Legislature(2007 - 2008)HOUSE FINANCE 519
02/06/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB273 | |
| HB321 | |
| HJR2 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 273 | TELECONFERENCED | |
| + | HB 321 | TELECONFERENCED | |
| + | HJR 2 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 6, 2008
1:44 P.M.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:44:04 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Harry Crawford
Representative Les Gara
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Mary Nelson
Representative Bill Thomas Jr.
MEMBERS ABSENT
Representative John Harris
ALSO PRESENT
Representative Nancy Dahlstrom; David Teal, Director,
Legislative Finance Division; Ian Fisk, Staff,
Representative Bill Thomas; Eddy Jeans, Director, Education
Support Services, Department of Education and Early
Development; Mary McDowell, Vice President, Pacific Seafood
Processors Association, Juneau; Tom Sunderland, Marketing
Director, Ocean Beauty Seafoods; Tim Cottongim, Fish Group
Manager, Tax Division, Department of Revenue; Dan Stickel,
Economist, Department of Revenue
PRESENT VIA TELECONFERENCE
Debbie Joslin, Eagle Forum Alaska
SUMMARY
HB 273 An Act relating to school funding, the base
student allocation, district cost factors, and the
adjustments for intensive services and average
daily membership calculations; and providing for
an effective date.
CS HB 273(FIN) was reported out of Committee with
a "do pass" recommendation and with previously
published fiscal notes 1 & 2 by the Department of
Education and Early Development and a new fiscal
note by the Department of Education and Early
Development.
HB 321 An Act relating to the salmon product development
tax credit; providing for an effective date by
amending an effective date in sec. 7, ch. 57, SLA
2003, as amended by sec. 4, ch. 3, SLA 2006; and
providing for an effective date.
CS HB 321(FSH) was reported out of Committee with
a "do pass" recommendation and with a new fiscal
note by the Department of Revenue.
HJR 2 Proposing an amendment to the Constitution of the
State of Alaska requiring an affirmative vote of
the people before any form of gambling for profit
may be authorized in Alaska.
HJR 2 was HEARD & HELD in Committee for further
consideration.
1:44:46 PM
Co-Chair Meyer noted for the record that during the 2/6/08
Committee on Committee's meeting, approval was made for the
temporary appoint-replacement of Representative John Harris
to fill the House Finance Committee seat for Representative
Richard Foster until he recovers.
1:46:06 PM
HOUSE BILL NO. 273
An Act relating to school funding, the base student
allocation, district cost factors, and the adjustments
for intensive services and average daily membership
calculations; and providing for an effective date.
1:46:56 PM
Representative Mike Hawker, MOVED to ADOPT Amendment 1, 25-
LS0148\M.1, Mischel, 1/25/08. Co-Chair Meyer OBJECTED for
discussion purposes.
Representative Hawker explained that the amendment adds
essential information on financing components &
recommendations made by the Joint Legislative Education
Funding Task Force. At the time the bill was drafted, the
information was not available to be included, addressing
recalibration of the pupil transportation costs. The
contracts were rewritten last summer and then renegotiated.
Amendment 1 reflects those contracts, adding them to the
bill.
1:48:01 PM
Co-Chair Meyer WITHDREW his OBJECTION. There being NO
further OBJECTTION, Amendment 1 was ADOPTED.
1:48:32 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, provided
members a handout: "K-12 Foundation Formula Funding-State of
Alaska FY2002 through FY2011". (Copy on File).
He explained that the information resulted from requests to
identify the numbers representing inflationary costs and
basic education funding. He highlighted the three various
scenarios:
· Method 1 - The amount of State spending for
education increased since FY2002
· Method 2 - Increases to the Base Student Allocation
(BSA)
· Method 3 - Numbers including retirement costs
Mr. Teal explained there is "no clear way" to determine what
education funding actually is or how it has changed. The
easiest way to understand education funding is to observe
the total amount appropriated for the foundation formula.
In FY02, the General Fund formula spending for the
foundation formula required $643 million dollars; FY09,
General Fund spending, not including debt reimbursement,
will amount to $1.214 billion dollars, which includes Task
Force recommendations not included in the BSA. The increase
from FY02 to FY09 is anticipated to be $570 million dollars,
an increase of 89% during the seven years or a 9.5% annual
increased spending.
