Legislature(2015 - 2016)HOUSE FINANCE 519

02/10/2015 01:30 PM House FINANCE



Audio Topic
01:31:54 PM Start
01:33:37 PM Indirect Expenditure Report Discussion Related to Chapter 61, Sla 14
02:34:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Indirect Expenditure Report Discussion Related TELECONFERENCED
to Chapter 61, SLA 14
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 10, 2015                                                                                          
                         1:31 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:31:54 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 1:31 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Dan  Stickel,  Assistant   Chief  Economist,  Tax  Division,                                                                    
Department of  Revenue; Mackenzie Merrill, Economist  I, Tax                                                                    
Economic  Research  Group,  Department  of  Revenue;  Brodie                                                                    
Anderson,  Staff,   Representative  Steve   Thompson;  Jerry                                                                    
Burnett, Deputy Commissioner,  Treasury Division, Department                                                                    
of  Revenue;  David   Teal,  Director,  Legislative  Finance                                                                    
Division.                                                                                                                       
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
PRESENTATION:   INDIRECT   EXPENDITURE   REPORT   DISCUSSION                                                                    
RELATED TO CHAPTER 61, SLA 14                                                                                                   
                                                                                                                                
Co-Chair Thompson reviewed  the agenda for the  day. He read                                                                    
from a prepared statement:                                                                                                      
                                                                                                                                
     The 28th  Legislature passed legislation  that requires                                                                    
     a  creation  of  two  reports to  be  produced  on  the                                                                    
     potential loss  of foregone revenue known  as "indirect                                                                    
     expenditures"  and  to  provide  a  definition  of  the                                                                    
     indirect  expenditures. The  first report  was produced                                                                    
     by the  Department of Revenue (DOR).  The second report                                                                    
     was  produced by  Legislative Finance  building on  the                                                                    
     report  provided  by  DOR.  Each  report  reflects  the                                                                    
     required information laid out in the legislation.                                                                          
                                                                                                                                
Co-Chair Thompson introduced the presenters for the day.                                                                        
                                                                                                                                
^INDIRECT EXPENDITURE  REPORT DISCUSSION RELATED  TO CHAPTER                                                                  
61, SLA 14                                                                                                                    
                                                                                                                                
1:33:37 PM                                                                                                                    
                                                                                                                                
DAN  STICKEL,  ASSISTANT   CHIEF  ECONOMIST,  TAX  DIVISION,                                                                    
DEPARTMENT   OF    REVENUE,   introduced    the   PowerPoint                                                                    
presentation,   "Indirect   Expenditure  Report   Discussion                                                                    
Related to Chapter 61, SLA 14."                                                                                                 
                                                                                                                                
Mr. Stickel revealed slide 2:  "Note." He indicated that the                                                                    
presentation  focused on  report methodology  and substance,                                                                    
not policy issues regarding specific indirect expenditures.                                                                     
                                                                                                                                
MACKENZIE  MERRILL,  ECONOMIST   I,  TAX  ECONOMIC  RESEARCH                                                                    
GROUP, DEPARTMENT OF REVENUE, reviewed slide 3: "Overview":                                                                     
                                                                                                                                
   Indirect Expenditure Report Legislation Overview                                                                             
                                                                                                                                
     Bill provisions, DOR  requirements, Legislative Finance                                                                    
     Division requirements                                                                                                      
                                                                                                                                
   Process and methodology for producing the DOR Indirect                                                                       
   Expenditure Report                                                                                                           
                                                                                                                                
   Overview of the DOR Indirect Expenditure Report                                                                              
                                                                                                                                
   Future Plans                                                                                                                 
                                                                                                                                
Ms. Merrill  discussed the legislation overview  in slide 5:                                                                    
"Indirect Expenditure Report Legislation Overview":                                                                             
                                                                                                                                
     Passed in 2014 and signed on July 7, 2014                                                                                  
                                                                                                                                
     The first DOR Indirect  Expenditure Report was released                                                                    
     the day after the bill was signed, July 8, 2014                                                                            
                                                                                                                                
     Requires  DOR to  submit a  report  to the  Legislature                                                                    
     biennially  on July  1 detailing  indirect expenditures                                                                    
     of all agencies in the State (AS 43.05.095)                                                                                
                                                                                                                                
     Requires the Legislative Finance  Division to provide a                                                                    
     report to the Legislature  on the indirect expenditures                                                                    
     of  certain agencies  before the  start of  Legislative                                                                    
     Session following the release of DOR's biennial report                                                                     
                                                                                                                                
     Modifies or implements sunset  dates on certain non-oil                                                                    
     and gas tax credits                                                                                                        
                                                                                                                                
Ms.  Merrill  touched  on   the  original  legislation  that                                                                    
created the report. She noted  that in statue the report was                                                                    
due on  July 1, 2014.  However, the report was  not released                                                                    
until July  8, 2014,  the day following  the signing  of the                                                                    
bill. She  pointed out that  the report was  published every                                                                    
two  years.  The  Legislative  Finance  Division  (LFD)  was                                                                    
required to provide an analysis  of indirect expenditures of                                                                    
specific agencies subsequent to the report's release.                                                                           
                                                                                                                                
