Legislature(2003 - 2004)
04/28/2003 02:30 PM House FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 28, 2003
2:30 P.M.
TAPE HFC 03 - 67, Side A
TAPE HFC 03 - 67, Side B
TAPE HFC 03 - 68, Side A
TAPE HFC 03 - 68, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 2:30 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
None
ALSO PRESENT
Representative Vic Kohring; Senator Gary Stevens; Larry
Persily, Deputy Commissioner, Department of Revenue; Eddy
Jeans, Manger, School Finance and Facilities Section,
Department of Education and Early Development; Robin Wilson,
Tax Auditor, Department of Revenue; John MacKinnon, Deputy
Commissioner, Highway & Public Facilities, Office of the
Commissioner, Department of Transportation & Public
Facilities; Bruce Twomley, Chairman, Commercial Fisheries
Limited Entry Commission; Mark Barnhill, Assistant Attorney
General, Department of Law; Bob Robertson, Superintendent,
Lower Yukon School District; Larry LaBolle, Staff,
Representative Foster; Landa Baily, Special Assistant,
Department of Revenue; David Tredway, Child Support
Enforcement Agency, Department of Revenue; Kevin Jardell,
Assistant Commissioner, Department of Administration; Greg
Winegar, Director, Division of Investments, Department of
Community & Economic Development
PRESENT VIA TELECONFERENCE
Kerry Jarrell, Director, Business Finance, Bering Straight
School District, Unalaskleet; Diane Wendlandt, Assistant
Attorney General, Department of Law; Robert Boyle, Assistant
Superintendent, Northwest Arctic School Borough, Kotzebue
SUMMARY
HB 97 An Act authorizing a long-term lease of certain
Alaska Railroad Corporation land at Anchorage; and
providing for an effective date.
HB 97 was reported out of Committee with
"individual" recommendations and with zero fiscal
note #1 by the Department of Community and
Economic Development.
HB 105 An Act relating to loans to satisfy past due
federal tax obligations of commercial fishermen
and to the commercial fishing loan program.
CS HB 105 (FIN) was reported out of Committee with
a "do pass" recommendation and with fiscal note #1
by Department of Community & Economic Development.
HB 154 An Act relating to admission to and advancement in
public schools of children under school age; and
providing for an effective date.
CS HB 154 (FIN) was reported out of Committee with
a "no recommendation" and with a new fiscal note
by the Department of Education & Early
Development.
HB 156 An Act increasing the motor fuel tax and repealing
the special tax rates on blended fuels; and
providing for an effective date.
HB 156 was HEARD and HELD in Committee for further
consideration.
HOUSE BILL NO. 154
An Act relating to admission to and advancement in
public schools of children under school age; and
providing for an effective date.
EDDY JEANS, MANGER, SCHOOL FINANCE AND FACILITIES SECTION,
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, noted that HB
154 had been prepared at the request of the Governor. He
stated it was determined that some school districts were
claiming four year olds in the kindergarten program and
counting them for two years. This came to the Department's
attention when they started doing the student level
electronic data reporting so the Department then knew how
old the students were that were being claimed for the State
foundation funding. The Department of Education & Early
Development attempted to address this through the regulatory
process. These concerns deal with AS 1403.080© - the right
to attend school. Provision © states is that a child under
school age may be admitted to the public school if the child
meets the minimum standards described by the Board and as
long as that child has the mental, physical and emotional
capacity to perform satisfactory at the educational program
being offered. He interjected that it is the term
"educational program", which the Department is attempting to
define.
Mr. Jeans continued that through the regulatory process, the
Department basically adopted the statute with the exception
of the "education program being offered" and instead
inserted "grade level being offered". The discussion was
centered around whether a school district can develop an
educational program and start serving whoever they want or
was the intent to allow school districts to enroll a child
that is ready to begin their school career at an earlier age
than five. The Department believes that it was the latter
and that it would be an exceptional child that starts their
educational career early.
Mr. Jeans explained that the Department took the regulations
to the State Board of Education and they were adopted in
September 2001. He stressed that this is not a new issue.
School districts did adopt the standards for enrolling a
student and some of the districts have continued to
blanketly enroll all four year olds.
Mr. Jeans stated that it is not the intent of the
legislation to block a child from getting into kindergarten
if they are ready; however, the Department would expect them
to advance to the next grade level in the subsequent year
and not stay in kindergarten for two years.