Representative Gara inquired the location of that
information on the handout. Mr. Teal said the cream colored
area listed under Method 1. He noted an objection to the
comparison of total spending and the number of items
affecting it includes the student count. On a per student
base, the average daily membership (ADM) in FY02 was $5
thousand dollars higher than it is currently. On a per
student basis, funding was approximately $4.8 thousand
dollars; in FY02 & FY09, it has increased 95% to $9.4
thousand dollars. To adjust that number for inflation, the
spending would be boosted by inflation to match FY09
equivalent dollars, placing the increase up to 62% per
student funding.
1:51:44 PM
Representative Gara pointed out that a large dollar increase
went into funding the retirement shortfall. That account
was placed into the BSA for a few years. He asked if those
funds had been backed out, would there still be an adjusted
inflation amount increase to education funding. Mr. Teal
pointed out that information was indicated on the Method 2
chart. Method 2 identifies the increase to the BSA, a more
traditional method at looking at education funding.
Education funding tends to be a mix of State and local
contributions, which can be affected by property values. He
commented, the BSA is the "cleanest way" to look at the
amount of money going toward education in the classroom.
Mr. Teal referenced handouts from previous meetings, which
he had modified to reflect the Task Force recommendations
amounting to a $100 dollar increase from that proposed for
FY09-FY11, $200 dollars.
Mr. Teal referenced Handout 2: "Alaska K-12 Funding, Base
Student Allocation with Adjustments". (Copy on File). The
pencils on that chart do not show an increase quite as
rapidly, highlighting a 49% increase from FY02-FY09.
However, with the indicated changes, what is actually being
proposed is a 45% increase.
The BSA does not reflect what the State has spent for K-12
because of inclusion of the early opportunity grants,
district cost factors, school improvement grants and
intensive needs.
1:54:02 PM
Representative Gara pointed out that the increases show the
upward flow to the BSA but do not indicate outside funding
such as the learning opportunity grants. Consequently, the
increases were actually higher. He noted that a large
portion of the BSA increases for a few years had gone into
the retirement shortfall. He requested more information
indicating the exclusion of money to the retirement
shortfall. He maintained that those dollars never go into
the classroom.
Mr. Teal advised that he had not tracked those numbers
because retirement was funded through the BSA; in order for
it to be tracked, there must be a conversion of the district
cost factors and the learning opportunity grants to a BSA
equivalent. He understood why Representative Gara would
want to do that for the retirement numbers because,
basically, that too is a reduction to the BSA. He noted
those numbers were only tracked for FY09; he added,
retirement costs could be ignored from the FY02-FY09
comparison. The State now has returned to the FY02
contribution rate and retirement costs have been corrected
in the FY02-FY09 comparison.
1:56:09 PM
Representative Gara understood that in FY09, the
contribution rate would be 12.5%; he asked if that was the
rate in FY02. Mr. Teal replied it was approximately 12.5%.
Representative Gara asked the change between FY02 and FY09
to per student funding. Mr. Teal referenced the chart with
the bars next to the pencils, Handout 2. The bars represent
the adjustments to the BSA. He described the process for
determining the difference between the graphed numbers,
pointing out that in FY05 & FY06, there was no funding
outside the formula. The BSA and the adjusted BSA was the
same in FY07, including the district cost factors; in FY09 &
later, intensive needs and district cost factors (DCF) add a
substantial amount of funding outside the BSA.
Mr. Teal continued, the Governor's proposed increase of $200
dollars to the BSA, would cost $44.8 million dollars in
FY09. Therefore, the $90 million dollars added for
intensive needs and DCF equals a $402 dollar increase to the
BSA.
1:59:28 PM
Mr. Teal stated those numbers include what the Department of
Education has indicated in the footnote with the $35 million
& the $70 million dollars outside the formula, converting it
to an equivalent BSA and then indicating the number. The
inflation adjustment does not include retirement costs, but
instead addresses dollars within the classroom. The
increase is approximately 45%, with an average increase of
about 5.4%. The BSA is anticipated to increase to 5.8% n
FY09, which will be a 45% increase since FY02. He
reiterated that the average annual rate of growth is
approximately 5.4% annually. Inflation has averaged 2.65%
each year, which means that since FY02, K-12 funding has
grown twice the rate of inflation.
2:01:08 PM
Representative Gara observed that those numbers did not
include the cuts for funding. By excluding retirement costs
and then including the outside allocated dollars within the
formula, the increase will be 5.4% per year. He pointed out
it is not calculated and in FY03, the Legislature cut the
amount of pupil transportation funding and the formula.