1:36:45 PM                                                                                                                    
                                                                                                                                
Ms.  Merrill  explained   slide  6:  "Indirect  Expenditures                                                                    
Defined":                                                                                                                       
                                                                                                                                
   Indirect expenditure: Any  foregone revenue by  the state                                                                    
   designed to encourage an  activity to benefit  the public                                                                    
   in the form of a credit,  exemption, deduction, deferral,                                                                    
   discount, exclusion, or other differential allowance.                                                                        
                                                                                                                                
   As defined by AS 43.05.095(d):                                                                                               
                                                                                                                                
   A tax credit or other credit                                                                                                 
                                                                                                                                
   An exemption, but does not include federal tax exemptions                                                                    
   adopted by reference in AS43.20.021                                                                                          
                                                                                                                                
   A discount                                                                                                                   
                                                                                                                                
   A deduction, but does  not include costs incurred  in the                                                                    
   ordinary course  of  business that  are  deducted in  the                                                                    
   calculation  of  a  tax  under  this   title  or  in  the                                                                    
   calculation of a royalty or net profit share payment for                                                                     
   a lease issued under AS 38                                                                                                   
                                                                                                                                
   A differential allowance                                                                                                     
                                                                                                                                
Ms.  Merrill   provided  the   definition  of   an  indirect                                                                    
expenditure  and reviewed  its  importance.  She noted  that                                                                    
many other states had tax  expenditure reports. However, the                                                                    
tax  expenditures  were  typically   tied  directly  to  tax                                                                    
systems.  Alaska had  many indirect  expenditures that  were                                                                    
not directly  linked to  its tax  system. The  Department of                                                                    
Revenue's (DOR)  report included  more variety and  was much                                                                    
more inclusive  of expenditures outside of  tax credits. She                                                                    
cited  the  example of  military  discounts  on hunting  and                                                                    
fishing licenses.                                                                                                               
                                                                                                                                
Ms.  Merrill turned  to slide  7: "DOR  Indirect Expenditure                                                                    
Report":                                                                                                                        
                                                                                                                                
     Released July 8, 2014 by DOR                                                                                               
                                                                                                                                
     Based in part on the 2013 Legislative Research report,                                                                     
     Indirect Expenditures, Provisions in Alaska Law                                                                            
                                                                                                                                
     Provides details on 251 indirect expenditures across                                                                       
     11 departments and agencies, including 78 provisions                                                                       
     administered by DOR                                                                                                        
                                                                                                                                
     A   cooperative    effort   between   the    10   other                                                                    
     participating agencies, coordinated by DOR                                                                                 
                                                                                                                                
Ms. Merrill  commented that  the department  maintained some                                                                    
of  the  formatting  from   the  2013  Legislative  Research                                                                    
Report, a  report that  also provided  some ground  work for                                                                    
departments  that   contributed  to  the  DOR   report.  She                                                                    
acknowledged  the   collaborative  efforts  of   the  report                                                                    
contributors.                                                                                                                   
                                                                                                                                
Ms. Merrill reviewed slide 8: "Credit Sunset Dates":                                                                            
                                                                                                                                
     The Indirect Expenditure Report legislation modified                                                                       
     sunset dates on certain credits:                                                                                           
                                                                                                                                
     December 31, 2016 for the Winn Brindle Scholarship tax                                                                     
     credit and the salmon utilization tax credit                                                                               
                                                                                                                                
     December 31, 2018 for the film production credit and                                                                       
     the education credit                                                                                                       
                                                                                                                                
     December 31, 2020 for the salmon product development                                                                       
                                                                                                                                
          credit and the Community Development Quote (CDQ)                                                                      
          credit                                                                                                                
                                                                                                                                
Ms. Merrill relayed that sunset  dates allowed for a regular                                                                    
review of tax  credits which was a common  practice in other                                                                    
states that generated similar reports.                                                                                          
                                                                                                                                
1:39:45 PM                                                                                                                    
                                                                                                                                
Ms.   Merrill   pointed   to  slide   10:   "Methodology   -                                                                    
Internally":                                                                                                                    
                                                                                                                                
     Internally:                                                                                                                
                                                                                                                                
     Work began in April 2014 with a dedicated economist                                                                        
     and dedicated time from others, including:                                                                                 
                                                                                                                                
        Audit supervisors and staff                                                                                             
                                                                                                                                
        Accounting supervisors and staff                                                                                        
                                                                                                                                
        DOR IT                                                                                                                  
                                                                                                                                
        Other Economic Research Group Staff                                                                                     
                                                                                                                                
        Department of Law                                                                                                       
                                                                                                                                
Ms. Merrill  presented the process and  methodology that DOR                                                                    
used for  completing the  2014 Indirect  Expenditure Report.                                                                    
She  mentioned  there was  a  dedicated  economist and  time                                                                    
dedicated  by volunteers.  She emphasized  that Dan  Stickel                                                                    
had been  very involved in  reviewing drafts and  helping to                                                                    
coordinate with the Department of Law (DOL).                                                                                    
                                                                                                                                
