Legislature(2003 - 2004)
05/17/2003 10:38 AM House FIN
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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
May 17, 2003
10:38 AM
TAPE HFC 03 - 99, Side A
TAPE HFC 03 - 99, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 10:38 AM.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Ethan Berkowitz
Representative Mike Chenault
Representative Richard Foster
Representative Mike Hawker
Representative Beth Kerttula
Representative Carl Moses
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
None
ALSO PRESENT
Pete Ecklund, Staff, Representative Bill Williams; John
MacKinnon, Deputy Commissioner, Department of Transportation
and Public Facilities; Annette Skibinski, Staff, Senator
Cowdry; Chip Wagoner, Pioneer of Alaska; Marie Darlin, AARP;
John Vowell, Director, Longevity Bonus Program.
PRESENT VIA TELECONFERENCE
Kent Hartberg, Anchorage; David Lampert, Fairbanks; Gregory
Peterson, Allied Charities of Alaska; Tawny Wright, Pull-Tab
Clerk, North Pole; Roger Shannon, Kenai; Brook Miles,
Executive Director, Alaska Public Office Commission (APOC);
Lenore Joness, Kenai.
SUMMARY
CSSB 100(FIN)(brf sup maj fld)(efd fld)
"An Act making capital appropriations,
supplemental appropriations, and reappropriations;
capitalizing funds; and making other
appropriations."
CSSB 100 (FIN) was heard and HELD in Committee for
further consideration.
CSSB 102(L&C) am(efd fld)
"An Act increasing the amount of revenue received
by the state from charitable gaming activities,
and relating to taxes on pull-tabs."
SB 102 was heard and HELD in Committee for further
consideration
CSSB 117(FIN)(EFD FLD)
"An Act relating to the longevity bonus program."
CSSB 117 (FIN) was heard and HELD in Committee for
further consideration.
CSSB 119(FIN)(efd fld)
"An Act authorizing the Alaska Public Offices
Commission to issue advisory opinions; amending
campaign financial disclosure and reporting
requirements, campaign contribution limits,
provisions related to contributions after
elections, and provisions related to unused
campaign contributions; providing for expedited
consideration of, and modifying procedures for
determining, violations of state election campaign
laws; amending the time period within which to
file an administrative complaint of a violation of
state election campaign laws; amending the
definitions of 'express communication' and
'political party' for state election campaigns;
amending the registration fee for lobbyists;
providing for increased use of electronic filing
for reports to the Alaska Public Offices
Commission; adding a definition of 'commission' in
the regulation of lobbying laws; amending the
requirements for the reporting of financial
interests by public officials; adding a definition
of 'domestic partner' in the legislative ethics
code and in the public official financial
disclosure requirements; allowing classified
employees to take an active part in political
party management; and making conforming
amendments."
CSSB 119 (FIN) was heard and HELD in Committee for
further consideration.
CSSB 213(FIN)(EFD FLD)
"An Act establishing the Knik Arm Bridge and Toll
Authority and relating to that authority."
CSSB 213(FIN)(EFD FLD) was REPORTED out of
Committee with a "do pass" recommendation and with
previously published fiscal impact note: #1.
SB 148 "An Act relating to allowable absences for certain
members of the armed forces and their spouses and
dependents for purposes of eligibility for
permanent fund dividends; and providing for an
effective date."
SB 148 was REPORTED out of Committee with
individual recommendations and one fiscal impact
note, #1 from the Department of Revenue.
CS FOR SENATE BILL NO. 100(FIN)(brf sup maj fld)(efd fld)
"An Act making capital appropriations, supplemental
appropriations, and reappropriations; capitalizing
funds; and making other appropriations."
PETE ECKLUND, STAFF, REPRESENTATIVE BILL WILLIAMS stated
that a House Finance Committee Substitute would soon be
prepared and made available.
CSSB 100(FIN) (brf sup maj fld) (efd fld) HELD in Committee
for further consideration.