Mr. Jeans spoke to the $3.9 million dollar fiscal note,
which lists the school districts with the dollar amount
associated with them. He pointed out that there are a
number of school districts that generate a substantial
amount of money through the provision. That dollar is large
in terms of State funding. He pointed out that these school
districts also receive federal impact aid money for early
entering programs.
· In the Bering Straight School district, 99% of the
students qualify for federal impact aid dollars,
which amounts to $5,000 dollars per child.
· In the Lower Yukon School district, 81% of their
students qualify for federal impact aid dollars.
· In the North Slope School District Borough, 67% of
the students qualify for the federal impact aid
dollars.
· In the Northwest Arctic Borough School District, 64%
of the students qualify.
Mr. Jeans noted that it the legislation passes, the schools
districts will continue to generate these federal impact aid
dollars in the amount of $5,000 dollars per child.
Representative Croft asked if the legislative would change
how the student was enrolled and if they would still qualify
for the federal aid. Mr. Jeans clarified that A.S.
1403.080, which is the right to attend public school free of
tuition, is what qualifies students for State foundation
funding. A school district can offer an educational
program, in which they do not claim those students for State
funding. If they do that, under the federal impact aid law,
they are then offering a preschool program, and even though
they are not receiving State money, they will still receive
federal impact aid dollars.
Representative Croft asked if they would let the student go
free of charge if an extra program was provided. Mr. Jeans
said yes.
Mr. Jeans maintained that this is an issue of fairness. If
some school districts are allowed to enroll all four year
olds, then all school districts should be allowed to do the
same. The costs to enroll all four year olds would be
between $50 & $60 million dollars. He reiterated that the
Department is not zeroing in on specific districts.
Co-Chair Harris asked why only some school districts have
chosen to take advantage of the federal impact aid dollars.
Mr. Jeans explained that the provision that is being
utilized under AS 1403.080© allows the child to be early
entered into school. Line 9 indicates "For the educational
program being offered". He pointed out that this is a broad
term and is what some school districts have utilized to
define the program. The Department did go to the State
Board of Education and adopted regulations, which changed
that wording to "For the grade level being offered". That
language would help to clarify that the intent of the law
would not be just any program but rather students that were
ready to start kindergarten. Even with that amendment on
the books, some school districts continue to enroll all four
year olds. Consequently, the Department comes before the
Legislature for clarification.
Co-Chair Harris addressed school district costs. He thought
that there are a few school districts heavily impacted by
the legislation.
Mr. Jeans commented that HB 154 would clarify that it is not
the intent to fund all four year olds through the foundation
program. Without the legislation, there will be more
districts that expand their program to include the four year
olds because they have space available. When there is space
available in a school, they want to fill it up. Once the
students are funded through the foundation program, they
must be counted for space for school construction.
Co-Chair Harris asked if the Department would have a problem
phasing the program out over a two-year period. Mr. Jeans
responded that the Governor's office wants to see it
resolved this year and that the districts have been on
notice. The Department has attempted to deal with it
through the regulatory process. The Department of Education
& Early Development regulations clarified that the previous
State Board adopted this piece of statute in September 2001.
The same school districts keep claiming the four year olds.
ROBERT BOYLE, (TESTIFIED VIA TELECONFERENCE), ASSISTANT
SUPERINTENDENT, NORTHWEST ARCTIC SCHOOL BOROUGH, KOTZEBUE,
quoted various studies regarding childhood school
involvement in early childhood success. All of the
different studies speak of the value of early education
programs particularly for children in social and
economically distressed areas. The districts that are
currently involved are districts that have severe and
chronic social and economic status differentiation from the
city schools or schools that have more economic
opportunities on a daily basis. The early childhood
opportunities for families and children within these areas
are non-existent. He stressed that these children live in
disadvantaged areas.
At this time, the process is directly reflective of the
socio-economic status of these children and not their
cognitive abilities. The school districts do what they
believe is appropriate in attempting to serve their
children. Mr. Boyle emphasized that it is not a process of
attempting to generate funds or to fill empty seats. He
stressed that this is an "educationally correct, sound thing
to do".
The studies previously sited go into great detail of how
this early intervention process is successful in reducing
the costs of education programs later, down the road. The
reduction of costs for retention of students, who end up in
social service programs is compensated over the cost of the
four-year-old programs.
Mr. Boyle reiterated that the question of "fairness" is not
the issue. The studies are about "quality". The fairness
issue comes down to what services, opportunities and
educational stimulation is available to students in these
regions.