Additionally, the Legislature cut the pre-Kindergarten
program, which had been included in the FY02 budget.
Schools were required to make up the shortfalls from their
BSA dollars; hence, classroom money had to be placed into
the above listed items. Community school funding was cut in
FY03. Representative Gara summarized, there are a number of
funding sources K-12 education in FY02, which are not
indicated in the itemization graph, which narrows the change
between FY02-FY09. Mr. Teal agreed.
2:02:18 PM
Mr. Teal admitted that many complications occur when making
a comparison. The attached chart represents only three
scenarios. Mr. Teal added that the items referred to by
Representative Gara were relatively small and would not
change the bottom line, which is that funding is increasing
roughly twice the rate of inflation.
2:03:12 PM
Co-Chair Meyer noted that references such as community
schools are not considered education funding. He commented
that pupil transportation had increased. Mr. Teal advised
that pupil transportation had not been indicated, only the
foundation formula and that pupil transportation has
increased. Some consider that cost outside classroom money.
There are numerous methods that could be considered in
providing a valid comparison.
Co-Chair Chenault noted that in FY03, the Legislature
instituted a new pupil transportation funding arrangement,
which he understood provided an increase. Currently, those
dollars are no longer adequate to address the concerns.
2:04:49 PM
Representative Hawker observed that the analysis had not
included any funding for the major maintenance list, capital
construction or debt reimbursement. Mr. Teal added, the
included costs are strictly operational.
Representative Hawker recalled that in FY03, pupil
transportation was moved from a non-accountable to an
accountable system. He acknowledged the difficulty of
composing an analysis and applauded the efforts done by
Legislative Finance Division (LFD).
Representative Kelly noted appreciation for the work
provided by the LFD breaking down specific funding
information. He warned that there had not been enough
information and research done for the choices being made.
He pointed out the 89% increased educational funding for K-
12 over the past seven years, emphasizing his concern with
the proposed budget. He stated the budget is unsustainable
and does not provide adequate value for increases to the
educational system. He pointed out that the retirement
costs to the system will take twenty-five years to pay off.
Representative Kelly urged that a more conservative approach
be taken. He reiterated that the proposed costs are "out of
control".
Co-Chair Meyer agreed with concerns voiced by Representative
Kelly. He had hoped that the Task Force would have adequate
information for making recommendations. Representative
Hawker noted that Mr. Jeans from the Department had provided
extensive information regarding the financial consequences
of the decisions being made.
Co-Chair Meyer advised that the legislative appropriations
have more than doubled in keeping up with inflation.
Representative Gara remembered opposing the change to pupil
transportation made in FY03. Until FY03, school districts
received full compensation for transportation costs.
Beginning in FY03, the communities were provided increased
supplemental funding for fuel costs. In most school
districts, the increase has been steep. The Legislature
determined a formula providing a percentage that did not
increase with the actual costs. Many districts have had to
take money from their classroom funds to pay for the
increased fuel costs, which has been a great concern since
FY03. He acknowledged, the education debate has been
frustrating. Education policy should be determining the
balance between urban and rural areas. In many districts,
class sizes are too big. He recommended that discussion
occur on what the legislature can do to help reduce class
size. Instead, discussion only compares funding from one
year to the next. Representative Gara worried about basic
education considerations.
2:12:33 PM
Mr. Teal addressed Method 3, the model excluding retirement
costs. Method 3 provides an analytic view of only the
dollars in the classroom. State retirement contributions on
behalf of school districts in FY09 will be $216 million
dollars. If that money was distributed to the districts,
the BSA would experience a 68% increase in K-12 funding
since FY02, growing at 7.7% annually, tripling the rate of
inflation. Retirement funding is costing the State more
money, however, the teachers are not being paid more. There
is no more available to the districts or the classrooms
because the funds are paid directly to the Department of
Education. Method 3 excludes retirement costs. Retirement
costs are now $216 million dollars per year, which the State
pays instead of increasing the BSA. If those dollars were
paid to the districts, it would be the equivalent of having
a BSA of $6.8 thousand dollars. He concluded that it grows
triple the rate of inflation.
Representative Gara discussed the amount of money currently
placed into the education system. Costs to the schools are
increasing faster than inflation. He questioned how much
health insurance & fuel costs had superseded inflation.
Those costs are eating away the district's ability to
provide curriculum. Mr. Teal agreed, but did not have the
numbers. The inflation indicator being used is the Consumer
Price Index (CPI), which has no relationship to the costs of
running schools but is the standard recommendation.