CS FOR SENATE BILL NO. 213(FIN)(efd fld)
"An Act establishing the Knik Arm Bridge and Toll
Authority and relating to that authority."
Representative Foster MOVED to report SB 213 out of
Committee with the accompanying fiscal note NO OBJECTION
CSSB 213(FIN)(EFD FLD) was REPORTED out of Committee with a
"do pass" recommendation and with previously published
fiscal impact note: #1.
SENATE BILL NO. 148
"An Act relating to allowable absences for certain
members of the armed forces and their spouses and
dependents for purposes of eligibility for permanent
fund dividends; and providing for an effective date."
ANNETTE SKIBINSKI, STAFF, SENATOR COWDRY provided
information on the bill. She explained that the legislation
pertains to permanent fund dividend eligibility of National
Guard reserve auxiliary military personnel that are
activated. Currently those in the National Guard who are
actively on orders are only allowed a 45-day absence from
the state, while other residents are allowed an absence of
180 days. The legislation would allow active military
personnel to be absent from the state [while on military
leave] for the full 180 days.
Representative Kerttula asked for clarification on the
length of the proposed allowable absence. Ms. Skibinski
clarified that the 180-day allowable absence would come into
play when the individual has been activated for 180 days or
more. She noted the case of an individual that served
overseas for 10 months. Upon his return he left the state
for two months, which was not allowed under the current
statute. The current 45-day allowable absence would be
extended to 180 days.
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
provided information on the legislation. He observed that
active duty days do not count against the recipient. The
questioned is the amount of time permissible in addition to
the allowable absence. Currently those in armed forces are
only allowed to be absent [outside of their active service]
for 45 days; students are allowed to be absent for up to 120
days [outside of the school year]. Residents are allowed
180 days or military active duty time plus 45 days. Someone
called for 90 days of active duty, who took a 60-day
vacation [150 total days] would be okay. The bill changes
the requirement to military time plus 180-days.
Representative Berkowitz concluded that active duty would be
like being in the state. Mr. Persily agreed that, as it
pertains to eligibility, active time would be like being in
the state.
Representative Kerttula asked about the amount of time
allowed for illness, and why there were differences in
allowable absences. Mr. Persily acknowledged that there
were different qualifications in allowable absences. He
pointed out that a 120-day absent for students would allow
them to remain out-of-state during the summer. A 45-day
allowable absence would require them to come back to Alaska
even if they had an internship or job on campus. All other
allowable absences are plus 45-days.
Representative Foster MOVED to report SB 148 out of
Committee with the accompanying fiscal note. There being NO
OBJECTIONS it was so ordered.
SB 148 was REPORTED out of Committee with individual
recommendations and one fiscal impact note, #1 from the
Department of Revenue.
CS FOR SENATE BILL NO. 102(L&C) am(efd fld)
"An Act increasing the amount of revenue received by
the state from charitable gaming activities, and
relating to taxes on pull-tabs."
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE
provided information on the legislation. He explained that
the Senate version would increase the state tax on the sale
of pull-tabs through a change in their calculation. The
current state tax on pull-tabs is 3 percent of the net,
which is actual gross minus prices. The legislation would
increase the state tax on pull-tabs (not bingo or raffle) to
15 percent of idea net, which is the assumption that all of
the pull tabs in the game or box are sold. If a game had
1,000 pull-tabs at a dollar each, the ideal gross is $1,000.
If 80 percent were paid out in prices, the ideal net would
be $200. The legislation would change the state tax to 15
percent of this amount. He added that Section 5, page 2,
would prohibit a municipality that has a sales tax from
collecting sales tax on charitable gaming. There is no
effective date, which would reduce the FY 04 revenue amount
[since it would not go into effect by July 1. He estimated
that the tax change would take effect in the middle of the
year.