Mr. Boyle reiterated that the school districts oppose HB
154. Currently, the funds are being used appropriately and
that use greatly enhances the State's long-term investment.
He added that as written, HB 154 is contradictory in regards
to the "achievement" of each child. He claimed that it was
"social promotion".
Co-Chair Williams asked if Mr. Boyle's same argument had
been presented to the State Board of Education. Mr. Boyle
responded that he was new to the position and was not around
in 2000.
KERRY JARRELL, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,
BUSINESS AND FINANCE, BERING STRAIGHT SCHOOL DISTRICT,
UNALASKLEET, spoke in opposition to HB 154. He stated that
the proposed legislation would not provide the anticipated
savings. Services terminated by this action will have a
severe impact on the most needy and vulnerable children in
the State.
Mr. Jarrell pointed out that in many rural Alaska
communities, there are very few opportunities for young
children to participate in early childhood education
programs. Outside of the schools, very few of the
communities have any kind of public or private preschool
programs. The districts recognize the dilemma in these
places. The districts have struggled to insure that all
children in the region have access to early childhood
programs of some type. In an area in which 80% of the
children fall below poverty level, access to a quality
educational experience to remedy the poverty and isolation,
is of paramount importance. He reiterated that this is not
a new program. The Bering Straight School district has been
offering the service for 13 years and as a result has been
able to insure that all three year old children have access
to a limited program of education where before there was
nothing.
The reduction of the funds sought in HB 154 will eliminate
that program. He pointed out that some believe that the
current language would allow other districts to begin to
offer programs for four-year-old children. Mr. Jarrell
suggested that was not the case. Establishing a program is
costly and time consuming. It took the Bering Strait
district several years to work through those initial issues.
A school district would not set up a program like that in a
short amount of time. The result of HB 154 will be short
time saving but those savings will be "overshadowed" by the
increased costs in special need services and the likihood
that more children will fail to succeed in school.
Mr. Jarrell reiterated that these children are the most
needy and vulnerable children in the charge of these school
districts. They have the fewest advocates and need the most
nurturing. He encouraged a no vote on the legislation.
Representative Joule asked Mr. Jarrell's position on phasing
out the program and he asked how that would affect each
district. Mr. Jarrell replied that phasing out the program
could at the very least provide time for requests and
application for grant funding to work with other
organizations to transition a program of some meaningful
educational value for the children. He stressed that the
program is so important that they request that the bill not
be passed from Committee. Mr. Boyle echoed the statements
made by Mr. Jarrell.
(TAPE MALFUNCTION)
BOB ROBERTSON, SUPERINTENDENT, LOWER YUKON SCHOOL DISTRICT,
spoke in opposition to the proposed legislation. He urged
that the Committee phase in the legislation to allow time
for the small communities to establish a program.
Vice-Chair Meyer inquired if 99% of the funding could be
offset through federal government aid. Mr. Robertson did
not know about the impact the bill would have on the federal
funding.
Representative Foster MOVED to adopt Amendment #1, #23-
GH1123\D.1, Ford, 4/9/03. Co-Chair Williams OBJECTED.
LARRY LABOLLE, STAFF, REPRESENTATIVE RICHARD FOSTER,
explained that the amendment would allow the program to be
prolonged for two more years. The amount of impact aid is
$5,000 per child and that money would continue to be there.
The intent of the amendment provides the districts time to
look at other sources for grant money in order to continue
these programs. Mr. LaBolle noted that Representative
Foster was not opposed to the bill as current law is open
ended and that phasing it out over 2 years would provide the
time needed to respond.
Co-Chair Williams questioned why the State Board of
Education had vetoed the concern. Mr. LaBolle responded
that the Board had made regulations, which could accomplish
the same end. He did not know why the program was being
discontinued.
Representative Hawker asked the effect of the amendment
would have on the exiting fiscal note. Mr. LaBolle replied
that the amendment would freeze the program and would not
allow any new districts to make a program. There would be
no decrease to the cost for the up-coming fiscal year and in
the second year it would be reduced by 50%.
(TAPE CORRECTED)
Representative Hawker commented that FY04 would have a zero
fiscal note effect; in FY05 with only 50% eligibility would
provide a reduction of nearly $2 million dollars; in FY06,
there would be a second reduction of $2 million dollars as
the program is phased out.
