Legislature(1995 - 1996)
02/19/1996 01:40 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
FEBRUARY 19, 1996
1:40 P.M.
TAPE HFC 96 - 41, Side 1, #000 - end.
TAPE HFC 96 - 41, Side 2, #000 - end.
TAPE HFC 96 - 42, Side 1, #000 - end.
TAPE HFC 96 - 42, Side 2, #000 - end.
TAPE HFC 96 - 43, Side 1, #000 - #168.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 1:40 P.M.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Navarre
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Kohring
ALSO PRESENT
Representative David Finkelstein; Representative Cynthia
Toohey; Chris Christensen, Staff Counsel, Alaska Court
System; Amy Daugherty, Aid, Representative Alan Austerman;
Marveen Coggins, Aid, Representative Cynthia Toohey; Bob
Bartholomew, Assistant Director, Income & Excise Tax
Division, Department of Revenue; Neil Slotnick, Assistant
Attorney General, Department of Law; Dennis Poshard,
Director, Division of Charitable Gaming, Department of
Revenue.
SUMMARY
HB 307 An Act prohibiting the sale of pull-tabs; and
providing for an effective date.
CS HB 307 (FIN) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Department of Revenue.
HB 397 An Act relating to the seafood marketing
assessment; and providing for an effective date.
HB 397 was HELD in Committee for further
consideration.
1
HB 437 An Act establishing the Judicial Officers
Compensation Commission; relating to the
compensation of supreme court justices, judges of
the court of appeals, judges of the superior
court, and district court judges; and providing
for an effective date.
HB 437 was HELD in Committee for further
consideration.
HOUSE BILL 397
"An Act relating to the seafood marketing assessment;
and providing for an effective date."
AMY DAUGHERTY, AID, REPRESENTATIVE ALAN AUSTERMAN, testified
that HB 397 was designed to more precisely align the current
fisheries resource landing tax (AS 43.77) with the fisheries
business tax (AS 43.75) and the Alaska Seafood Marketing
Institute (ASMI) assessment provision (AS 16.51). The
legislation is needed to avoid future legal questions and
would add a measure of fairness to the tax. HB 397
clarifies that landing tax is an occupational tax and would
equalize tax rates and credits with the fisheries business
tax.
Ms. Daugherty commented that within HB 397, the 3.3% landing
tax would include .3% for ASMI and would established a 3%
landing tax. The separate .3% would provide for a seafood
marketing assessment application. This action would
separate the marketing assessment in the landing tax
statutes and would equalize the landing tax with the shore-
based fisheries business tax.
The legislation specifies that a person subject to the
landing tax would be liable for the .3% seafood marketing
assessment; all business which produces less than $50,000 in
seafood products per calendar year would be exempt from the
assessment. That would encourage the small operator, value
added processing.
Representative Brown asked if the tax would become eligible
for an education tax credit through this legislation and if
that action would create a greater loss of revenue for the
State.
NEIL SLOTNICK, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, said the policy reason for extending the tax credit
would be driven by the compensatory tax doctrine. The
interstate commerce laws originate in the U.S. Constitution.
A compensatory tax is legal when the two taxes balance out.
2
He added that under the compensatory tax doctrine, the taxes
should be the same. The payers of the landing tax have
raised an argument, indicating that they are not eligible
for the same credits the fisheries business tax are eligible
for. Those business have stated that this is
"discrimination".
BOB BARTHOLOMEW, ASSISTANT DIRECTOR, INCOME & EXCISE TAX
DIVISION, DEPARTMENT OF REVENUE, explained the education
credit. The current fiscal note that the Department of
Revenue enclosed does not include an estimate of the revenue
potentially lost due to the education credit.
Representative Brown voiced her concern with the proposed
credits. She recommended that the revenue loss be indicated
on the fiscal note and requested further clarification on
either eliminating or expanding the credit. Mr. Bartholomew
noted that the Department does not have a strong position on
elimination or expansion, and will thus follow the lead of
the Legislature. He noted that the legislation does
indicate a specific position.
Mr. Slotnick explained that the legislation would create an
equalization process and thus make the work of the
Department of Law more simple. Representative Brown asked
the total amount of taxes which would be collected from the
education credit. Mr. Bartholomew replied that in FY95,
there were five taxes eligible for the credit totaling $1.2
million dollars corporate income tax credit.
Representative Martin echoed Representative Brown's
concerns. He asked if the legislation would be expanding
the authority. Mr. Bartholomew clarified how the tax would
work. A small portion of the tax is self assessed. The
landing tax is assessed by the Legislature. Currently, it
is a 3.3% which includes an assessment for ASMI. The
legislation will make it clearer, taking the .3% of the
current assessment, and moving it into the ASMI statutes.
The 3% State tax would stay in AS 43.77 Landing Tax
Statutes. The decision to allow or not, the education
credit will be a legislative policy call. Mr. Bartholomew
added that the fishermen or the processor will pay the ASMI
assessment to the Department of Revenue.
Co-Chair Hanley pointed out that it was a tax and would be
accounted for as general fund dollars. Representative
Martin questioned the specifics of the lawsuit. Mr.
Slotnick explained in Superior Court, that the point was
raised if the landing tax was discriminatory because it was
assessed at a rate of 3.3%, whereas, the fisheries business
tax was assessed at 3%. The extra .3% which was assessed
3
against the landers was for ASMI, but was not part of the
ASMI assessment. This legislation would remedy that issue
and make them members of ASMI.
Representative Navarre questioned if the corporate income
taxes could be used to fund the fiscal impact. Mr.
Bartholomew explained that currently, the education credit
works by creating a cap which should not be exceeded, and
applying to all taxes. A corporation would not be able to
give under two different tax categories and would be subject
to the same cap. The total contribution under the education
credit that can be contributed would be $200 thousand
dollars, subject to $150 thousand dollar credit.