KENT HARTBERG, ANCHORAGE, testified via teleconference in
opposition to the bill. He noted that he was a licensed
operator and was formerly employed with the Department of
Gaming. He discussed the financial difficulties presented by
the bill. He emphasized that there will be games that do not
realize the ideal net. He also noted that licensed operators
are the only ones to have their licenses revoked for failing
to meet state minimums. He encouraged the legislature to
closely examine the bill for all of its impacts.
DAVID LAMPERT, FAIRBANKS, testified via teleconference in
opposition to the bill. He stated that he is a fundraiser
for 17 organizations, and maintained that the bill would put
them out of business if it were enacted. He would be forced
to layoff 22 employees. He explained that the organizations
could not meet the requirements of the legislation. The
effective date would be a problem, since many organizations
had already based their budgets on the current tax
structure. The tax would have to be prepaid. He maintained
that there had been no testimony in favor of the bill from
the Department of Revenue. He stressed the negative impact
of this bill on non-profits.
GREGORY PETERSON, ALLIED CHARITIES OF ALASKA testified via
teleconference in opposition to the bill. He stated that the
legislation would raise the level of taxes paid by charities
by 500 percent, impacting 800 - 1,000 jobs across the state
of Alaska, ending programs. He stressed that although the
new version of the bill was better than the original, it
would still have negative impacts on the needy. He urged
the legislators to stop the bill.
TAWNY WRIGHT, PULL-TAB CLERK, NORTH POLE, testified via
teleconference in opposition to the bill. She maintained
that the bill would have a negative impact on charities, and
stressed that the increase from three to fifteen percent in
tax was too steep. She noted that her family of four was
supported by her job in the pull-tab industry, because it
provided flexibility. She maintained that the bill would
negatively impact many of the lower income individuals.
DAVID SANDON, MVP, JUNEAU testified in support of the
Committee Substitute. He noted that he works for two
Montessori programs that provide early childhood education
and Juneau Dance Unlimited. He spoke in favor of the
exemption from municipal taxation. He maintained that the
Senate Labor and Commerce interim subcommittee should be
allowed to review the issue during the interim and suggested
the following be reviewed:
1. Use an adequate percentage of the additional revenue
the state will be receiving to step up enforcement of
gaming regulation.
2. License all management (not just operators) involved
in gaming and revoke those licenses if the permits
they manage do not return the state mandated minimums.
3. Prevent "ghost charities" those charities that only
exist on paper from being allowed gaming permits by
strengthening the requirements for qualification.
4. Increase the state mandated returns to the nonprofits.
5. Consider a revenue sharing scheme with the local
municipalities based on where. the finds are
generated.
Mr. Sandon maintained that there is room for increased
taxation in the industry as a whole if it is viewed from
a statewide perspective. He continued to read from
prepared remarks:
"We are currently paying 28% of our ideal net in taxes,
25% to our municipality and 3% to the state. Without
the local sales tax prohibition in this legislation we
would be under a 40% tax burden. You do the math under
a 40% tax burden we will simply be literally taxed into
bankruptcy. We would like to note here that in our
original testimony through both the Senate and House
Labor and Commerce Committees we brought forth a
revenue sharing strategy between the state and ~ii
local municipalities based on where the proceeds were
raised.
This is your opportunity to set some precedence
statewide concerning the taxation of gaming as we move
towards our future. We urge you to support this
legislation in its current form.
I am certain you are hearing many voices of concern
regarding this legislation. We would like to address
some questions you might have of us as follows:
Q: Why don't you pass the sales tax along to the customer?
A: This was tried with disastrous results, as the pace and
process of pull-tab gaming was frustrated and as a
result gross revenues dropped 60%. We had no choice but
to absorb the tax.
Imagine if you will every time someone exchanges a
playback the oil that runs all gaming (the small
winning tickets $ 1, $2, $5, $10 winners) they had to
reach for small change in their pocket or receive small
change. These transactions currently take place in
seconds. This logistical scenario of passing along a
tax to the consumer is frankly impossible.