Representative Hawker clarified that the funding in the
amendment would guarantee that the school districts would be
able to receive their basic need plus the percentage of the
difference of the basic need between the base fiscal year
and the second fiscal year. He thought that the definition
of basic need was a little vague and acted like a "hold
harmless" clause for basic need. Mr. LaBolle did know how
it would apply to the entire program but requested that it
be considered.
Vice-Chair Meyer suggested that the amendment should be
addressed conceptually. He advised that the Education
Subcommittee had left full funding in the budget for this
concern. If it were left at 100%, it would be satisfactory
and then gradually reduced. He acknowledged that the
Governor was counting on the savings this year. He inquired
what action Senate Finance Committee had taken on the issue.
Mr. LaBolle believed that they had not yet moved the bill.
Representative Foster MOVED to make Amendment #1 conceptual.
Representative Whitaker asked about the research done
regarding the need for this program. Mr. LaBolle reiterated
that the Assistant Superintendent of the Northwest Arctic
Borough School District had cited three important studies.
There have been many articles over the years regarding early
intervention in areas where there is severe economic
depravation, which does exist in many village areas. He
assured Representative Whitaker that there is a large body
of research regarding this concern.
Mr. Jeans advised that Representative Hawker was correct in
his observation that the amendment would provide a "hold
harmless" provision. A conceptual amendment would clarify
that. He added that this is not a new issue and that the
districts have been aware of the Department's position. It
has been around for a few administrations. He added that
the Senate had taken the proposed cut in their budget.
Co-Chair Williams asked the argument used by the State Board
of Education. Mr. Jeans responded that the statute is broad
and that the Department believes that the purpose of the
foundation program is to fund K-12 education. If the
Legislature wants to direct funding for pre-K, that would be
another discussion. The Department is attempting to bring
clarity to the statutes regarding the manner in which the
Department applies them.
Representative Hawker questioned the school districts
intention during the phase out period. Mr. LaBolle
responded that the districts would be working with other
agencies in their regions to come up with alternate sources
of funding for the program. School districts do receive
money from other resources. He referenced the old Title 1
program, which provides assistance to students that are
economically deprived. He noted the Indian Education funds,
some of which go to the actual village rather than to the
school districts. He indicated that the amendment would
provide an opportunity for them to go back and creatively
look at other sources of funding to be able to continue the
program. The districts bring forward approximately $5,000
on their own to help with these programs.
TAPE HFC 03 - 67, Side B
Mr. LaBolle explained that if the student was not being
claimed for foundation purposes, then the Department would
hold them harmless from the right to recapture federal
funds. Representative Hawker acknowledged that he did not
understand the mechanics of education funding.
Representative Hawker asked if it would be necessary to
defer the step down to FY05 rather than FY04. Mr. LaBolle
responded that it would be close to a "wash" if the
Department placed it at 50% and allowed the districts to
keep the impact aid funds.
Representative Croft pointed out that the State does not let
the districts keep the federal impact aid money. Mr.
LaBolle replied that was correct. He added that it would be
"cleanest" to maintain the 100% funding for one year and
allow the Department to recapture the impact aid money
involved. The total cost to the State would be more.
In response to Representative Croft, Mr. Jeans noted that
currently, if a school district were claiming a four year
old in the foundation program for State funding, the
Department would deduct that impact aid the student
receives. He noted that it is important to go back to the
starting point. These school districts generate about
$11,000 dollars per student and that amount is shared
between the State and federal impact aid. Right now the
State deducts a little over $4,000 per child, which
generates impact aid being claimed under the program. If
the State does not provide State aid, none of the impact aid
is deducted and the district would retain 100%. It would
change the funding from $11,000 per child to $5,000 per
child.
Representative Croft asked if the $5,000 dollars was a
separate line. Mr. Jeans replied that it is not on a
separate line and that the school district claims students
that are eligible for impact aid; the State receives
vouchers, which highlights the percentage that school
population is eligible for in federal impact aid. The State
relies on the school district to claim for foundation
funding and then makes the necessary adjustments.
Representative Croft clarified that the State does not
deduct from their foundation formula those students that
they are not claiming in the formula. Mr. Jeans stated that
they do not deduct the impact aid from students not claimed
for State aid.
Representative Croft commented that at present time, those
students are receiving both payments. He asked if the
Department's fiscal note reflects the savings in State aid
by not having those kids in school and the loss of 90% of
the $5,000 dollars federal aid. Mr. Jeans advised that the
Department reflected the State aid savings and not the
impact aid that would offset that number.