Co-Chair Hanley asked if it was possible to add a section
which could specify that if the case was lost in court, that
section would then be repealed. Mr. Slotnick noted that if
the Department of Law loses the current litigation, there
will be no tax. Mr. Bartholomew added, there has been one
tax year filed for 1994 and collected in FY95. Over $7
million dollars has been collected, of which 50% was shared
with the local governments. Mr. Slotnick noted that amount
would be retroactive to 1994.
Mr. Bartholomew responded to Representative Brown's question
regarding companies that are eligible under the landing tax
credit, who do not currently pay one of the other taxes. He
stated that the difference would be the type of business
organization paying the tax. The status selected by a
corporation for tax purposes is confidential information.
Representative Brown spoke to the expansion of the tax
credit within the legislation. She asked if in Section #21,
the tax was being lowered for developing commercial fish
species. Mr. Bartholomew explained that under the fishery
business tax, there exists a provision for developing
commercial fish species as defined by the Department of Fish
and Game and having a different tax rate. The fiscal note
reflects that .2 of 1% which would amount to $8 thousand
dollars, be used for developing species. Representative
Brown requested a current list of "developing species". Mr.
Bartholomew offered to provide that information.
Co-Chair Hanley inquired the amount of anticipated revenue.
Mr. Bartholomew informed members that the potential would be
$8 thousand dollars, which would switch the 3% to 1% for
classification and development purposes. Co-Chair Hanley
summarized the three items used:
1. To equalize, which would include the education
tax;
4
2. The ASMI assessment;
3. Separating the rate from 3% to 1%.
Co-Chair Hanley noted the net impact would be zero.
HB 397 was HELD in Committee for further consideration.
HOUSE BILL 437
"An Act establishing the Judicial Officers Compensation
Commission; relating to the compensation of supreme
court justices, judges of the court of appeals, judges
of the superior court, and district court judges; and
providing for an effective date."
CHRIS CHRISTENSEN, STAFF COUNSEL, ALASKA COURT SYSTEM,
testified in support of HB 437. He stated that the bill
would establish a Judicial Officers Compensation Commission.
The bill was introduced by the Judiciary Committee at the
request of the Alaska Supreme Court.
He added that the bill would create a new Judicial Officers
Compensation Commission to assume the judicial salary
functions of the existing State Officers Compensation
Commission. The existing commission recommends compensation
levels for judges and other state officers to the
legislature; those proposals frequently go unheeded for
reasons unrelated to their merits.
In contrast, the commission created by HB 437 would have the
authority to actually establish compensation levels for
supreme court justices, judges of the court of appeals,
judges of the superior court and district court judges. The
commission, appointed by the governor, could submit proposed
salary and per diem for those officers to the Legislature
every two years. These compensation levels would take
effect on the date of the first appropriation to fund the
increase, unless disapproved by another bill enacted into
law within 60 days of submission.
Mr. Christensen summarized:
* Eight states and the federal government operate a
compensation commission which sets the salary of
certain public officials;
* The existing State Officers Compensation
Commission does not have the power to establish
salaries, only to make recommendations to the
legislature.
5
* The commission created by HB 437 is modeled
closely on the existing commission. Two
differences are that the new commission will have
the power to establish compensation for justices
and judges, not make recommendations, and will
have a list of specific factors used in
consideration of fair compensation for justices
and judges.
* The commission would have five members appointed
by the Governor to four year terms. Among those
members must be a business executive, a person
with experience in personnel management, a
representative or a nonpartisan voters'
organization, an economist, and a lawyer.
* The commission meets every other year.
* The commission may consider the compensation of
justices of the supreme court, judges of the court
of appeals, judges of the superior court and
district court judges.
* The legislature has 60 days in which to reject the
order by enacting a law.
(Tape Change, HFC 96-41, Side 2).
Representative Parnell asked why judges should be removed
from the State Officers Compensation Preview. Mr.
Christensen noted that judges get caught up in many battles
over salaries. With passage of the legislation, the
salaries would still be subject to appropriation. In
response to Representative Parnell, Mr. Christensen
explained that a judge's salary could not be changed by
appropriation but instead by a change to the statute.
The State Constitution specifies that a judges salary can
not be diminished during a term in office. That
understanding is repeated in the proposed legislation,
although, would not apply to magistrates. A magistrates
salary is set by the Supreme Court.
Discussion followed referencing material on Page 4, Line 21,
"opportunity for other earned income". Representative Brown
referenced Page 3, Line 30, noting that 60 days was not
enough time to pass a bill through the legislature. Mr.
Christensen replied that 60 days was chosen as it appeared
also in the Boundary Commission recommendations. He
elaborated that in order for the proposed legislation to be
in statute, it must be a bill, not a resolution.
6
Representative Parnell questioned why the fiscal notes do
not reflect any increases for personnel. Mr. Christensen
replied, until the compensation commission actually meets
and orders a change in salary, there would be no fiscal
impact showing. It would be speculative at this time.
Representative Mulder asked if it was a problem attracting
competent people to serve as judges. Mr. Christensen
pointed out that there are fewer private applicants applying
for judgeships and more people from the attorney general's
and public defender's office. He commented that the less
you pay people, the less qualified people will apply.
Mr. Christensen continued, the legislative intent was
initiated during the Hickel Administration through a
salaries commission but then died in the Senate Rules
Committee. The legislation was again introduced last year,
and after a hearing in the Senate State Affairs Committee,
legislators agreed that they would not support the
legislation if "legislators" remained in it. It was
reintroduced this year with only judges included.
Co-Chair Hanley asked what would happen if the Legislature
did not take action the first 60 days and there was not a
specific appropriation for judges salaries. Mr. Christensen
explained that issue has not yet been discussed.
Representative Parnell recommended changing the language on
Page 3, Line 30, "within 60 days" to "when enacted in law,
within 120 legislative days". That way it could be taken up
at any period of time during the legislative session and
then the appropriate language could be inserted. Mr.
Christensen indicated that an order would have to be
submitted within the first 10 days of the session by the
commission. The 60 day period was chosen because other
items in statute use that time frame.