2:16:09 PM
Representative Kelly asked if K-12 education system used a
similar index as that used by the University. Mr. Teal said
no. Representative Kelly opined that the spreadsheet
attachment provides a "great voucher proposal" for
education. He reiterated concerns with the proposed budget.
2:17:30 PM
EDDY JEANS, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, explained that he had
just received the LFD analysis, which, he assumed originated
from his testimony during the pervious hearing, identifying
the Governor's request to move $100 dollars per student per
year for each of the next three years.
Mr. Jeans hoped he had not left the Committee with the
impression that education funding had not substantially
increased since FY02. That was not his intent. Mr. Jeans
warned it is inappropriate, for the Legislature to consider
formula adjustments in an inflation calculation. The Task
Force made recommendations because they perceived
deficiencies in the existing formula, to be adjusted. Mr.
Jeans stated there should not be an adjustment, weighing in
a cost of living factor. He understood that Anchorage's
contract for their teachers would increase 4%-3%-3% over the
next three years. The Governor's proposes a $200 dollar
increase, which would be slightly below 4%. The
Administration attempts to achieve sustainability and
predictability for the school districts & municipalities so
that they can plan ahead for the next four years. He
commented that the $200 dollar increase will provide that
predictability.
2:20:09 PM
Representative Gara maintained that there must be a formula,
protecting both urban and rural school districts. He noted
his support for the proposal by the Administration, increase
as recommended in the bill. He observed the increase for
special needs funding is a fraction of the real costs. He
asked how much the Anchorage School District receives for
their special needs student versus the real costs for that
student.
Mr. Jeans replied that currently, Anchorage is spending $80
thousand dollars for a special needs child; they are
actually funded $26 thousand dollars through the foundation
program. He hoped that could be a formula correction
recommended by the Task Force and to include it as an offset
to inflation in the analysis would be inappropriate.
Representative Gara warned that establishing a formula that
leaves the majority of students in the State behind
inflation, results in bigger class sizes & less curriculum.
He hoped that the Committee could discuss ways to address
those concerns.
Representative Kelly disagreed with comments that Alaskan's
only look at the cost of education. He believed that the
public looks at the total costs, reiterating that the
proposed costs are not sustainable.
2:23:32 PM
Co-Chair Meyer interjected that on the State level, only the
total costs should be addressed. It is up to the local
school districts to determine which programs are offered in
their location. The function of the Legislature is only to
provide the necessary funding.
Representative Gara advised he intends to offer an amendment
on the House floor. He urged reconsideration of the
proposed increase contained in the bill. He agreed with the
Administration that $200 dollars per year does make more
sense. Initially, the however, the Task Force members
disagreed about the exact amount and decided that the
Legislature should determine it. He requested further
discussion on the increased levels of funding are and what
it means in terms of class size and curriculum offered and
it affects each student.
2:26:01 PM
Representative Crawford noted frustration maintaining the
status quo for Alaska's students. He urged a better
investment in kids so that they can succeed in the
competitive world. He supported the number proposed by the
Administration.
Representative Joule observed that the Education Funding
Task Force had a narrowly defined mission and that the
timeline was short for addressing such a large focus. He
shared frustration as voiced by other members.
2:29:49 PM
Co-Chair Chenault appreciated the work that the Task Force
accomplished with the requested direction provided them.
They did address some of the needs of Alaskan students. He
did not agree that the proposed funding keeps districts at a
status quo but thought, instead, it moves them forward. He
indicated the short funding over the past ten years, and
realized that Anchorage intensive needs are a huge issue.
He mentioned the special needs in his own district and
pointed out that statewide, there are over 800 children in
that category. Smaller classrooms require more money in
education and/or hiring more teachers. He agreed the topic
should be discussed at greater length at a future time.
Co-Chair Chenault acknowledged the system is not perfect.
He indicated concern with the voucher criteria. He thought
that the Task Force did an excellent job in forming
legislation, maintaining that HB 273 improves the outlook of
education in the State.
2:34:05 PM
Co-Chair Meyer reiterated his appreciation for the work by
the Task Force. He pointed out the three fiscal notes, with
a new one by the Department of Education and Early
Development.
Representative the statistics on the number of kids actually
graduating from high school & how Alaska ranks with the
other states.
2:35:22 PM
Representative Hawker acknowledged there had been a
divergence of opinions brought forward in drafting HB 273.