Ms.   Merrill  reported   on   slide   11:  "Methodology   -                                                                    
Externally":                                                                                                                    
                                                                                                                                
     Externally:                                                                                                                
                                                                                                                                
     DOR met with other departments and agencies and sent                                                                       
     out a survey for the report                                                                                                
                                                                                                                                
     Each  agency  examined  their  operations  to  identify                                                                    
     indirect   expenditures   and   report   the   required                                                                    
     information                                                                                                                
                                                                                                                                
     Many   departments   identified   additional   indirect                                                                    
     expenditures that needed to be added                                                                                       
                                                                                                                                
        Submissions from other departments and agencies are                                                                     
        not independently verified                                                                                              
                                                                                                                                
Ms.   Merrill  explained   that  when   DOR  met   with  the                                                                    
departments  and agencies  they laid  out expectations.  The                                                                    
Department  of Revenue  also sent  out a  survey to  solicit                                                                    
information  for   the  report.  She  reiterated   that  the                                                                    
Legislative Research  Report helped  to lay the  ground work                                                                    
allowing for the department  to identify additional indirect                                                                    
expenditures. The  Department of  Revenue hoped  that, going                                                                    
forward, departments  would improve on  identifying indirect                                                                    
expenditures within their operations.                                                                                           
                                                                                                                                
Ms. Merrill scrolled to slide 12: "Reported Information":                                                                       
                                                                                                                                
     Each department  was required  to report  the following                                                                    
     information:                                                                                                               
                                                                                                                                
     The name of the indirect expenditure                                                                                       
                                                                                                                                
     A brief description                                                                                                        
                                                                                                                                
     The statutory authority                                                                                                    
                                                                                                                                
     The repeal date, if applicable                                                                                             
                                                                                                                                
     The intent  of the legislature in  enacting the statute                                                                    
     authorizing the indirect expenditure                                                                                       
                                                                                                                                
     The public purpose served by the indirect expenditure                                                                      
                                                                                                                                
     The   estimated   revenue   impact  of   the   indirect                                                                    
     expenditure   for  the   previous  five   fiscal  years                                                                    
     (excluding  the fiscal  year immediately  preceding the                                                                    
     date the report is due)                                                                                                    
                                                                                                                                
     The   estimated  cost   to   administer  the   indirect                                                                    
     expenditure, if applicable                                                                                                 
                                                                                                                                
     The   number   of   beneficiaries   of   the   indirect                                                                    
     expenditure                                                                                                                
                                                                                                                                
Ms.  Merrill  commented  that  the  list  was  laid  out  in                                                                    
statute. The  Department of Revenue  also asked  agencies to                                                                    
provide the year in which  each expenditure was enacted. She                                                                    
observed that there were many enacted prior to statehood.                                                                       
                                                                                                                                
Ms.   Merrill   advanced   to    slide   13:   "Review   and                                                                    
Coordination":                                                                                                                  
                                                                                                                                
     Before release, DOR methodology and report drafts were                                                                     
     reviewed by:                                                                                                               
                                                                                                                                
     Contributing agencies and departments                                                                                      
                                                                                                                                
     Legislative Finance Division                                                                                               
                                                                                                                                
     The Office of Management and Budget                                                                                        
                                                                                                                                
     The Bill Sponsor's staff                                                                                                   
                                                                                                                                
Ms.  Merrill  offered  that  DOR wanted  to  make  sure  all                                                                    
parties  involved understood  the  process and  methodology.                                                                    
Feedback was provided  in the report to  the extent possible                                                                    
given the compressed timeframe.                                                                                                 
                                                                                                                                
1:43:40 PM                                                                                                                    
                                                                                                                                
Ms. Merrill explained slide 15:  "Overview of DOR's Indirect                                                                    
Expenditure Report":                                                                                                            
                                                                                                                                
        Introduction, discussing the purpose of the report,                                                                     
        what is included in the report, and an explanation                                                                      
        of the limitations of the report                                                                                        
        The indirect expenditures are organized by:                                                                             
                                                                                                                                
          Departments, alphabetically                                                                                           
                                                                                                                                
               Divisions, alphabetically                                                                                        
                                                                                                                                
                    Grouped by Program Name (if applicable)                                                                     
                                                                                                                                
Ms. Merrill  discussed the contents of  the report including                                                                    
how the  indirect expenditures were organized.  She gave the                                                                    
example of multiple programs within  the tax division of the                                                                    
Department of Revenue.-                                                                                                         
                                                                                                                                
Ms.  Merrill talked  about slide  16: "Limitations  of DOR's                                                                    
Indirect Expenditure Report":                                                                                                   
                                                                                                                                
     Due to the short time constraints:                                                                                         
                                                                                                                                
        There is some missing or unverified information                                                                         
          "Cost to Administer" is limited                                                                                       
                                                                                                                                
          The "Legislative Intent" section of many indirect                                                                     
          expenditures was incomplete                                                                                           
                                                                                                                                
          In some cases "Number of Beneficiaries" required                                                                      
          additional work to ascertain the impact of the                                                                        
          indirect expenditure                                                                                                  
                                                                                                                                