Mr. Christensen informed Committee members that this issue
has been considered in federal courts on several occasions.
In order for the delegation to set constitutional salaries,
the courts have held that there must be a disapproval
mechanism as well as an appropriation mechanism.
Representative Brown questioned the decision making process
and structure within the court system. Mr. Christensen
responded that under the Constitution, the supreme court is
vested with ultimate administrative authority over the
judicial branch. He concluded that judges salaries total
less that 25% of the court systems budget.
Representative Brown questioned if the list of recommended
commission members needed to include lawyers and economists.
7
Mr. Christensen replied that the supreme court does not care
what type of people are included on the commission as long
as they are "public spirited" and have some knowledge of the
concerns. Representative Parnell thought attorneys should
be included on the commission as they are better informed of
the time and skill required for that type commitment.
HB 437 was HELD in Committee for further consideration.
(Tape Change, HFC 96-42, Side 1).
HOUSE BILL 307
"An Act prohibiting the sale of pull-tabs; and
providing for an effective date."
REPRESENTATIVE CYNTHIA TOOHEY, testified in support of HB
307 noting that the bill would simply prohibit politicians
and other political entities from receiving charitable
gaming proceeds. She said that no one should consider
politicians, or their attempts to influence the electoral
process, a legitimate use of charity money.
Representative Therriault MOVED that 9-LS1070\K, Luckhaupt,
2/7/96, be the version before the Committee. Representative
Brown OBJECTED for purposes of understanding how that
version differs from the prior versions of the bill. Co-
Chair Hanley explained that the original bill prohibited
pull tabs; the Judiciary version prohibited charitable
gaming except for raffles for political parties and
candidates; the Finance committee substitute prohibits all
charitable gaming including raffles.
Representative Toohey emphasized that politicians and
political parties should be removed from receiving any kind
of charitable money. Representative Brown asked
Representative Toohey if she continued to support the
original version of the legislation which excluded pull
tabs. Representative Toohey disagreed that was her intent.
Representative Brown removed her OBJECTION to adopting the
committee substitute. There being no further objection, CS
HB 307 (FIN) was adopted as the version before the
Committee.
DENNIS POSHARD, DIRECTOR, CHARITABLE GAMING DIVISION,
DEPARTMENT OF REVENUE, commented that the Department has not
taken a position on HB 307. He indicated that the
Legislature will need to make the policy calls regarding
that bill. He pointed out Departmental concerns of the
legislation.
1. The bill deals with campaign finance reform.
8
Would the Department of Revenue be in charge of
policing campaign contributions. Could the
problem be better addressed through Title 15,
Alaska Public Offices Commission (APOC) statutes.
2. Will the legislation accomplish the intent. He
stressed that the contributions will not be
audited through the Department.
3. What would happen assuming a violation occurred.
The only recourse the Division would have, would
be to take action against the charity's permit.
There is no action or recourse that the Division
can take against the campaign or candidate that
receives that money.
Mr. Poshard reiterated that when a violation occurs, the
Division will take action against the charity's permit.
There will be no means of recourse against the candidate
that receive the money.
Mr. Poshard spoke to the advantages of placing the concern
under the jurisdiction of the Alaska Public Office
Commission (APOC). APOC has the expertise to deal with
campaign financing law. The Division does not have that
expertise, and it is not the focus of their program. Co-
Chair Hanley advised that the intent would be to prohibit
the contribution. Mr. Poshard reminded Committee members
that most of the groups included also report to APOC.
Representative Brown recommended that these concerns be
considered in the campaign finance reform and a rewrite of
the statutes.
Mr. Poshard explained that the Department has done extensive
research in how other organizations establish minimum
returns to the charity and minimum returns to the State.
The Administration is looking at ways to change how the
State initiates this action. Currently, there is a bill
being drafted which would increase the amount of revenue
received by the State and the charity and would streamline
the auditing procedures.
Representative Brown questioned the fundamental problem with
a political candidate receiving money from charitable
gaming, agreeing that it should be well regulated.
Representative Therriault asked if groups gathering money
for a political system are legitimate charities.
Mr. Poshard noted that a prohibition exists in using net
proceeds to pay a lobbyist. There is no prohibition against
a charitable organization to hire a lobbyist, but it is
illegal for them to pay the lobbyist from the net proceeds.
9
Representative Toohey noted for the record that she has
received gaming contributions from pull tabs charities.
Representative Navarre elaborated on comments made by
Representative Martin pointing out that corruption in
politics goes far beyond contributions received from
charitable gaming. He voiced support for the original bill
over the committee substitute.
Representative Kohring mentioned that Alaska is the only
State which allows gaming proceeds to be used for political
contributions, and voiced concern for proceeds being used
for political purposes. Representative Toohey corrected
that few states do allow it.
Representative Brown inquired why the bill was drafted in
such a way that the sanction would affect only the "charity"
and not the candidate receiving the funding. Co-Chair
Hanley indicated that concern was addressed in the bill.
Representative Toohey pointed out that on Page 75, under the
Section "Elections", the statutes clarifies this issue. Mr.
Poshard stated that he did not know if the APOC statutes
contain a corresponding prohibition.
MARVEEN COGGINS, AID, REPRESENTATIVE CYNTHIA TOOHEY, agreed
that Alaska Legal Services specified that the candidate will
not be responsible but rather the contributor would be. She
suggested that language could be included stating that the
"candidate can not knowingly accept contributions that
constitute in whole or part the net proceeds of a charitable
gaming organization". Terry Cramer, Legal Services
attorney, recommended if that language was adopted, that it
be a new subsection to A.S. 15:17:070, labeled number (I).
(Tape Change, HFC 96-42, Side 2).
Co-Chair Hanley noted that he would oppose all the
amendments. They are not part of a comprehensive campaign
reform. Philosophically, he voiced a concern with gambling
money being used in politics. Representative Brown
countered that the likelihood of campaign reform is evident.