He acknowledged shared concerns voiced by Representative
Kelly.
Representative Hawker MOVED to REPORT CS HB 273 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. Representative Kelly OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Crawford, Gara, Hawker, Joule, Nelson,
Stoltze, Thomas, Chenault, Meyer
OPPOSED: Kelly
Representative Foster was not present for the vote.
The MOTION FAILED (9-1).
CS HB 273(FIN) was reported out of Committee with a "do
pass" recommendation and with two previously published
fiscal notes by the Department of Education and Early
Development and one new fiscal note by the Department of
Education and Early Development.
AT EASE: 2:38:12 PM
RECONVENE: 2:44:03 PM
HOUSE BILL NO. 321
An Act relating to the salmon product development tax
credit; providing for an effective date by amending an
effective date in sec. 7, ch. 57, SLA 2003, as amended
by sec. 4, ch. 3, SLA 2006; and providing for an
effective date.
REPRESENTATIVE BILL THOMAS, SPONSOR, noted that the Salmon
Product Development Tax Credit encourages and accelerates
the development and production of value added salmon
products in Alaska by providing an economic incentive to the
investments in new technology and equipment. He explained
that HB 321 provides a recommended sunset extension for an
additional 3 years. The original expiration date was
December 31, 2008. The tax credit applies to the fisheries
business tax paid by the processors. It allows processers
to claim up to 50% of the costs. The dollars must be
predominately used for salmon and value-added product. The
bill allows for innovative marketing of salmon products.
Representative Thomas pointed out that during the Salmon
Task Force meeting, the market condition and prices were
low, competing with farmed salmon. As a result of some
other efforts and the drafting of the bill that trend is
changing. He indicated strong support for the program,
which is of value for the communities and the statewide
economy. He urged passage of the tax extension.
IAN FISK, STAFF, REPRESENTATIVE BILL THOMAS, clarified the
changes made in the committee substitute and put forward by
the Fisheries Committee. He referenced Page 2, Lines 11-12,
language relating to conveyers:
"(iii) Conveyors used specifically in the act of
producing a value-added salmon product;"
A conveyer is equipment, which often is integral to value-
added salmon processing. The language should have been
included as intent, passing from the Task Force. Language
on Page 2, Lines 14-15, was requested by the Department of
Revenue, to prevent any misunderstanding regarding the use
of the equipment:
"(i) vehicles, forklifts, conveyors not used
specifically in the act of producing a value-added
salmon product,"
Mr. Fish commented that for small processors, conveyors can
be important equipment and should be included in the
program.
He referenced language on Page 2, Section 3, Line 24, taken
from the original bill:
"*Sec. 3. AS 43.75.035 is amended by adding a new
subsection to read:"
The language indicates a procedure for preliminary
determination for eligibility, suggesting it would be a
logical addition to the program.
Representative Hawker asked if the Representative Thomas was
in agreement with the amendments made during the committee
process. Representative Thomas replied yes.
MARY MCDOWELL, VICE PRESIDENT, PACIFIC SEAFOOD PROCESSORS
ASSOCIATION (PSPA), JUNEAU, stated that three of PSPA's
member companies are salmon processors - Peter Pan Seafoods,
Alaska General Seafoods and North Pacific Seafoods. All
three companies have made good use of the salmon product
development tax credit, working with the program goals
including development & expansion of new and value-added
salmon products while keeping Alaska fishery market
competitive in the world market.
Ms. McDowell noted letters of support in the Committee file
from the processors, outlining the benefit of the credit.
She pointed out that the Legislature had tightly constructed
the program so that it could achieve the goals set forth.
That has proven successful.
Ms. McDowell added there is more to do to continue the
momentum of the program to insure that the product stays
competitive. Currently, skyrocketing energy costs are
eating up profits. Processors for the most part operate in
rural communities where energy costs are the highest; the
profit margins could otherwise be invested in equipment.
The tax credit encourages processors to move ahead. The
value-added product keeps Alaska's fish competitive in the
world market, which in turn benefits fishermen and
communities. Ms. McDowell anticipated that the investment
will pay for itself.
Representative Gara asked how the tax is calculated and the
anticipated annual revenue generated. He also asked the
amount being credited. Co-Chair Meyer requested the
question be held until public testimony was closed.