        More time was needed to carry out in-depth analysis                                                                     
                                                                                                                                
Ms.  Merrill mentioned  that looking  forward DOR  wanted to                                                                    
establish a  concrete definition of "cost  to administer' in                                                                    
order  to be  consistent across  departments. She  indicated                                                                    
that the  department would be  meeting with  stakeholders to                                                                    
set  a definition.  She  asserted that  DOL  was helpful  in                                                                    
trying to  determine legislative  intent. She  reported that                                                                    
DOR would be examining some  of the expenditure history. She                                                                    
pointed  out the  need for  additional  time to  be able  to                                                                    
conduct  a more  in-depth examination.  The next  report was                                                                    
due in July  2016 which would allow for the  needed time for                                                                    
further analysis.                                                                                                               
                                                                                                                                
1:46:48 PM                                                                                                                    
                                                                                                                                
Ms. Merrill slide 18: "Future Plans":                                                                                           
                                                                                                                                
     Reaching out to the University of Alaska and the                                                                           
     Alaska Railroad for inclusion in future reports                                                                            
                                                                                                                                
     Reaching out  to the Office  of Management  and Budget,                                                                    
     the Legislative Finance Division,  and the Bill Sponsor                                                                    
     concerning  the  next  Indirect Expenditure  Report  in                                                                    
     2016                                                                                                                       
                                                                                                                                
     Refining definitions of "Cost of Administration" and                                                                       
     "Legislative Intent" by working with stakeholders                                                                          
                                                                                                                                
     Integrating DOR Indirect Expenditure Report reporting                                                                      
     with the new Tax Revenue Management System                                                                                 
                                                                                                                                
     Compiling feedback and suggestions which may be                                                                            
     incorporated into the next report in summer 2016                                                                           
                                                                                                                                
Ms. Merrill informed  the committee that DOR  was looking to                                                                    
include  additional departments  and  agencies  in the  next                                                                    
report. She relayed  that DOR would be conducting  a dry run                                                                    
of  indirect expenditure  reporting in  the state's  new tax                                                                    
revenue  management   system  to  ensure  that   any  needed                                                                    
information could  be extracted  from it. She  stressed that                                                                    
DOR welcomed any feedback or  suggestions to make the report                                                                    
a useful and effective document.                                                                                                
                                                                                                                                
Co-Chair  Neuman  asked Mr.  Stickel  for  his view  of  the                                                                    
recommendations  made in  the indirect  expenditures report.                                                                    
Specifically,  he wanted  Mr.  Stickel's  take on  potential                                                                    
economic impacts  on Alaskan communities. Mr.  Stickel asked                                                                    
if Co-Chair Neuman was referring  to the recommendations for                                                                    
each indirect expenditure.                                                                                                      
                                                                                                                                
Co-Chair Neuman responded in  the affirmative and referenced                                                                    
Mr.  Stickel's  comments  in  the  comment  section  of  the                                                                    
report.  Mr. Stickel  replied that  DOR's report  stated the                                                                    
facts including  a list of  indirect expenditures  and their                                                                    
corresponding  revenue  impacts.   The  Legislative  Finance                                                                    
Division  analyzed some  of  the  indirect expenditures  and                                                                    
made recommendations to keep, modify, or eliminate them.                                                                        
                                                                                                                                
Co-Chair  Neuman clarified  that Mr.  Stickel looked  at the                                                                    
expenditures  then categorized  them. Mr.  Stickel explained                                                                    
that  DOR  had  not   made  any  recommendations  about  the                                                                    
indirect expenditures.                                                                                                          
                                                                                                                                
1:50:49 PM                                                                                                                    
                                                                                                                                
Representative    Guttenberg    asked    about    unverified                                                                    
information from  agencies and  departments. He  wondered if                                                                    
Mr. Stickel would  go back to verify information  at a later                                                                    
time.  Ms.  Merrill responded  that  DOR  assumed they  were                                                                    
looking at the best  information possible. In future reports                                                                    
DOR  wanted to  be a  resource  if a  department was  having                                                                    
issues finding information or needed clarification.                                                                             
                                                                                                                                
Representative Guttenberg  asked how  unverified information                                                                    
would be  dealt with  in the  future. Mr.  Stickel responded                                                                    
that  DOR  would   be  looking  at  things   like  "cost  to                                                                    
administer." He  would make sure  that each of  the agencies                                                                    
was using the same definitions  for what they were reporting                                                                    
to DOR.                                                                                                                         
                                                                                                                                
1:53:03 PM                                                                                                                    
                                                                                                                                
Vice-Chair Saddler  asked if it  would be easy  to integrate                                                                    
the  Indirect  Expenditure  Report into  the  tax  reporting                                                                    
management  system (TRMS).  Mr.  Stickel  responded that  he                                                                    
anticipated a  straight forward integration. He  pointed out                                                                    
that  the report  requirement legislation  passed while  the                                                                    
revenue management  system project was already  underway. He                                                                    
also stated that the reports had  to be set up in the system                                                                    
in order  to generate  information. The department  would be                                                                    
setting up reports in the upcoming summer.                                                                                      
                                                                                                                                