Representative Brown spoke to Amendment #1. [Attachment
their money was going. Mr. Poshard stated that it should
not be a problem for any business to comply with the
amendment. It would be easy to announce who would receive
the net proceeds from each evenings session.
10
Representative Brown MOVED to adopt Amendment #1. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Brown, Grussendorf, Navarre, Therriault.
OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell,
Hanley, Foster.
The MOTION FAILED (4-7).
Representative Brown MOVED to adopt Amendment #2.
[Attachment #2]. She noted that the amendment would
identify where the pull tab money would be going. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Grussendorf, Kelly, Navarre, Brown.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Foster, Hanley.
The MOTION FAILED (4-7).
Representative Brown MOVED to adopt Amendment #3 which would
adjust upward by 10%, the amount of adjusted gross income
that goes to charities from pull tab activity. [Attachment
comparison to other states in the percentage being donated
to charities. He stressed that only 8.7% is returned on
each dollar to the charity. Currently, some states
contribute up to 34% on bingo and pull tab dollars. Co-
Chair Hanley OBJECTED to adoption of Amendment #3.
A roll call was taken on the MOTION.
IN FAVOR: Kohring, Navarre, Brown, Grussendorf.
OPPOSED: Kelly, Martin, Mulder, Parnell,
Therriault, Hanley, Foster.
The MOTION FAILED (4-7).
Representative Brown spoke to Amendments 4, 5 & 6,
[Attachments 4,5 & 6], which address increasing the
operators license fee, the distributors license and the pull
tab manufactures license. Mr. Poshard commented that the
fees established have not been changed in a few years.
Gaming regulations are lower than other jurisdictions.
Representative Mulder questioned if the fees collected off-
set operations within the Department of Revenue. Mr.
Poshard replied, not entirely. A 3% pull tab tax and a 1%
11
fee on the ideal net proceeds are also collected. Those
taxes, in addition to the fees, are double the annual
budget.
Representative Brown MOVED to adopt Amendment #4. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Kelly, Foster, Hanley.
The MOTION FAILED (3-8).
Representative Brown WITHDREW Amendments #5 & #6. She spoke
to Amendment #7. [Attachment #7]. The amendment would
close a loop-hole in gaming activity. Mr. Poshard added
that there is a limit on bingo activity. More than $1000
dollars can not be given away on one activity or $5000
dollar per session. There is no statutory limitation on
pull tab prize pay-out. Mr. Poshard recommended limiting it
to $500 dollars.
Representative Brown MOVED to adopt Amendment #7. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Martin, Mulder, Parnell, Therriault,
Kelly, Kohring, Hanley, Foster.
The MOTION FAILED (3-8).
Representative Brown explained Amendment #8. [Attachment
of charities which could participate. Currently, there are
more charities than operators available. Mr. Poshard
elaborated that a charity's maximum contract would be $500
thousand dollars annually. There are a number of charities
seeking to have the permit paid by an operator. Reducing
the amount would then force an operator to contract with a
greater number of charities to conduct activity. Co-Chair
Hanley questioned how many permits would be taken off the
market. Mr. Poshard responded that there are 24 political
groups who have permits.
Representative Navarre spoke against the amendment. He
thought that it would force more people moving to Multi
Benefit Permitees (MBP), thus reducing the number of slots
available. MBP's have a greater cap from which to operate.
12
Mr. Poshard agreed with Representative Navarre.
Representative Brown asked if charities would be better off
with an operator or with a MBP. Mr. Poshard noted that the
rate of return would be higher with an MBP, although, they
would then be capable of contracting with only six. As an
operator, they would be able to contract with twelve. The
charity could make twice as much money under the MBP,
although only half the charities would receive benefit.
Representative Brown withdrew Amendment #8 as it was her
intention that the amendment benefit the charities.
Representative Brown explained Amendment #9 which would
increase the tax from 3% to 5% on the gross receipts plus
prizes awarded from the pull tabs. [Attachment #9]. She
noted that this would generate $800 thousand dollars in
program receipts annually to the general fund. Mr. Poshard
advised that increasing the tax would create new funds for
the State, a tax collected by the distributors and remitted
on a quarterly basis.
Following comments by Representative Martin, Representative
Brown suggested a change to delete the language in the
amendment "less prizes awarded". Mr. Poshard pointed out
with removal of that language, the tax would become much
more substantial. He voiced concern that the proposed
percentage would change the gross without also changing the
return to the permitees. That would dramatically decrease
their net proceeds.
Mr. Poshard added, that he would prefer a 5% tax on the
gross, changing how the charities receive their payment.
Currently, those conducting activity would be expending the
tax to the permitees.
(Tape Change, HFC 96-43, Side 1).
Representative Brown asked to replace the deleted language
with the language as originally written.
Representative Brown MOVED to adopt Amendment #9. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown.
OPPOSED: Mulder, Parnell, Therriault, Kelly,
Kohring, Martin, Foster, Hanley.
Representative Grussendorf was not present for the vote.
13
The MOTION FAILED (2-8).
Representative Navarre MOVED to adopt Amendment #10.
[Attachment #10]. Representative Martin OBJECTED.
Representative Navarre pointed out that the amendment was a
portion of the bill which passed from Committee last year.
Currently, a municipal exemption has not been applied for,
resulting in MBP's doing the same thing as operators and
competing against small organizations, driving them out of
business. The amendment is an attempt to allow those
municipalities, if they choose, to regulate the level of
gaming in their communities.
A roll call was taken on the MOTION to adopt Amendment #10.
IN FAVOR: Navarre, Brown.
OPPOSED: Parnell, Therriault, Kelly, Kohring,
Martin, Mulder, Hanley, Foster.
Representative Grussendorf was not present for the vote.
The MOTION FAILED (2-8).
Representative Martin MOVED to report CS HB 307 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 307 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Revenue.
ADJOURNMENT
The meeting adjourned at 4:40 P.M.