Believe me if we could pass the sales tax along we
would have been doing so since its inception. The City
and Borough of Juneau has long since realized this as
well; however, they have also been stubbornly aware of
the room for taxation in this industry. We can pay a
justifiable tax but we cannot pay a combined local and
state tax burden of 40%. There can only be one hand in
the taxation of this revenue stream. That hand in this
case should be the state. The state can then decide
whether and on what proportion these tax proceeds
should be spent between local and state interests.
Please note, that the City and Borough of Juneau does
not seem willing to back down on its rhetoric either.
Please do not put us at their mercy for they might by
default simply choose to tax local gaming out of
existence with out a vote of the local electorate.
Q: Are your expenses higher than other types of business?
A: No in fact I challenge you to find another business in
the State that that returns 30.5% profit while
absorbing our current 28% tax burden. (25% sales tax 3%
state ideal net tax)
Q: How can we create an equitable tax structure on gaming
statewide, while making sure we have proper regulation
and no profiteering? Thus insuring the permit holders
receive the maximum possible return.
GEORGE WRIGHT, OPERATOR 84, JUNEAU ANB, testified in
opposition to the bill. He stated that they have 100
employees, working with 52 non-profits. He stressed that the
tax is heavy, especially in combination with local sales
tax, but that they could live with the current version. He
emphasized concern with the effective date and noted more
time was needed for implementation. Charities' years go from
January 1, to December 31. He asserted that SB 102 would
negatively impact charities. He suggested that any work
group should include individuals from the industry. He
stated that charities in Juneau would be finished without a
local prohibition [on municipal taxation] or an effective
date. He suggested a later effective date.
ROGER SHANNON, KENAI, testified via teleconference. He
discussed the potential negative impacts of the gaming
industry.
SB 102 was HELD in Committee for further consideration.
CS FOR SENATE BILL NO. 119(FIN)(efd fld)
"An Act authorizing the Alaska Public Offices
Commission to issue advisory opinions; amending
campaign financial disclosure and reporting
requirements, campaign contribution limits, provisions
related to contributions after elections, and
provisions related to unused campaign contributions;
providing for expedited consideration of, and modifying
procedures for determining, violations of state
election campaign laws; amending the time period within
which to file an administrative complaint of a
violation of state election campaign laws; amending the
definitions of 'express communication' and 'political
party' for state election campaigns; amending the
registration fee for lobbyists; providing for increased
use of electronic filing for reports to the Alaska
Public Offices Commission; adding a definition of
'commission' in the regulation of lobbying laws;
amending the requirements for the reporting of
financial interests by public officials; adding a
definition of 'domestic partner' in the legislative
ethics code and in the public official financial
disclosure requirements; allowing classified employees
to take an active part in political party management;
and making conforming amendments."
BROOK MILES, EXECUTIVE DIRECTOR, ALASKA PUBLIC OFFICE
COMMISSION (APOC), testified via teleconference and provided
information on the bill. The bill provides important tools
for the Commission in obtaining its mission to ensure
accountability of candidates, public officials, and
lobbyists to the public. The legislation provides the
foundation for mandatory electronic filings under all four
laws administered by the Commission. Section 17, codifies
the way the Commission processes complaints. Under the new
procedures, most complaints, should reach their final
disposition no more than 90 days after the complaint is
filed. An expedited complaint process would be initiated.
Verified complaints could endanger the results of an
election. The bill gives the Commission authority for cease
and desist orders and allows the Commission to issue
advisory opinions (a process the Commission has practiced
since the mid 1980's). The Commission's authority to issue
advisory opinions has been in question. This tool provides
requestors clarification and allows them to avoid
complaints. The legislation increases limits under campaign
disclosure, changes reporting under campaign disclosure and
increases the reporting threshold under the financial
disclosure law. Under the changes, individuals may
contribute up to $1,000 to candidates or political action
committees and up to $10,000 to a political party.