Representative Croft reiterated that the fiscal note does
not reflect the amount that would be lost. He asked if the
Department had an estimate of that amount. Mr. Jeans
responded that they would reflect the current year numbers.
Representative Croft thought that it would amount to 40% of
the savings. Mr. Jeans did not know the offset. He added
that their analysis took all four-year-old children that
were counted in the current year and backed them out of the
equation to determine how much State aid they represent.
Representative Croft asked about how many pre-kindergarten
students would the bill identify. Mr. Jeans replied 650
students statewide.
Vice-Chair Meyer spoke to the amendment extension. Co-Chair
Williams called an at-ease.
At Ease: 3:32 P.M.
Reconvene: 3:40 P.M.
Representative Foster WITHDREW Amendment #1. There being NO
OBJECTION, Amendment #1 was withdrawn.
Representative Foster MOVED to change the effective date on
Page 1, Line 12, to "July 1, 2004".
Co-Chair Williams OBJECTED.
Co-Chair Harris pointed out that the fiscal note would need
to be changed in the FY2004 line section.
Representative Joule commented that accepting the amendment
would provide time for the communities to form partnerships
to help with the effects from the cuts in State funding. He
emphasized that the action was extremely important for the
future of education in Alaska.
A roll call vote was taken on the motion.
IN FAVOR: Hawker, Joule, Meyer, Moses, Whitaker,
Chenault, Croft, Foster, Harris
OPPOSED: Stoltze, Williams
The MOTION PASSED (9-2).
Representative Croft suggested that the effective date be
placed into the title of the bill. He MOVED a Title
Amendment on Page 1, Line 2, inserting language: "An
effective date for the Act of July 1, 2004". The change
provides the date to conform to Amendment #1.
There being NO OBJECTION, it was adopted.
Representative Foster MOVED to report CS HB 154 (FIN)
including the Title Change out of Committee with individual
recommendations and with the accompanying new fiscal note.
There being NO OBJECTION, it was so ordered.
CS HB 154 (FIN) was reported out of Committee with a "no
recommendation" and with a new fiscal note by the Department
of Education & Early Development.
Representative Foster voiced his appreciation to the
Committee for passage of the bill and stressed how much the
bill would help the Bush area.
HOUSE BILL NO. 97
An Act authorizing a long-term lease of certain Alaska
Railroad Corporation land at Anchorage; and providing
for an effective date.
REPRESENTATIVE VIC KOHRING commented that in 2002, the
Legislature passed House Bill 298 to increase the maximum
lease term without termination rights the Alaska Railroad
can grant without Legislative approval to 55 years from the
35-year maximum set in 1984. The increase was to encourage
economic development in communities along the Rail belt by
making it easier for large commercial and residential
developers to obtain financing through grants and other
sources, which require a longer lease. For example, the
Housing and Urban Development (HUD) 202 Senior Housing
Grants required a minimum 40-year lease. The 55-year lease
maximum set forth in HB 298 went into effect May 30, 2002.
Representative Kohring noted that after the minimum lease
requirement for HUD 202 grants increased from 40 years to 75
years, in effect putting developers back at square one. The
Alaska Railroad can approve a lease in excess of 55 years;
however, they must reserve the right to terminate the lease
in the event the land is needed for railroad purposes.
A multi-family senior housing project has been planned for
Government Hill in Anchorage and the Alaska Railroad Board
granted the developer a 55-year lease for the project site.
When HUD changed the terms of the 202 program, it
disqualified the project for consideration for HUD 202
grants.
Representative Kohring commented that HB 97 would allow the
Alaska Railroad to extend the developer's current 55-year
lease, without the termination clause, allowing them to
apply for HUD 202 funding.
Representative Foster MOVED to report HB 97 out of Committee
with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
HB 97 was reported out of Committee with "individual"
recommendations and with zero fiscal note #1 by the
Department of Community and Economic Development.
AT EASE: 3:50 P.M.
RECONVENED: 4:00 P.M.
(TAPE MALFUNCTION)
HOUSE BILL NO. 105
An Act relating to loans to satisfy past due federal
tax obligations of commercial fishermen and to the
commercial fishing loan program.
SENATOR GARY STEVENS provided information on the bill,
noting that it was intended to help an industry in crisis.
He explained that the last appropriation into the revolving
loan fund was in 1985. The bill reinstates a system used in
the past to mitigate a federal tax obligation. He pointed
out that the Salmon Task Force considered the bill as an
important part of their package of legislation to help the
industry. Many permits in Alaska are at risk. These are
secured loans.