HOUSE FINANCE COMMITTEE
FEBRUARY 19, 1996
1:40 P.M.
TAPE HFC 96 - 41, Side 1, #000 - end.
TAPE HFC 96 - 41, Side 2, #000 - end.
TAPE HFC 96 - 42, Side 1, #000 - end.
TAPE HFC 96 - 42, Side 2, #000 - end.
TAPE HFC 96 - 43, Side 1, #000 - #168.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 1:40 P.M.
PRESENT
14
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Navarre
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Kohring
ALSO PRESENT
Representative David Finkelstein; Representative Cynthia
Toohey; Chris Christensen, Staff Counsel, Alaska Court
System; Amy Daugherty, Aid, Representative Alan Austerman;
Marveen Coggins, Aid, Representative Cynthia Toohey; Bob
Bartholomew, Assistant Director, Income & Excise Tax
Division, Department of Revenue; Neil Slotnick, Assistant
Attorney General, Department of Law; Dennis Poshard,
Director, Division of Charitable Gaming, Department of
Revenue.
SUMMARY
HB 307 An Act prohibiting the sale of pull-tabs; and
providing for an effective date.
CS HB 307 (FIN) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Department of Revenue.
HB 397 An Act relating to the seafood marketing
assessment; and providing for an effective date.
HB 397 was HELD in Committee for further
consideration.
HB 437 An Act establishing the Judicial Officers
Compensation Commission; relating to the
compensation of supreme court justices, judges of
the court of appeals, judges of the superior
court, and district court judges; and providing
for an effective date.
HB 437 was HELD in Committee for further
consideration.
HOUSE BILL 397
"An Act relating to the seafood marketing assessment;
and providing for an effective date."
AMY DAUGHERTY, AID, REPRESENTATIVE ALAN AUSTERMAN, testified
that HB 397 was designed to more precisely align the current
fisheries resource landing tax (AS 43.77) with the fisheries
15
business tax (AS 43.75) and the Alaska Seafood Marketing
Institute (ASMI) assessment provision (AS 16.51). The
legislation is needed to avoid future legal questions and
would add a measure of fairness to the tax. HB 397
clarifies that landing tax is an occupational tax and would
equalize tax rates and credits with the fisheries business
tax.
Ms. Daugherty commented that within HB 397, the 3.3% landing
tax would include .3% for ASMI and would established a 3%
landing tax. The separate .3% would provide for a seafood
marketing assessment application. This action would
separate the marketing assessment in the landing tax
statutes and would equalize the landing tax with the shore-
based fisheries business tax.
The legislation specifies that a person subject to the
landing tax would be liable for the .3% seafood marketing
assessment; all business which produces less than $50,000 in
seafood products per calendar year would be exempt from the
assessment. That would encourage the small operator, value
added processing.
Representative Brown asked if the tax would become eligible
for an education tax credit through this legislation and if
that action would create a greater loss of revenue for the
State.
NEIL SLOTNICK, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, said the policy reason for extending the tax credit
would be driven by the compensatory tax doctrine. The
interstate commerce laws originate in the U.S. Constitution.
A compensatory tax is legal when the two taxes balance out.
He added that under the compensatory tax doctrine, the taxes
should be the same. The payers of the landing tax have
raised an argument, indicating that they are not eligible
for the same credits the fisheries business tax are eligible
for. Those business have stated that this is
"discrimination".
BOB BARTHOLOMEW, ASSISTANT DIRECTOR, INCOME & EXCISE TAX
DIVISION, DEPARTMENT OF REVENUE, explained the education
credit. The current fiscal note that the Department of
Revenue enclosed does not include an estimate of the revenue
potentially lost due to the education credit.
Representative Brown voiced her concern with the proposed
credits. She recommended that the revenue loss be indicated
on the fiscal note and requested further clarification on
either eliminating or expanding the credit. Mr. Bartholomew
noted that the Department does not have a strong position on
16
elimination or expansion, and will thus follow the lead of
the Legislature. He noted that the legislation does
indicate a specific position.
Mr. Slotnick explained that the legislation would create an
equalization process and thus make the work of the
Department of Law more simple. Representative Brown asked
the total amount of taxes which would be collected from the
education credit. Mr. Bartholomew replied that in FY95,
there were five taxes eligible for the credit totaling $1.2
million dollars corporate income tax credit.
Representative Martin echoed Representative Brown's
concerns. He asked if the legislation would be expanding
the authority. Mr. Bartholomew clarified how the tax would
work. A small portion of the tax is self assessed. The
landing tax is assessed by the Legislature. Currently, it
is a 3.3% which includes an assessment for ASMI. The
legislation will make it clearer, taking the .3% of the
current assessment, and moving it into the ASMI statutes.
The 3% State tax would stay in AS 43.77 Landing Tax
Statutes. The decision to allow or not, the education
credit will be a legislative policy call. Mr. Bartholomew
added that the fishermen or the processor will pay the ASMI
assessment to the Department of Revenue.
Co-Chair Hanley pointed out that it was a tax and would be
accounted for as general fund dollars. Representative
Martin questioned the specifics of the lawsuit. Mr.
Slotnick explained in Superior Court, that the point was
raised if the landing tax was discriminatory because it was
assessed at a rate of 3.3%, whereas, the fisheries business
tax was assessed at 3%. The extra .3% which was assessed
against the landers was for ASMI, but was not part of the
ASMI assessment. This legislation would remedy that issue
and make them members of ASMI.
Representative Navarre questioned if the corporate income
taxes could be used to fund the fiscal impact. Mr.
Bartholomew explained that currently, the education credit
works by creating a cap which should not be exceeded, and
applying to all taxes. A corporation would not be able to
give under two different tax categories and would be subject
to the same cap. The total contribution under the education
credit that can be contributed would be $200 thousand
dollars, subject to $150 thousand dollar credit.
