but actually it may not be reducing it as much as you think," he said. "If nothing else, people [will be] brewing their own." Number 0520 MR. LAUBER referred to the concept of "sin taxes" and said that term no longer applied. He mentioned the health benefits of consuming small amounts of beer or wine. He indicated it was the abuse of the alcoholic beverage, not the consumption of minor amounts, that was the problem. "The vast majority of this tax is going to be paid by people who are moderate consumers of alcohol beverage, not the people you're targeting," he said. REPRESENTATIVE KOTT referred to his earlier question about whether the Department of Revenue was aware of a correlation between increasing taxes on alcoholic beverages and consumption. He asked whether Mr. Lauber was aware of any statistics based on what other states had done. Number 0600 MR. LAUBER replied yes, he had seen figures to that effect. He stated that although Alaska had last increased alcohol taxes in 1983, the federal government had doubled its taxes on beer since that time. "Their records indicate a drop in consumption ... directly related to the tax increase," he said. He thought this might be the largest increase percentage-wise in the history of the United States. "It's certainly greater than doubling of the tax on beer," he added. "It will reduce consumption." He mentioned the law of economics, which said increasing prices lowered consumption. He emphasized that the vast majority of beer was consumed by moderate drinkers, not by people who had to have it. Those moderate drinkers had the option of not buying as much. Number 0706 REPRESENTATIVE NICHOLIA commented on reasons for decreasing alcohol consumption. She thought the decrease was not a direct result of a tax increase. In the late 1980s, there was more of an awareness of alcohol and drug prevention program. There was also a prevention movement across the state. From her experience of being in a rural area, it was not until about 1987 that these prevention programs became more noticeable, with increased awareness and pushing for sobriety. She thought that was probably the largest force in decreasing consumption of alcohol. Number 0758 MR. LAUBER specified that the decrease he knew about was nationwide, following an increase in federal tax. He acknowledged there were many reasons why people changed their drinking habits. REPRESENTATIVE KOTT pointed out the law of economics would apply in almost any case; as the price of a commodity increased, the chances of buying it at the same level would decrease. Furthermore, people on budgets for entertainment would have less purchasing power if the price was increased. Number 0864 KEVIN RITCHIE, Executive Director, Alaska Municipal League, testified that the Alaska Municipal League was strongly in support of allowing local communities to set their own rates for the alcohol tax. The league was also generally in support of the concept of the entire bill. "This is one area where municipalities and the state really come together," Mr. Ritchie said. There was a wide range of costs attributable to alcohol, not only on the part of people who drank frequently, but also in health areas including insurance and others, he added. Number 0899 MR. RITCHIE explained he had been involved with the Long Range Financial Planning Commission. "During that time, one of the questions asked was, `how can we decrease court costs, corrections costs and other public safety cost,' and the answer was `control alcohol.'" Mr. Ritchie acknowledged that CSHB 383 may or may not affect consumption. However, on a level of taxation in municipalities, people had generally been more supportive when they knew a tax being imposed would solve a problem related to that tax. He thought the legislation was a very positive step and offered the assistance of the Alaska Municipal League. Number 0958 CO-CHAIR AUSTERMAN thought there had been several good suggestions for possible changes. He noted that the bill had two more committees of referral, the House State Affairs Committee and the House Finance Committee. "I would like to see it move on and we'll take a good look at those suggestions and propose a CS," he said. Number 0977 REPRESENTATIVE ELTON said he was greatly encouraged by the kind of debate and testimony that had been heard. He did not see this as a tax increase. "We already have the tax. We could just say that we're accounting for inflation over the last 14 years, since it was last raised," he said. He added, "even with the new provisions, we fall far short of reimbursing the state and local communities for the costs incurred through the use of alcohol." He applauded the work that had been done and endorsed Co-Chair Austerman's comment that this was a first step. He suggested looking at consolidation and some of the prevention and education programs. He hoped the revenues would not be used to simply supplant other general fund dollars that were already being applied to the problem, because the dimensions of the problem necessitated this being an increment to the programs now in place. Number 1061 REPRESENTATIVE KOTT noted that there were two issues being addressed. The first was whether the increase in revenues would substantially change social behavior. As for the second, he felt this indeed was a tax increase. He questioned the concept of imposing a tax of any kind on Alaskans in order to close the fiscal gap. "I can't answer any of those in the affirmative, so I won't be supporting the bill," he concluded. Number 1096 REPRESENTATIVE NICHOLIA moved that CSHB 383 be moved from committee with attached fiscal notes and individual recommendations. CO-CHAIR IVAN noted that there was an objection and asked for a roll call vote. Voting in favor of moving CSHB 383 from committee were Representatives Nicholia, Elton, Austerman and Ivan. Voting against the motion were Representatives Kott and Vezey. Therefore, CSHB 383 moved from committee with attached fiscal notes and individual recommendations. CO-CHAIR IVAN mentioned that HB 474 and HB 488 would be addressed at the next meeting. Number 1166 ADJOURNMENT There being no further business to conduct, CO-CHAIR IVAN adjourned the House Community and Regional Affairs Committee meeting at 2:20 p.m.