Senator Stevens explained that permit holders who want to
take advantage of the loan program must be a State resident
for a continuous two years before applying for the
application. They must be current on their income tax
filing with a payment agreement with the Internal Revenue
Service (IRS). HB 105 would eliminate the ½ percent
refinancing fee in the program. He added that there was a
provision, eliminating the word "promptly", allowing more
flexibility for the Division of Investments. He stated that
the bill is a "small step" for an industry in crisis.
Co-Chair Harris spoke to the fiscal note, asking where the
funds would come from. Senator G. Stevens noted that the
dollars would come from the people that participate in it.
They have been used in the past from the revolving loan
fund.
Representative Croft observed that the funds indicated in
the fiscal note were general funds. Senator G. Stevens
acknowledged that this would be a loss of income for the
general fund.
GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT
OF COMMUNITY & ECONOMIC DEVELOPMENT, corrected Senator
Stevens noting that it would be a loss to the Revolving Loan
Fund. In response to a question by Representative Croft,
Mr. Winegar expected a relatively low activity around 10-15
loans per year. He stated that the fund would not be
impacted.
Representative Croft asked if the loans had a different
default rate. Mr. Winegar replied that the loans have had a
higher delinquency rate.
Representative Croft asked how the loans would be secured.
Mr. Winegar replied that they would be secured with the
permit as collateral.
Co-Chair Harris inquired the balance in the Revolving Loan
Fund. Mr. Winegar commented that the current balance was
approximately $90 million dollars. The projected balance
for this fiscal year is approximately $15 million dollars.
Co-Chair Harris asked if there was any money taken out of
the fund from the recent past. Mr. Winegar stated that last
year, $2 million dollars had been taken out of that fund to
balance the Power Cost Equalization (PCE) fund.
(TAPE CORRECTION)
TAPE HFC 03 - 68, Side A
Representative Hawker MOVED to adopt Amendment #1, #23-
LS0534\D.1, Utermohle, 4/28/03, which would add language
"and child support liens of which the department has
notice". Representative Chenault OBJECTED and asked if it
would be a normal procedure.
Mr. Winegar replied that it was normal and had been used in
the past.
BRUCE TWOMLEY, CHAIRMAN, COMMERCIAL FISHERIES LIMITED ENTRY
COMMISSION added that the amendment was consistent with
current law. Child Support Enforcement Agency (CSEA) has
the power to step in at that point and legally cannot take
any proceeds over and above those that need to be satisfied.
Representative Chenault asked about the notification process
to CSEA. Mr. Twomley deferred that question to the
Department of Revenue.
DAVID TREDWAY, CHILD SUPPORT ENFORCEMENT AGENCY, DEPARTMENT
OF REVENUE, offered to answer questions of the Committee.
He noted that all cases through the State of Alaska are
informed of any arrears that they have in the State and that
CSEA is assigned to collect that data through normal
channels. If this language was in statute, it would become
a statutory process liable for collection.
Representative Chenault commented that child support is
important in the State. He encouraged that the lag time be
shortened regarding what is owed verses paid.
Representative Chenault WITHDREW his OBJECTION to the
amendment. There being NO further OBJECTION, Amendment #1
was adopted.
Representative Foster MOVED to report CS HB 105 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note.
CS HB 105 (FIN) was reported out of Committee with a "do
pass" recommendation and with fiscal note #1 by Department
of Community & Economic Development.
At Ease: 4:15 P.M.
Reconvene: 4:40 P.M.
HOUSE BILL NO. 156
An Act increasing the motor fuel tax and repealing the
special tax rates on blended fuels; and providing for
an effective date.
Vice-Chair Meyer MOVED to adopt work draft #23-GH1118\Q,
Kurtz, 4/25/03, as the version of the bill before the
Committee.
Representative Croft OBJECTED. He asked about the missing
exemptions. Co-Chair Williams replied that the difference
represented the tax credits for the timber industry and fish
waste. Representative Croft noted that it would get rid of
the contingent effect on the constitutional amendment for
the permanent fund. Co-Chair Williams advised that was the
Governor's original bill.
Representative Croft WITHDREW his OBJECTION. There being NO
further OBJECTION, it was adopted.
ROBYNN WILSON, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT OF
REVENUE, ANCHORAGE, offered to answer questions of the
Committee.