Vice-Chair  Saddler   understood  that  it  was   the  first                                                                    
indirect expenditure  review required. He asked  Mr. Stickel                                                                    
to  discuss  the  most surprising  thing  uncovered  in  the                                                                    
process.  Mr. Stickel  responded that  the most  interesting                                                                    
item was  the significant  number of  indirect expenditures.                                                                    
He acknowledged that there were many indirect expenditures.                                                                     
                                                                                                                                
Representative  Edgmon  asked  if the  Indirect  Expenditure                                                                    
Report had  any role in reviewing  state agency performance.                                                                    
He  continued  that  many  programs   were  not  tied  to  a                                                                    
particular department that might  be able to be incorporated                                                                    
into the review process in the future.                                                                                          
                                                                                                                                
1:55:41 PM                                                                                                                    
                                                                                                                                
BRODIE  ANDERSON,  STAFF,   REPRESENTATIVE  STEVE  THOMPSON,                                                                    
began  his presentation  of the  Legislative Finance  Report                                                                    
Overview  and  a summary  of  findings.  He pointed  to  the                                                                    
goldenrod book  entitled, "Indirect Expenditure  Report." He                                                                    
read from a prepared statement:                                                                                                 
                                                                                                                                
     Like  mentioned previously  in  the DOR  presentations,                                                                    
     once an agency's  report is finished it  is provided to                                                                    
     the Legislature  and the Legislative  Finance Division.                                                                    
     At  the  start  of  every new  Legislature,  every  two                                                                    
     years,  the  Legislative  Finance Division  delivers  a                                                                    
     report analyzing  the Department of  Revenue's indirect                                                                    
     expenditure report  from the  specific agencies  to the                                                                    
     chair  of  the finance  committee  in  each house.  The                                                                    
     first  review  was  completed for  2015  for  the  29th                                                                    
     Legislature and included the following:                                                                                    
                                                                                                                                
          Department of Commerce, Community, and Economic                                                                       
          Development,                                                                                                          
                                                                                                                                
          Department of Fish and Game,                                                                                          
                                                                                                                                
         Department of Health and Social Services                                                                               
                                                                                                                                
          Department of Labor and Workforce Development,                                                                        
                                                                                                                                
          Department of Revenue                                                                                                 
                                                                                                                                
     The  next report  will come  out in  2017 for  the 30th                                                                    
     Legislature and that will include:                                                                                         
                                                                                                                                
          Alaska Court System                                                                                                   
                                                                                                                                
          Department of Administration                                                                                          
                                                                                                                                
          Department of Education and Early Development                                                                         
                                                                                                                                
         Department of Environmental Conservation                                                                               
                                                                                                                                
          Department of Natural Resources                                                                                       
                                                                                                                                
          Department    of    Transportation   and    Public                                                                    
          Facilities                                                                                                            
                                                                                                                                
     Finally  in 2019  for the  31st Legislature  the report                                                                    
     will review:                                                                                                               
                                                                                                                                
          All remaining agencies                                                                                                
                                                                                                                                
     Subsequent reviews of each agency  will occur every six                                                                    
     years  from  the  previous review  so  the  departments                                                                    
     reviewed  in  the current  year  in  the 2015  Indirect                                                                    
     Expenditure   Report   will   cycle   for   review   by                                                                    
     Legislative  Finance  Division  in 2021  for  the  32nd                                                                    
     Legislature.                                                                                                               
                                                                                                                                
     The Legislative  Finance Division  Indirect Expenditure                                                                    
     Report   is   required   to   provide   the   following                                                                    
     information and answer specific questions:                                                                                 
                                                                                                                                
        An estimate of the revenue foregone by the state                                                                        
        because of the indirect expenditure;                                                                                    
                                                                                                                                
        An estimate of the monetary benefit  of the indirect                                                                    
        expenditure to the recipients of the  benefit of the                                                                    
        indirect expenditure;                                                                                                   
                                                                                                                                
        A determination of whether the legislative intent of                                                                    
        the expenditure is being met;                                                                                           
                                                                                                                                
        A  recommendation  as   to  whether   each  indirect                                                                    
        expenditure  should   be  continued,   modified,  or                                                                    
        terminated, and a basis for the  recommendation;                                                                        
                                                                                                                                
        The expected effect on  the economy of the  state if                                                                    
        the state recommendation is executed;                                                                                   
                                                                                                                                
        An explanation  of the  methodology and  assumptions                                                                    
        used in preparing the report.                                                                                           
                                                                                                                                
     The Legislative Finance Division Report Summary:                                                                           
                                                                                                                                
          The report's introduction  provides an explanation                                                                    
          of  the methodology  and the  assumptions used  to                                                                    
          make the recommendations presented                                                                                    
                                                                                                                                
          On the  second page  of the introduction  which is                                                                    
          not identified with page numbers.                                                                                     
                                                                                                                                
          The actual  indirect expenditure report  begins on                                                                    
          page 3.                                                                                                               
                                                                                                                                
     The Page layout for each indirect expenditure:                                                                             
                                                                                                                                
          Above the divider line  reflects the Department of                                                                    
          Revenue submission of the indirect expenditure.                                                                       
                                                                                                                                