TOM SUNDERLAND, MARKETING DIRECTOR, OCEAN BEAUTY SEAFOODS,
testified in support of HB 321. He pointed out that Ocean
Beauty is an Alaskan owned corporation, 50% owned by the
Bristol Bay Economic Development Corporation (BBEDC) and 50%
owned by fishermen. The corporation operates only as a
shore-based operation.
Mr. Sunderland continued, Ocean Beauty provides direct
incentive for value-added fish and how to improve the
quality of that product. He provided background on the
original bill. Companies only have a certain ability to
expand their plans. Ocean Beauty has taken advantage of the
tax credit. Ultimately, the plan is to improve the value-
added equipment. He acknowledged that many improvements are
necessary requiring the use of tax credits. He emphasized
that long-term economics for passage of the bill remain
strong, while outlined specific costs. He believed that the
credits have the benefit of rising the value of the fishery
and that raising taxes at the same time could create better
& higher paying jobs for the State of Alaska.
Representative Gara questioned if Ocean Beauty makes
investments because they know they can receive a tax credit.
Mr. Sunderland said they have. Representative Gara asked to
receive an estimate of projects that would not have been
done if the company had not received the tax credit. Mr.
Sunderland expected it would have been half of what was
accomplished.
Vice-Chair Stoltze stated that previously, he had not
supported the bill. He asked if a short season would impact
the tax credit. Mr. Sunderland asserted that a short season
impacts everything; it is difficult to amortize costs when
the season is short.
Representative Gara reiterated his request to get the
numbers of estimated projects pending receipt of the credit.
Mr. Sunderland said he did not know but imagined that the
rate of growth was 50% higher.
3:06:07 PM
Representative Kelly referenced the flow chart credit
indicator and asked about those numbers. [Attachment not
Available]. Mr. Sunderland pointed out that processors
using credit, don't always get their projects approved. He
understood that there have been disputes over syntax of the
language, which has resulted in the inclusion of
modifications for a binding predetermination.
PUBLIC TESTIMONY CLOSED.
Representative Gara requested a review by the Department of
Revenue for how the credit system works and the amount it
generates for the State.
TIM COTTONGIM, FISH GROUP MANAGER, TAX DIVISION, DEPARTMENT
OF REVENUE, provided members a chart, "Salmon Product
Development Tax Credits, Calendar years 2003-2006". (Copy
on File). The handout indicates the amount of credits
allowed. The tax is imposed on anyone that processes raw
resources in the State for purposes of resale. The
mentioned tax credit is specifically for salmon processed in
the State and can only be claimed for 50% of the tax on the
salmon processed in Alaska. The spreadsheet indicates that
approximately $2.8 million dollars in credits have been
claimed each year.
Representative Gara asked if the $2.8 million dollars in
FY06, was a reduction in the tax or dollars that would
qualify for the 50% tax credit. Mr. Cottongim replied it
had been generated and would qualify.
Representative Gara referenced the $1.4 million dollars
taken off the total tax, leaving the number for the Salmon
Processing Tax.
3:13:00 PM
DAN STICKEL, ECONOMIST, DEPARTMENT OF REVENUE, explained
that the total investment expenditures that qualified for
the tax in FY06 was $5.8 million dollars. That amount
resulted in $9 million dollars in credits claimed. A final
audit has not occurred; however, it is anticipated that the
total credits allowed will be around $2 million dollars.
Representative Gara asked the approximate amount of the
Salmon Processing Tax. Mr. Stickel replied that for FY06,
there was approximately $12.7 million dollars fisheries tax
received.
3:14:31 PM
Representative Kelly inquired if the credit was still
needed.
Representative Thomas understood that in order to continue
forward with product development, the legislation needs to
pass. He advised, when equipment is purchased, it becomes
taxed by local borough assemblies. The processors continue
to pay property tax on the equipment.
Co-Chair Meyer noted the new fiscal note.
Vice-Chair Stoltze MOVED to REPORT CS HB 321 (FSH) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
3:17:10 PM
CS HB 321(FSH) was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by the
Department of Revenue.
3:17:52 PM
HOUSE JOINT RESOLUTION NO. 2
Proposing an amendment to the Constitution of the State
of Alaska requiring an affirmative vote of the people
before any form of gambling for profit may be
authorized in Alaska.
REPRESENTATIVE NANCY DAHLSTROM, SPONSOR, advised that some
Alaskans may consider gambling to be a harmless pastime;
however, those costs are underestimated in relationship to
human suffering. HJR 2 would amend the Alaska Constitution
to require an affirmative vote of the people before any form
of gambling for profit can be authorized in Alaska.