LANDA BAILY, SPECIAL ASSISTANT TO THE COMMISSIONER,
DEPARTMENT OF REVENUE, noted that she had reviewed the
committee substitute with Commissioner Corbus and that the
Department does support the proposed bill. The bill would
levy a twenty-cent per gallon tax on motor fuel. She added
that this bill is a significant part of the Governor's
package to address the current fiscal gap.
Representative Croft MOVED to ADOPT Amendment #1. Co-Chair
Williams OBJECTED.
Representative Croft explained that the amendment would ask
that the State appropriate the statutory amount for road
maintenance assistance to the municipalities. The
municipalities have over 40% of the roads in their
maintenance jurisdiction. Currently, the State has been
under-funding the statutory amount dedicated to roads at 10%
funding. He acknowledged that Amendment #1 is a complicated
amendment. The concept of the amendment gives less for
municipal assistance for roads than the statute requires,
reducing the amount of tax collected by that percentage.
Representative Croft pointed out that this concern is
usually addressed in the dedicated funds section. He
reiterated that the concept is simple, if money is
appropriated in the prior fiscal year, the amount in
statute, the full amount for revenue sharing and road
maintenance, and then collected for full tax. If less has
been received, then that would be the percentage collected
for that tax.
Representative Stoltze asked if these funds would only go to
organized governments or would rural areas also be able to
collect. Representative Croft responded that there is a
formula regarding the square miles of roads maintained by
the municipality in the districts and that determination is
made per road mile.
JOHN MACKINNON, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION & PUBLIC FACILITIES, understood that formula
was handled by the Department of Commerce & Economic
Development. He noted that he had listened to testimony
given by Kevin Ritchie, Alaska Municipal League (AML). He
had given a good explanation for funds added for road
maintenance. In the original Intermodal Surface
Transportation Efficiency Act (ISTEA) crafted in Congress in
1991, Senator Ted Stevens placed a provision, 1-18-E,
allowing only Alaska and Puerto Rico to use federal highway
funds for community roads. In 1991, there was no federal
highway trust fund dollars and that changed to the State
being awarded $72 million dollars. There is a tremendous
amount of highway dollars floating in the municipalities.
Mr. MacKinnon reminded members that the proposed legislation
was a measure to reduce the fiscal gap. He added that the
Department of Transportation & Public Facilities sees this
as a user fee.
Representative Stoltze noted that the amendment contained a
pro rata distribution for the more densely populated urban
areas. He questioned the equity of the issue distribution.
Representative Croft explained that it would limit the
amount and if enough had not been received, then they would
not collect the full amount of the tax. Nothing would be
changed regarding the distribution by road miles.
Representative Stoltze voiced his concern that the amendment
would only benefit downtown Anchorage.
Ms. Bailey pointed out the fluctuating amount indicated in
the amendment. She stated that the original intent of the
Governor was to address the fiscal gap and that the proposed
legislation was an important piece of that package.
A roll call vote was taken on the motion.
IN FAVOR: Joule, Moses, Croft
OPPOSED: Meyer, Stolze, Chenault, Foster, Williams
Representative Whitaker, Representative Hawker and Co-Chair
Harris were not present for the vote.
The MOTION FAILED (3-5).
Representative Croft MOVED to adopt Amendment #2, #23-
GH1118\Q.2, Kurtz, 4/28/03. (Copy on File).
Co-Chair Williams OBJECTED.
Representative Croft explained that Amendment #2 would
attempt an alternative approach. The amendment was
recommended by the AML. It attempts to put together a fund
that would place a portion of that money into assistance for
the municipalities.
Ms. Bailey stated the amendment seeks to place a structure
in statute that would be counter to the Governor's original
intent.
Representative Croft argued that would depend on what the
Governor's original intent was. Representative Croft noted
that if it were to go for maintenance of a road, then it
would be more compatible with the Governor's plan. The
amendment diverts from the general fund specifically to road
maintenance. He believed that would be what most Alaskans
would want with the increase.
A roll call vote was taken on the motion to adopt Amendment
#2.
IN FAVOR: Moses, Croft, Joule
OPPOSED: Meyer, Stoltze, Chenault, Foster, Williams
Representative Whitaker, Representative Hawker and Co-Chair
Harris were not present for the vote.
The MOTION FAILED (3-8).
Co-Chair Williams MOVED to adopt Amendment #3, #23-
GH118\Q.4, Kurtz, 4/28/03. (Copy on File).
Representative Joule OBJECTED for the purpose of discussion.