          Below  the  line  are  answers  to  questions  the                                                                    
          Legislative  Finance   Division  is   required  to                                                                    
          provide.                                                                                                              
                                                                                                                                
     Legislative Finance Division's recommendations can be                                                                      
     grouped in the following way:                                                                                              
                                                                                                                                
          Termination the indirect expenditure                                                                                  
                                                                                                                                
         Reconsideration the indirect expenditure                                                                               
                                                                                                                                
          Review the indirect expenditure                                                                                       
                                                                                                                                
          Continue the indirect expenditure                                                                                     
                                                                                                                                
          The final recommendations which is not a                                                                              
          recommendation                                                                                                        
                                                                                                                                
             Indirect expenditure listed might not actually                                                                     
             be an indirect expenditure by the definition                                                                       
                                                                                                                                
             Or no recommendation due to recent legislative                                                                     
             activities                                                                                                         
                                                                                                                                
2:00:44 PM                                                                                                                    
                                                                                                                                
Mr. Anderson continued reading from a prepared statement:                                                                       
                                                                                                                                
     The report recommends a total of 17 terminations to                                                                        
     certain indirect expenditures:                                                                                             
                                                                                                                                
        Two in Commerce Community and Economic Development                                                                      
                                                                                                                                
          Small Loan Company Exemption                                                                                          
                                                                                                                                
             Citing it is obsolete and ineffective                                                                              
                                                                                                                                
             Page 3                                                                                                             
                                                                                                                                
          Property Tax Equivalency Payment (Renters rebate)                                                                     
                                                                                                                                
             Citing it is not meeting legislative intent                                                                        
             due to the lack of appropriations since 2000                                                                       
             so the program may be obsolete                                                                                     
                                                                                                                                
             Page 9                                                                                                             
                                                                                                                                
        Three termination recommendations are in Fish and                                                                       
        Game                                                                                                                    
                                                                                                                                
          All of terminations are in the Commercial                                                                             
          Fisheries Entry Commission.                                                                                           
                                                                                                                                
          Termination recommended based on low usage and                                                                        
          small benefit.                                                                                                        
                                                                                                                                
        The largest share of termination recommendations, a                                                                     
        total of 12, are found in the Department of Revenue                                                                     
                                                                                                                                
          The recommendations  include oil & gas  tax, state                                                                    
          royalty  exploration   credits,  corporate  income                                                                    
          tax,  exemptions,  fees,  rates,  and  exclusions,                                                                    
          tobacco  tax   and  discounts,  motor   fuel  tax,                                                                    
         commercial vessel tax, and the tire tax.                                                                               
                                                                                                                                
     It is  difficult to  assign a  direct dollar  amount to                                                                    
     the  potential  savings  since  there  is  not  a  true                                                                    
     dollar-to-dollar  translation  between what  the  state                                                                    
     forgoes versus what the state might collect.                                                                               
                                                                                                                                
          Potential  loss   of  foregone  revenue   is  $446                                                                    
          thousand.                                                                                                             
                                                                                                                                
          Not including five unknown costs estimates                                                                            
                                                                                                                                
          One indeterminate                                                                                                     
                                                                                                                                
2:03:38 PM                                                                                                                    
                                                                                                                                
Mr. Anderson further read from a prepared statement:                                                                            
                                                                                                                                
     One of the potential  terminations, the cigarette tax -                                                                    
     tax stamp  discount found on  page 142 of  the Indirect                                                                    
     Expenditure Report. Below is a  sample of portions of a                                                                    
     termination:                                                                                                               
                                                                                                                                
          Department of Revenue Submission per AS 43.05.095                                                                     
                                                                                                                                
          (1) Description of Provision                                                                                          
          Gives a discount of up  to $50,000 as compensation                                                                    
          for affixing stamps to packs of cigarettes.                                                                           
                                                                                                                                
          (5) Legislative Intent                                                                                                
          To provide a discount  to compensate taxpayers for                                                                    
         the cost of affixing stamps to each pack.                                                                              
                                                                                                                                
          Legislative Finance Analysis per AS 24.20.235                                                                         
                                                                                                                                
          (1) Estimate  of Annual Foregone Revenue  is about                                                                    
          $313,192                                                                                                              
                                                                                                                                
          (2)  Estimate  of  Annual  Benefit  to  Recipients                                                                    
          $24,092                                                                                                               
                                                                                                                                
          (3) Legislative Intent Met: Yes`                                                                                      
          (4)  Should   it   be   Continued,   Modified   or                                                                    
          Terminated?  Recommend  termination. The  cost  of                                                                    
          affixing stamps  to packs of cigarettes  should be                                                                    
          considered  a   cost  of  selling   cigarettes  in                                                                    
          Alaska.                                                                                                               
                                                                                                                                
Mr. Anderson continued reading from a prepared statement:                                                                       
                                                                                                                                
     Another  group  of   potential  terminations  is  early                                                                    
     filing  discounts.  The   policy  discussion  might  be                                                                    
     whether  or not  the state  continues to  provide early                                                                    
    filing discounts versus a penalty for filing late.                                                                          
                                                                                                                                