Co-Chair Hanley asked if it was possible to add a section
which could specify that if the case was lost in court, that
section would then be repealed. Mr. Slotnick noted that if
the Department of Law loses the current litigation, there
will be no tax. Mr. Bartholomew added, there has been one
17
tax year filed for 1994 and collected in FY95. Over $7
million dollars has been collected, of which 50% was shared
with the local governments. Mr. Slotnick noted that amount
would be retroactive to 1994.
Mr. Bartholomew responded to Representative Brown's question
regarding companies that are eligible under the landing tax
credit, who do not currently pay one of the other taxes. He
stated that the difference would be the type of business
organization paying the tax. The status selected by a
corporation for tax purposes is confidential information.
Representative Brown spoke to the expansion of the tax
credit within the legislation. She asked if in Section #21,
the tax was being lowered for developing commercial fish
species. Mr. Bartholomew explained that under the fishery
business tax, there exists a provision for developing
commercial fish species as defined by the Department of Fish
and Game and having a different tax rate. The fiscal note
reflects that .2 of 1% which would amount to $8 thousand
dollars, be used for developing species. Representative
Brown requested a current list of "developing species". Mr.
Bartholomew offered to provide that information.
Co-Chair Hanley inquired the amount of anticipated revenue.
Mr. Bartholomew informed members that the potential would be
$8 thousand dollars, which would switch the 3% to 1% for
classification and development purposes. Co-Chair Hanley
summarized the three items used:
1. To equalize, which would include the education
tax;
2. The ASMI assessment;
3. Separating the rate from 3% to 1%.
Co-Chair Hanley noted the net impact would be zero.
HB 397 was HELD in Committee for further consideration.
HOUSE BILL 437
"An Act establishing the Judicial Officers Compensation
Commission; relating to the compensation of supreme
court justices, judges of the court of appeals, judges
of the superior court, and district court judges; and
providing for an effective date."
CHRIS CHRISTENSEN, STAFF COUNSEL, ALASKA COURT SYSTEM,
testified in support of HB 437. He stated that the bill
would establish a Judicial Officers Compensation Commission.
18
The bill was introduced by the Judiciary Committee at the
request of the Alaska Supreme Court.
He added that the bill would create a new Judicial Officers
Compensation Commission to assume the judicial salary
functions of the existing State Officers Compensation
Commission. The existing commission recommends compensation
levels for judges and other state officers to the
legislature; those proposals frequently go unheeded for
reasons unrelated to their merits.
In contrast, the commission created by HB 437 would have the
authority to actually establish compensation levels for
supreme court justices, judges of the court of appeals,
judges of the superior court and district court judges. The
commission, appointed by the governor, could submit proposed
salary and per diem for those officers to the Legislature
every two years. These compensation levels would take
effect on the date of the first appropriation to fund the
increase, unless disapproved by another bill enacted into
law within 60 days of submission.
Mr. Christensen summarized:
* Eight states and the federal government operate a
compensation commission which sets the salary of
certain public officials;
* The existing State Officers Compensation
Commission does not have the power to establish
salaries, only to make recommendations to the
legislature.
* The commission created by HB 437 is modeled
closely on the existing commission. Two
differences are that the new commission will have
the power to establish compensation for justices
and judges, not make recommendations, and will
have a list of specific factors used in
consideration of fair compensation for justices
and judges.
* The commission would have five members appointed
by the Governor to four year terms. Among those
members must be a business executive, a person
with experience in personnel management, a
representative or a nonpartisan voters'
organization, an economist, and a lawyer.
* The commission meets every other year.
* The commission may consider the compensation of
19
justices of the supreme court, judges of the court
of appeals, judges of the superior court and
district court judges.
* The legislature has 60 days in which to reject the
order by enacting a law.
(Tape Change, HFC 96-41, Side 2).
Representative Parnell asked why judges should be removed
from the State Officers Compensation Preview. Mr.
Christensen noted that judges get caught up in many battles
over salaries. With passage of the legislation, the
salaries would still be subject to appropriation. In
response to Representative Parnell, Mr. Christensen
explained that a judge's salary could not be changed by
appropriation but instead by a change to the statute.
The State Constitution specifies that a judges salary can
not be diminished during a term in office. That
understanding is repeated in the proposed legislation,
although, would not apply to magistrates. A magistrates
salary is set by the Supreme Court.
Discussion followed referencing material on Page 4, Line 21,
"opportunity for other earned income". Representative Brown
referenced Page 3, Line 30, noting that 60 days was not
enough time to pass a bill through the legislature. Mr.
Christensen replied that 60 days was chosen as it appeared
also in the Boundary Commission recommendations. He
elaborated that in order for the proposed legislation to be
in statute, it must be a bill, not a resolution.
Representative Parnell questioned why the fiscal notes do
not reflect any increases for personnel. Mr. Christensen
replied, until the compensation commission actually meets
and orders a change in salary, there would be no fiscal
impact showing. It would be speculative at this time.
Representative Mulder asked if it was a problem attracting
competent people to serve as judges. Mr. Christensen
pointed out that there are fewer private applicants applying
for judgeships and more people from the attorney general's
and public defender's office. He commented that the less
you pay people, the less qualified people will apply.
Mr. Christensen continued, the legislative intent was
initiated during the Hickel Administration through a
salaries commission but then died in the Senate Rules
Committee. The legislation was again introduced last year,
and after a hearing in the Senate State Affairs Committee,
legislators agreed that they would not support the
20
legislation if "legislators" remained in it. It was
reintroduced this year with only judges included.
Co-Chair Hanley asked what would happen if the Legislature
did not take action the first 60 days and there was not a
specific appropriation for judges salaries. Mr. Christensen
explained that issue has not yet been discussed.
Representative Parnell recommended changing the language on
Page 3, Line 30, "within 60 days" to "when enacted in law,
within 120 legislative days". That way it could be taken up
at any period of time during the legislative session and
then the appropriate language could be inserted. Mr.
Christensen indicated that an order would have to be
submitted within the first 10 days of the session by the
commission. The 60 day period was chosen because other
items in statute use that time frame.