KEVIN JARDELL, ASSISTANT COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, explained Amendment #3, which is a technical
amendment that identifies how the State purchases its fuel
from resale to gasoline. Currently, when a reseller
purchases fuel from a wholesaler, it pays the gas tax to the
wholesaler. When the State purchases from the reseller,
they can purchase the fuel without paying the gas tax. At
that point, the reseller, under statute, can recoup the gas
tax that it has paid from the Department of Revenue. Only a
reseller of fuel can do that. One of the benefits of the
new contract is that a State agency that has a high use of
fuel, can go to any gas station, purchase that fuel with a
State credit card and the reseller does not have to worry
about going through the process of recouping the tax from
the State. The credit card company pays the reseller the
cost of the tax and the fuel. Under Amendment #3, the
credit card company could go and recoup the tax it has paid.
It would allow the full benefit, use of credit cards and
expands where the State can purchase fuel given the benefit
of not paying the tax.
Representative Joule asked how "local government" would be
defined. Mr. Jardell responded that local government
agencies would go through certain levels. Ms. Wilson added
that the statute identifies official use. The amendment
would not change whether a government agency could receive a
refund or not. It does not change the tax structure and
would simplify paper work to make it whole.
Representative Stoltze asked at what level would State
government be defined. He stated for the record that he
would not vote for a personal exemption. Mr. Jardell
responded that it would only apply to State business as it
now does. He reiterated that it would not apply to personal
use.
MIKE BARNHILL, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, advised that the amendment would not change existing
law. When on official business and using fuel, that person
would be exempt.
In response to comments made by Co-Chair Harris, Mr.
Barnhill pointed out that the definition of motor fuel in
current statute excludes purchases by State, local and
federal government agencies for official use.
Representative Foster asked if it would affect diesel fuel.
Mr. Barnhill replied that it would.
In response to queries by Representative Foster, Ms. Wilson
explained that off-road vehicles and big equipment
not used in conjunction with vehicle license, currently
amounts to a net $.02 cents.
Representative Joule asked if that would apply to the De
Long transportation system, also known as the Haul Road.
Ms. Wilson replied that the off-road refund would be
available if the vehicle is not licensed to be used on
public ways.
Representative Joule WITHDREW his OBJECTION to Amendment #3.
There being NO further OBJECTION, it was adopted.
Representative Joule MOVED to ADOPT Amendment #4, #23-
GH1118\H.2, Kurtz, 4/14/03. (Copy on File).
Co-Chair Williams OBJECTED.
Representative Joule explained the amendment, which provide
for those areas not connected to road systems, continue to
pay at the current rate. He emphasized that rural
communities are already paying "huge" prices for fuel.
Ms. Bailey inquired the effect of the amendment on the
revenue derived from tax. Ms. Wilson responded that she did
not know the numbers that would be foregone by the
amendment. Wholesalers pay the tax in the State and they
are not required to tell where the fuel is sold. She could
not provide that information at this time.
Ms. Bailey maintained that given the fact that Ms. Wilson
was unable to access the net effect, it would be better for
the Committee to pass the bill amended with only Amendment
#3. She believed that Amendment #4 would have detrimental
effects on the Governor's long-term plan.
Co-Chair Williams encouraged Representative Joule to work
with the Administration regarding his concern.
A roll call vote was taken on the motion.
IN FAVOR: Moses, Joule
OPPOSED: Stoltze, Chenault, Foster, Meyer, Harris,
Williams
Representative Whitaker, Representative Hawker and
Representative Croft were not present for the vote.
The MOTION FAILED (2-6).
Representative Foster commented that within his district,
there are airports instead of roads. There are 50 runways
that serve the population. The Department of Transportation
& Public Facilities spends $10 million dollars a year in the
Northern Region. He claimed that was a good return on their
money and that the money on the gas tax would be helping out
those area runways and keeping them open for emergencies.
Representative Foster supported the 3% increase to keep
airports open and roads working. Village areas do not spend
much on keeping their infrastructure in tact and it is
crucial to keep runways open. He acknowledged that everyone
must pay a little to help up with the expenses.
Co-Chair Harris asked Representative Foster how much he paid
for fuel in his area. Representative Foster responded that
cost fluctuates between $1.75 and $4.00 dollars per gallon.
Co-Chair Williams stated that HB 156 would be HELD in
Committee for further consideration.
TAPE HFC 03 - 68, Side B
ADJOURNMENT
The meeting was adjourned at 5:17 P.M.
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