Studies have shown that about 2.5 million Americans are
pathological gamblers and another 3 million are problem
gamblers. The compulsive gamblers have high rates of
suicide, depression, mania, alcohol and drug abuse and
arrest rates. According to the American Insurance
Institute, gambling is the main cause of white collar crime
and is the third leading cause of individual bankruptcy in
America. Though the human suffering caused by compulsive
gambling may be borne by a minority of the population, the
overall economic and social costs are shared by all. She
urged support for HJR 2.
3:21:11 PM
Vice-Chair Stoltze asked the definition of gambling for
profit & how that would affect gambling for non-profit. He
questioned if a secondary party could be involved, which he
thought might restrict charitable gaming. Representative
Dahlstrom responded that the resolution does not change
anything already in place.
Vice-Chair Stoltze stated that the language appeared
ambiguous, regarding inclusion of an approval vote by
municipalities.
REPRESENTATIVE HARRY CRAWFORD, SPONSOR, advised that
language had been included during the last committee of
referral, for the local option as well.
Vice-Chair Stoltze understood the option, but wanted further
information regarding the intent. Representative Crawford
thought that both were needed. Vice-Chair Stoltze did not
think both were intended; he worried that about the proposed
language was unclear and could become a constitutional
amendment.
Representative Crawford read the referencing language: "A
majority vote of the qualified voters of the State"; the
language following that: "Approved by the municipality". He
believed that language could addresses concerns voiced by
Representative Stoltze.
Vice-Chair Stoltze reiterated his question. He asked if it
was intended for a municipal vote or if it meant that a
local assembly could pass an ordinance or the mayor, an
edict. He recommended another threshold be used.
3:24:19 PM
Representative Dahlstrom explained that in version\M, as
changed in the House Judiciary committee, Line 10, uses the
word "any". She added that the sponsors had worked with
Jerry Luckhaupt at Legislative Legal to draft the language.
Co-Chair Chenault advised that members have the version\K
before them. Representative Dahlstrom explained the
differences in which Line 10, "any" was deleted and the
reason for that deletion, is the insertion of the language:
"The addition of the word 'any' on Line 10, may lead to
unintended consequences. If the Legislature passed a
law allowing for-profit gambling, in any municipality
with a population of one thousand or more, the decision
is ratified by the voters, then it may be legal in
other municipalities".
"Any" was deleted and "each" was inserted. She emphasized
that the intent is that no gambling expansion statewide. If
a municipality chooses to vote on it, each individual
municipality would vote, if they have a voting population
over 1,000.
3:27:18 PM
Representative Crawford added that the legislation requires
a majority vote of the entire State. He inquired if
Representative Stoltze would like to see a majority vote
also within each municipality. Vice-Chair Stoltze demanded
to know what was meant by the language as written.
Representative Crawford thought he had clarified what he
meant. Vice-Chair Stoltze replied what is meant and what
has been said are not in sync, reiterating the ambiguity.
He asked if it was intended that a voter approval
requirement be placed at the local level. Representative
Crawford replied that was the intent. Representative
Dahlstrom agreed. Vice-Chair Stoltze asked what "yes"
meant.
Co-Chair Chenault interjected that the intent of the
constitutional amendment is to have a majority vote of the
citizens of the State to introduce gaming anywhere in the
State. Also, it is intended that municipalities exceeding
on thousand voting residents would have to have a majority
vote within their municipality in order to have it, even
though the citizens of the State said it was allowable.
Representative Dahlstrom affirmed.
3:29:46 PM
Representative Hawker noted consequences associated under
the federal Indian Gaming Act, mandating unrestricted gaming
anywhere and already allows gaming statewide. He asked the
consequences of opening up unrestricted Indian gaming.
Representative Crawford replied that the legislation does
not intend to open up gaming anywhere in the State. If
qualified voters in the State say it is okay to open it up
for profit gaming, could open up an allowance for Indian
gaming.
Representative Hawker inquired about the secondary
qualification and approval by the municipality. He was
curious if there was a conflict between the Indian Gaming
Act and State authority. Representative Crawford explained
that the previous Committee realized that the language could
be vetoed at the local level. He thought it would not
preclude Indian gaming.
3:33:05 PM
Co-Chair Chenault clarified for the record that the bill did
not contain a population requirement as currently written.