Mr. Christensen informed Committee members that this issue
has been considered in federal courts on several occasions.
In order for the delegation to set constitutional salaries,
the courts have held that there must be a disapproval
mechanism as well as an appropriation mechanism.
Representative Brown questioned the decision making process
and structure within the court system. Mr. Christensen
responded that under the Constitution, the supreme court is
vested with ultimate administrative authority over the
judicial branch. He concluded that judges salaries total
less that 25% of the court systems budget.
Representative Brown questioned if the list of recommended
commission members needed to include lawyers and economists.
Mr. Christensen replied that the supreme court does not care
what type of people are included on the commission as long
as they are "public spirited" and have some knowledge of the
concerns. Representative Parnell thought attorneys should
be included on the commission as they are better informed of
the time and skill required for that type commitment.
HB 437 was HELD in Committee for further consideration.
(Tape Change, HFC 96-42, Side 1).
HOUSE BILL 307
"An Act prohibiting the sale of pull-tabs; and
providing for an effective date."
REPRESENTATIVE CYNTHIA TOOHEY, testified in support of HB
307 noting that the bill would simply prohibit politicians
and other political entities from receiving charitable
21
gaming proceeds. She said that no one should consider
politicians, or their attempts to influence the electoral
process, a legitimate use of charity money.
Representative Therriault MOVED that 9-LS1070\K, Luckhaupt,
2/7/96, be the version before the Committee. Representative
Brown OBJECTED for purposes of understanding how that
version differs from the prior versions of the bill. Co-
Chair Hanley explained that the original bill prohibited
pull tabs; the Judiciary version prohibited charitable
gaming except for raffles for political parties and
candidates; the Finance committee substitute prohibits all
charitable gaming including raffles.
Representative Toohey emphasized that politicians and
political parties should be removed from receiving any kind
of charitable money. Representative Brown asked
Representative Toohey if she continued to support the
original version of the legislation which excluded pull
tabs. Representative Toohey disagreed that was her intent.
Representative Brown removed her OBJECTION to adopting the
committee substitute. There being no further objection, CS
HB 307 (FIN) was adopted as the version before the
Committee.
DENNIS POSHARD, DIRECTOR, CHARITABLE GAMING DIVISION,
DEPARTMENT OF REVENUE, commented that the Department has not
taken a position on HB 307. He indicated that the
Legislature will need to make the policy calls regarding
that bill. He pointed out Departmental concerns of the
legislation.
1. The bill deals with campaign finance reform.
Would the Department of Revenue be in charge of
policing campaign contributions. Could the
problem be better addressed through Title 15,
Alaska Public Offices Commission (APOC) statutes.
2. Will the legislation accomplish the intent. He
stressed that the contributions will not be
audited through the Department.
3. What would happen assuming a violation occurred.
The only recourse the Division would have, would
be to take action against the charity's permit.
There is no action or recourse that the Division
can take against the campaign or candidate that
receives that money.
Mr. Poshard reiterated that when a violation occurs, the
Division will take action against the charity's permit.
There will be no means of recourse against the candidate
22
that receive the money.
Mr. Poshard spoke to the advantages of placing the concern
under the jurisdiction of the Alaska Public Office
Commission (APOC). APOC has the expertise to deal with
campaign financing law. The Division does not have that
expertise, and it is not the focus of their program. Co-
Chair Hanley advised that the intent would be to prohibit
the contribution. Mr. Poshard reminded Committee members
that most of the groups included also report to APOC.
Representative Brown recommended that these concerns be
considered in the campaign finance reform and a rewrite of
the statutes.
Mr. Poshard explained that the Department has done extensive
research in how other organizations establish minimum
returns to the charity and minimum returns to the State.
The Administration is looking at ways to change how the
State initiates this action. Currently, there is a bill
being drafted which would increase the amount of revenue
received by the State and the charity and would streamline
the auditing procedures.
Representative Brown questioned the fundamental problem with
a political candidate receiving money from charitable
gaming, agreeing that it should be well regulated.
Representative Therriault asked if groups gathering money
for a political system are legitimate charities.
Mr. Poshard noted that a prohibition exists in using net
proceeds to pay a lobbyist. There is no prohibition against
a charitable organization to hire a lobbyist, but it is
illegal for them to pay the lobbyist from the net proceeds.
Representative Toohey noted for the record that she has
received gaming contributions from pull tabs charities.
Representative Navarre elaborated on comments made by
Representative Martin pointing out that corruption in
politics goes far beyond contributions received from
charitable gaming. He voiced support for the original bill
over the committee substitute.
Representative Kohring mentioned that Alaska is the only
State which allows gaming proceeds to be used for political
contributions, and voiced concern for proceeds being used
for political purposes. Representative Toohey corrected
that few states do allow it.
Representative Brown inquired why the bill was drafted in
such a way that the sanction would affect only the "charity"
23
and not the candidate receiving the funding. Co-Chair
Hanley indicated that concern was addressed in the bill.
Representative Toohey pointed out that on Page 75, under the
Section "Elections", the statutes clarifies this issue. Mr.
Poshard stated that he did not know if the APOC statutes
contain a corresponding prohibition.
MARVEEN COGGINS, AID, REPRESENTATIVE CYNTHIA TOOHEY, agreed
that Alaska Legal Services specified that the candidate will
not be responsible but rather the contributor would be. She
suggested that language could be included stating that the
"candidate can not knowingly accept contributions that
constitute in whole or part the net proceeds of a charitable
gaming organization". Terry Cramer, Legal Services
attorney, recommended if that language was adopted, that it
be a new subsection to A.S. 15:17:070, labeled number (I).
(Tape Change, HFC 96-42, Side 2).
Co-Chair Hanley noted that he would oppose all the
amendments. They are not part of a comprehensive campaign
reform. Philosophically, he voiced a concern with gambling
money being used in politics. Representative Brown
countered that the likelihood of campaign reform is evident.