TAPE HFC 03 - 99, Side B
Ms. Miles added that the bill changes the method of
reporting. She discussed current reporting methods, and
indicating that the original intent was for total
disclosure. Under the current SFIN version, campaigns would
report the aggregate figure for those contributors that give
less than $100 dollars. She observed that the original
proposal was for full disclosure, with all contributors
identified by their names and addresses (regardless of
amount), unless the contribution was the result of an exempt
fund raising activity. Names and addresses would be
reported for contributions over $100 but under $250.
Contributions of over $250 would require a detail report:
name, address, occupation and employer. The amount for
exempt campaigns would change from $2,500 to $5,000; fewer
people would be required to disclose at the municipal level.
The requirement for candidates to file 10-days after the
election was deleted. The reporting period for year-end
disclosure was expanded. Candidate filings on February 15,
the year after the election, would include all campaign
costs. Under the current provisions the public must wait
another calendar year for this information.
Ms. Miles noted that the legislation removes the
restriction, which prevents candidates that are unopposed on
the general election from raising money 45-days after the
primary election. These candidates would be allowed, as all
other candidates, to raise funds until 45-days after the
general election ballot. She noted that the current
provision proved unworkable. She noted that Section 18
redefined express communication, enabling issue advocacy to
be dealt with differently. Issue advocacy that is clearly to
support or oppose a candidate would be subject to the
campaign disclosure law and would be an important tool for
the Commission. She added that lobbyist registration fees
had been increased from $100 to $250 per client per year.
This is the first increase since they were enacted in 1990.
The reporting threshold for legislators and public officials
to disclose sources of income was raised from $1,000 to
$10,000. Disclosing stock holdings is streamlined by
exempting stock interest of less than $10,000 per public or
trading company.
ROGER SHANNON, KENAI, testified via teleconference and
emphasized the public importance of APOC. He suggested that
the APOC should receive proper funding.
AUDREE MCCLOUD, testified via teleconference against raising
the contribution limit. She maintained that the increase
would limit competition and bar entry, and questioned the
need for the increase.
Co-Chair Williams concluded public testimony.
CSSB 119 (FIN) HELD in Committee for further consideration.
CS FOR SENATE BILL NO. 117(FIN)
"An Act relating to the longevity bonus program; and
providing for an effective date."
JOHN VOWELL, DIRECTOR, LONGEVITY BONUS PROGRAMS, DEPARTMENT
OF ADMINISTRATION provided information on the bill.
Beginning in 2004, the bill would reduce the longevity bonus
by 20 percent each year until 2007, until it is eliminated
(2008).
MARIE DARLIN, AMERICAN ASSOCIATION OF RETIRED PERSONS
(AARP), JUNEAU TESTIFIED provided information regarding the
legislation. She stated that she is a third generation
Juneau resident and pointed out the Alaskan seniors provide
support to the state's economy. She noted that the Pioneer's
of Alaska worked on the current version of the bill. She
stated that their preference was to have the program
continue, but noted that Section 6 was a proposal arrived at
to give people an opportunity to plan for the consequences
of an elimination of the longevity bonus program. She noted
that the bill provides for adult public assistance as
proposed. She stated that if the bill were the best that
could be provided for the seniors of Alaska, they would
support it. She stressed the need for "safety nets" to help
seniors meet their needs. She emphasized that most seniors
did not foresee a way to meet their needs, particularly in
the medical area. She stated the $250 per month for seniors
85 years old or older made a major impact. She concluded
that this was a proposal at the request of the Governor's
office, and that they awaited a response.