     The  next  block  of  recommendations  come  under  two                                                                    
     recommendations;    either   reconsider    or   review.                                                                    
     Reconsider is  more directed towards a  critique of the                                                                    
     actual expenditure  and the review is  directed towards                                                                    
     the policy  discussions and overall structure  of where                                                                    
     the fee or indirect expenditure is located.                                                                                
                                                                                                                                
     Reconsideration. The  report recommends  a total  of 33                                                                    
     indirect expenditures be reconsidered:                                                                                     
                                                                                                                                
     1) Fourteen are  in  Commerce  Community  and  Economic                                                                    
        Development:                                                                                                            
        a) Corporation filings and reporting recommendations                                                                    
          found on  pages 13 through 18.  The recommendation                                                                    
          was   for  reconsideration   of  the   entire  fee                                                                    
          structure to  determine if Alaska's  fee structure                                                                    
          is effective and competitive with other states.                                                                       
        b) Property tax exemption which has not been funded                                                                     
          since 1997.                                                                                                           
                                                                                                                                
     2) There  is  one  reconsideration  for   each  of  the                                                                    
        indirect expenditures found in the Department of                                                                        
        Fish and Game and in the Department of Health and                                                                       
        Social Services.                                                                                                        
                                                                                                                                
     3) Department of  Labor  has  four  recommendations  of                                                                    
        reconsideration.                                                                                                        
        a) Workers compensation, Alaska Vocational Technical                                                                    
          Education Center (AVTEC),  and Occupational Safety                                                                    
          and Health Administration (OSHA) programs.                                                                            
                                                                                                                                
     4) There are  13 recommendations  in the  Department of                                                                    
        Revenue for reconsideration:                                                                                            
        a) Some of  the   highlighted  reconsiderations  are                                                                    
          corporation   income   tax   fee   and   structure                                                                    
          regarding their effectiveness.                                                                                        
        b) The state's motor  fuel tax  was recommended  for                                                                    
          reconsideration.                                                                                                      
                                                                                                                                
     5) There are $42 million of  indirect expenditures that                                                                    
        were recommended for reconsideration.                                                                                   
                                                                                                                                
Co-Chair Thompson used the indirect  expenditure report as a                                                                    
tool.  Once he  saw so  many of  the corporation  income tax                                                                    
fees and filings  he submitted a request  to the Legislative                                                                    
Research  department  to  conduct a  project  that  compared                                                                    
Alaska's corporate income tax  structure to other states' in                                                                    
the nation.                                                                                                                     
                                                                                                                                
2:07:56 PM                                                                                                                    
                                                                                                                                
Mr. Brodie continued reporting from a prepared testimony:                                                                       
                                                                                                                                
     Review. The  report recommends a  total of  24 indirect                                                                    
     expenditures be reviewed:                                                                                                  
                                                                                                                                
     1) The  bulk  of  the   recommended  reviews  suggested                                                                    
        involve the  Department of  Fish and  Game licensing                                                                    
        fees:                                                                                                                   
        a) Some of the highlighted  reconsiderations include                                                                    
          a corporation income tax fee and the structure                                                                        
          regarding their effectiveness.                                                                                        
        b) Insufficient funds to cover the  annual operating                                                                    
          and capital costs                                                                                                     
                                                                                                                                
     2) Total indirect expenditure that  was recommended for                                                                    
        review is roughly $72 million.                                                                                          
                                                                                                                                
     Continuation.  The  report  recommends a  total  of  37                                                                    
     indirect expenditures be allowed to continue:                                                                              
                                                                                                                                
     1) Many of the reason way they recommended continuation                                                                    
        is because  they are  currently meeting  legislative                                                                    
        intent  and  have   a  measurable  benefit   to  the                                                                    
        recipients.                                                                                                             
                                                                                                                                
     2) Required  for  compliance   in  federal  law   or  a                                                                    
        necessary component of state operation                                                                                  
                                                                                                                                
     No  recommendation.  The  report  has  a  total  of  20                                                                    
    indirect expenditures that have no recommendation:                                                                          
                                                                                                                                
     1) The majority of  the no recommendations  are because                                                                    
        of  recent   legislative  activity   regarding  that                                                                    
        expenditure                                                                                                             
        a) Includes the majority of the Oil & Gas Production                                                                    
          Tax                                                                                                                   
     2) Many of the tax credits that had sunsets established                                                                    
        or changed through the legislation  that created the                                                                    
        Indirect Expenditure report                                                                                             
                                                                                                                                
Mr. Anderson continued reading from a prepared statement:                                                                       
                                                                                                                                
     Removal  from  the  Report. There  are  three  indirect                                                                    
     expenditures  that  the  Legislative  Finance  Division                                                                    
     thought   did   not   fit  the   indirect   expenditure                                                                    
     definition.                                                                                                                
                                                                                                                                
     No action.  Two indirect expenditure either  expired or                                                                    
     are slated to  expire and require no  action since they                                                                    
     are not being utilized.                                                                                                    
                                                                                                                                
     Action  needed.  One  Indirect  expenditure  will  need                                                                    
     passage  of  legislation  to extend  a  sunset  or  the                                                                    
     credit will expire in 2016:                                                                                                
                                                                                                                                