Representative Brown spoke to Amendment #1. [Attachment
their money was going. Mr. Poshard stated that it should
not be a problem for any business to comply with the
amendment. It would be easy to announce who would receive
the net proceeds from each evenings session.
Representative Brown MOVED to adopt Amendment #1. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Brown, Grussendorf, Navarre, Therriault.
OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell,
Hanley, Foster.
The MOTION FAILED (4-7).
Representative Brown MOVED to adopt Amendment #2.
[Attachment #2]. She noted that the amendment would
identify where the pull tab money would be going. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Grussendorf, Kelly, Navarre, Brown.
24
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Foster, Hanley.
The MOTION FAILED (4-7).
Representative Brown MOVED to adopt Amendment #3 which would
adjust upward by 10%, the amount of adjusted gross income
that goes to charities from pull tab activity. [Attachment
comparison to other states in the percentage being donated
to charities. He stressed that only 8.7% is returned on
each dollar to the charity. Currently, some states
contribute up to 34% on bingo and pull tab dollars. Co-
Chair Hanley OBJECTED to adoption of Amendment #3.
A roll call was taken on the MOTION.
IN FAVOR: Kohring, Navarre, Brown, Grussendorf.
OPPOSED: Kelly, Martin, Mulder, Parnell,
Therriault, Hanley, Foster.
The MOTION FAILED (4-7).
Representative Brown spoke to Amendments 4, 5 & 6,
[Attachments 4,5 & 6], which address increasing the
operators license fee, the distributors license and the pull
tab manufactures license. Mr. Poshard commented that the
fees established have not been changed in a few years.
Gaming regulations are lower than other jurisdictions.
Representative Mulder questioned if the fees collected off-
set operations within the Department of Revenue. Mr.
Poshard replied, not entirely. A 3% pull tab tax and a 1%
fee on the ideal net proceeds are also collected. Those
taxes, in addition to the fees, are double the annual
budget.
Representative Brown MOVED to adopt Amendment #4. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Kelly, Foster, Hanley.
The MOTION FAILED (3-8).
Representative Brown WITHDREW Amendments #5 & #6. She spoke
to Amendment #7. [Attachment #7]. The amendment would
close a loop-hole in gaming activity. Mr. Poshard added
that there is a limit on bingo activity. More than $1000
25
dollars can not be given away on one activity or $5000
dollar per session. There is no statutory limitation on
pull tab prize pay-out. Mr. Poshard recommended limiting it
to $500 dollars.
Representative Brown MOVED to adopt Amendment #7. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Martin, Mulder, Parnell, Therriault,
Kelly, Kohring, Hanley, Foster.
The MOTION FAILED (3-8).
Representative Brown explained Amendment #8. [Attachment
of charities which could participate. Currently, there are
more charities than operators available. Mr. Poshard
elaborated that a charity's maximum contract would be $500
thousand dollars annually. There are a number of charities
seeking to have the permit paid by an operator. Reducing
the amount would then force an operator to contract with a
greater number of charities to conduct activity. Co-Chair
Hanley questioned how many permits would be taken off the
market. Mr. Poshard responded that there are 24 political
groups who have permits.
Representative Navarre spoke against the amendment. He
thought that it would force more people moving to Multi
Benefit Permitees (MBP), thus reducing the number of slots
available. MBP's have a greater cap from which to operate.
Mr. Poshard agreed with Representative Navarre.
Representative Brown asked if charities would be better off
with an operator or with a MBP. Mr. Poshard noted that the
rate of return would be higher with an MBP, although, they
would then be capable of contracting with only six. As an
operator, they would be able to contract with twelve. The
charity could make twice as much money under the MBP,
although only half the charities would receive benefit.
Representative Brown withdrew Amendment #8 as it was her
intention that the amendment benefit the charities.
Representative Brown explained Amendment #9 which would
increase the tax from 3% to 5% on the gross receipts plus
prizes awarded from the pull tabs. [Attachment #9]. She
noted that this would generate $800 thousand dollars in
program receipts annually to the general fund. Mr. Poshard
advised that increasing the tax would create new funds for
the State, a tax collected by the distributors and remitted
26
on a quarterly basis.
Following comments by Representative Martin, Representative
Brown suggested a change to delete the language in the
amendment "less prizes awarded". Mr. Poshard pointed out
with removal of that language, the tax would become much
more substantial. He voiced concern that the proposed
percentage would change the gross without also changing the
return to the permitees. That would dramatically decrease
their net proceeds.
Mr. Poshard added, that he would prefer a 5% tax on the
gross, changing how the charities receive their payment.
Currently, those conducting activity would be expending the
tax to the permitees.
(Tape Change, HFC 96-43, Side 1).
Representative Brown asked to replace the deleted language
with the language as originally written.
Representative Brown MOVED to adopt Amendment #9. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown.
OPPOSED: Mulder, Parnell, Therriault, Kelly,
Kohring, Martin, Foster, Hanley.
Representative Grussendorf was not present for the vote.
The MOTION FAILED (2-8).
Representative Navarre MOVED to adopt Amendment #10.
[Attachment #10]. Representative Martin OBJECTED.
Representative Navarre pointed out that the amendment was a
portion of the bill which passed from Committee last year.
Currently, a municipal exemption has not been applied for,
resulting in MBP's doing the same thing as operators and
competing against small organizations, driving them out of
business. The amendment is an attempt to allow those
municipalities, if they choose, to regulate the level of
gaming in their communities.
A roll call was taken on the MOTION to adopt Amendment #10.
IN FAVOR: Navarre, Brown.
OPPOSED: Parnell, Therriault, Kelly, Kohring,
Martin, Mulder, Hanley, Foster.
27
Representative Grussendorf was not present for the vote.
The MOTION FAILED (2-8).
Representative Martin MOVED to report CS HB 307 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 307 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Revenue.
ADJOURNMENT
The meeting adjourned at 4:40 P.M.
28
| Document Name | Date/Time | Subjects |
|---|