CHIP WAGONER, PIONEERS OF ALASKA, testified about the
proposed compromise devised by Pioneers and AARP in response
to the Governor's original elimination of the longevity
bonus program. He noted that the program was being
eliminated 24 years earlier than projected. He commended
these organizations for taking all state programs into
account in crafting a proposal to provide a "soft landing"
for seniors. He stated that to immediately eliminate the
program would be cruel to seniors. He stated that the
average age of a recipient was 78 years old. He stated that
the basing the program on assets was not adequate, since
seniors faced a variety of medical expenses not related to
their income. They do not support a needs based program.
Co-Chair Harris spoke to the history and origination of the
program, and its natural phasing out. He asked what services
are not provided in Alaska that are provided to seniors in
other states. Ms. Darlin referred to public assistance
programs, property tax assistance provided to seniors in
other states.
Co-Chair Williams referred to potential changes and stated
that that the Administration was not supportive of a five-
year phase out. He observed that the Governor might agree to
a two-year phase out. He stated that the Committee would
likely pass [a five year phase out], with the knowledge that
the Governor may ultimately zero the program out of the
budget.
Co-Chair Williams clarified that a two-year phase out would
reduce payments by 50 percent ($22 million), and then cease
payments in the following year. He stated that the payments
would continue at some level for FY 04 and FY 05. He
reiterated that the Governor would support a two-year phase
out.
LENORE JONESS, KENAI, testified via teleconference in
opposition to the legislation. She noted that the program
could be funded from the tax break that the Governor has
proposed for the oil industry. She also opposed changing to
a needs based program. She questioned the legislature's
concern for seniors in this regard and also in terms of the
sales tax. She maintained that the State was taking
advantage of seniors since they did not generate income.
She noted that senior retirement income and medical payments
had an impact on the state's economy. She referred to a
study [not cited], which concluded that Alaska seniors are
one of the largest single sources of money flowing into the
state. Senior retirement income and medical payments have a
significant beneficial effect on the state's economy. At the
same time more than half of Alaskan seniors live vicariously
on the edge of solvency. For some, financial considerations
may determine whether they continue to reside in the state.
For many others, a combination of financial benefits
available from state and municipal government is critical to
their wellbeing. Seniors also provide the equivalent of
2,400 full time jobs as volunteers, worth approximately $60
million a year. Seniors over 60 provide unpaid care giving
services that are the equivalent of 6,300 full time jobs.
Seniors over 60 make up 8 percent of the state's population.
Seniors are estimated to make up 20 percent of the state's
population by 2025.
CSSB 117 (FIN) HELD in Committee for further consideration.
CS FOR SENATE BILL NO. 102(L&C) am(efd fld)
"An Act increasing the amount of revenue received by
the state from charitable gaming activities, and
relating to taxes on pull-tabs."
Vice-Chair Meyer noted that the Senate added an amendment to
prohibit municipal taxation: A city that levies and collects
sales and use taxes under (a) of this section may not levy
and collect a sales or use tax on pull-tabs used in
charitable gaming. He questioned if it would be possible to
allow communities that currently collect the tax (Juneau,
Nome and Bethel) to continue to do so, while prohibiting new
communities (Anchorage) from collections.
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
provided information on the legislation. In response to the
question by Vice-Chair Meyer, he observed that similar
exemptions have been allowed under the taxation of alcohol.
Vice-Chair Meyer speculated that the amendment was not
intended to negatively impact municipalities. Mr. Persily
indicated that legislative legal could be consulted about
how the provision could be change.
Vice-Chair Meyer speculated that the maker of the senate
amendment had intended to exclude Anchorage, but did not
intend to adversely affect the communities collecting the
tax.
Mr. Persily discussed the fiscal notes accompanying SB 102.
He assumed that the bill would be signed in June and take
affect in the fall, which would reduce the state's revenue.
The Governor's legislation would have also limited the prize
payback. He stressed that all of the fiscal notes are based
on the assumption that there would be no change in gaming
activity in Alaska.
CSSB 102 HELD in Committee for further consideration.
ADJOURNMENT
The meeting was adjourned at 12:21 PM
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