Representative Nelson noticed that whenever Committee
members address gaming, Indian gaming is brought up and
becomes the "bogie man". She questioned that heightened
level of concern. Representative Dahlstrom explained that
her concern was with gambling or gaming of any sort,
anyplace in Alaska. The legislation has nothing to do with
race or culture. Anything that already exists, will
continue to be allowed. She worried about the effect for
future generations and the costs to society.
Representative Nelson asked Representative Hawker about his
concern. Representative Hawker apologized if he was seen to
have racist views. He was concerned about the possibility
of establishing a conflict between federal statute and State
Constitutional authority. He thought it could result in
some form of litigation to further clarify the relationship
between the State and the federal government.
Representative Crawford noted urgency for the initiative to
be on the ballot, August 20008. He pointed out that the
initiative would establish a five person gaming commission.
He referenced Page 3, Section 05.18.030, Number 3, which
clarifies that authorization of gaming activities pursuant
to Section 05.18.100. The commission could authorize any
future gaming activities. He stated he opposes gambling
activity on moral and economic grounds and that Alaska can
not absorb for profit gaming, which shrinks the economy and
over the long-term, the social costs keep growing.
3:38:42 PM
Representative Gara asked if it was intended that the
municipalities vote. Representative Crawford explained, it
is intended for any municipality to hold a public vote and
decide upon the issue for their area. Representative Gara
agreed with the comments expressed by Vice-Chair Stoltze,
referencing language on Page 1, Line 9, "ratified by a
majority vote of the qualified voters of the State". He
recommended the language "ratified by a majority vote of the
qualified voters in the municipality", be added,
guaranteeing that it is a public vote.
Representative Gara added that requiring local vote of one
thousand or more is not fair to the smaller municipalities.
He recommended retaining current language including a
uniform rule for all municipalities.
3:40:56 PM
Representative Dahlstrom acknowledged that language would be
acceptable.
Vice-Chair Stoltze understood that the intent was to
substitute the legislative role with the public role on a
State & local level. Representative Dahlstrom said yes.
Vice-Chair Stoltze inquired that once the initiative was on
the ballot, by asking voters approval, could the requirement
be met. Representative Crawford responded that the
initiative sets up a gaming commission. The legislation is
about regulating what currently exists. Vice-Chair Stoltze
understood it was about expanded gambling and did not want
to see the language clouded.
AT EASE: 3:44:06 PM
RECONVENE: 3:44:28 PM
Representative Crawford explained that the people could pass
the initiative and the constitutional amendment, legalizing
the ability for the Commission to set up gambling by passing
the initiative and the Constitutional amendment. He stated
that the amendment would supersede the initiative. The
initiative does not legalize gambling; it legalizes the
ability for the commission to set up gambling and would not
contradict the will of the people.
3:45:31 PM
Representative Dahlstrom advised that following conversation
with Legislative Legal, Mr. Luckhaupt clarified that the
Constitution does supersede statute.
Representative Hawker questioned if "municipality" should be
used rather than "political subdivision". Representative
Gara advised that a statutory definition of municipality
could become imposed. He was not sure but thought that
municipality would be covered by statute, yet, did not know
if municipality was defined anywhere else in the
Constitution. Representative Dahlstrom asked if
municipality could include a political subdivision.
Representative Gara did not know.
3:47:36 PM
Representative Gara asked about moving a conceptual
amendment. Co-Chair Chenault requested that a fully drafted
amendment be prepared for the next Committee meeting.
Representative Dahlstrom offered to work with Co-Chair
Meyer's staff to address the intent.
Representative Gara asked to clarify comments made by Vice-
Chair Stoltze, understanding that he did not intend to
remove the right to vote. He advised that only the
populace, through their own vote, can remove that.
3:50:07 PM
DEBBIE JOSLIN, (TESTIFIED VIA TELECONFERENCE), EAGLE FORUM
ALASKA, testified in support of HJR 2. She concurred with
comments made by Representative Dahlstrom and the ills that
occur with gambling. She recommended that language be added
to Line 10 "approved that even when there is a statewide
vote, municipalities should be allowed to vote independent
of that vote.
3:53:18 PM
PUBLIC TESTIMONY CLOSED.
Co-Chair Chenault inquired if a majority vote would be
required at the municipal level. Representative Crawford
commented that initially, a 60% majority vote was required;
however, during the process, language was changed to a
simple majority. He clarified that he preferred the 60%.
HJR 2 was HELD in Committee for further consideration.
3:54:45 PM
ADJOURNMENT
The meeting was adjourned at 3:54 P.M.
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