     1) Winn Bridle Scholarship listed on page 180.                                                                             
                                                                                                                                
     What is next:                                                                                                              
                                                                                                                                
     1) Major legislation  to repeal  some  of the  indirect                                                                    
        expenditures that are recommended for termination.                                                                      
                                                                                                                                
     2) Further legislative  research to  review tax  rates,                                                                    
        exemptions, fees, discounts for effectiveness within                                                                    
        a certain  department. In  expectation  a change  in                                                                    
        policy  through  legislation  or   practices  within                                                                    
        departments  can   reduce  some   of  the   indirect                                                                    
        expenditures  that   are  costing   more  than   the                                                                    
        perceived benefit.                                                                                                      
                                                                                                                                
     3) Discussions  of  the  overall   direction  of  state                                                                    
        indirect expenditure  policy,  potentially  limiting                                                                    
        the creation of new indirect expenditures.                                                                              
                                                                                                                                
     4) Individual legislation to address specific indirect                                                                     
        expenditures like the cigarette tax stamp or                                                                            
        property tax exemption.                                                                                                 
                                                                                                                                
Representative Wilson wondered if  the terminations could be                                                                    
dealt  with  in  one  piece  of  legislation.  Mr.  Anderson                                                                    
responded that the decision would  be up to the legislature.                                                                    
He commented that  some terminations would fit  well into an                                                                    
omnibus bill and others would not.                                                                                              
                                                                                                                                
Representative Wilson was not looking  for a policy. She did                                                                    
not   know  if,   for  example,   terminations  within   the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED) had  to be kept  separate from other  agency related                                                                    
terminations. She wondered if  the cause for termination had                                                                    
anything  to do  with dividing  terminations into  different                                                                    
pieces of legislation. Mr. Anderson  responded that he would                                                                    
provide  additional   information  to   the  chair   of  the                                                                    
committee.                                                                                                                      
                                                                                                                                
2:12:56 PM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman  offered  that  he had  worked  on  another                                                                    
project in  which he had  requested LFD review  fiscal notes                                                                    
from the  previous ten years.  He believed that it  was good                                                                    
public policy to work with  the departments to see what laws                                                                    
could  be removed  from  the books.  In  the current  fiscal                                                                    
climate he wanted to closely  examine which statutes were no                                                                    
longer needed but continued to  add to the state's operating                                                                    
costs.                                                                                                                          
                                                                                                                                
Representative Gara joined the committee.                                                                                       
                                                                                                                                
Representative Edgmon  asked about reporting  mechanisms for                                                                    
the  indirect expenditures  and whether  there were  printed                                                                    
copies. Mr. Anderson deferred the question to DOR and LFD.                                                                      
                                                                                                                                
Representative  Edgmon  wondered  about  the  fiscal  impact                                                                    
associated with all  of the paper transactions  having to do                                                                    
with  indirect  expenditures.  He supposed  there  was  some                                                                    
fiscal  impact   having  to  do   with  the   related  paper                                                                    
transactions. Mr.  Stickel confirmed  that there  were costs                                                                    
connected to  the paper transactions. He  indicated that DOR                                                                    
would  be  closely looking  at  administrative  costs to  be                                                                    
included in the 2016 report.                                                                                                    
                                                                                                                                
2:15:25 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki asked about  the estimate of revenue                                                                    
foregone by  the state because  of indirect  expenditures in                                                                    
HB 306.  He relayed  that the bill  did not  have deductions                                                                    
for costs  that were incurred  during the regular  course of                                                                    
taxation, mainly in  the oil and gas tax  section. He wanted                                                                    
DOR  to provide  comments. Co-Chair  Thompson reported  that                                                                    
oil and  gas were specifically left  out of HB 306  and were                                                                    
not part of the review.                                                                                                         
                                                                                                                                
Representative  Kawasaki  asked  if  Co-Chair  Thompson  was                                                                    
referring to  all oil and  gas. Mr. Anderson  responded that                                                                    
there  was  an  exclusion   for  all  indirect  expenditures                                                                    
related to Title  38 of the Alaska  Statutes, which included                                                                    
the oil and gas credits and expenditures.                                                                                       
                                                                                                                                
Representative Kawasaki  asked if the amount  deducted was a                                                                    
significant number. Mr. Stickel  indicated that when looking                                                                    
at taxes there  was the issue of which  deductions were part                                                                    
of determining  the tax base  versus credits  and exemptions                                                                    
against  the  tax  base. He  commented  that  DOR  primarily                                                                    
looked at credits, exemptions,  and deductions that occurred                                                                    
after the tax base was calculated.  He referred to page 3 of                                                                    
the department's summary, which  addressed the definition of                                                                    
the  indirect  expenditures  in  more  detail  than  in  the                                                                    
presentation. He  also mentioned that there  was a narrative                                                                    
in the report  that explained some of the  decisions made by                                                                    
the department.                                                                                                                 
                                                                                                                                
Representative  Kawasaki relayed  that he  would review  the                                                                    
narrative.                                                                                                                      
                                                                                                                                
2:18:22 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg  referred  to   page  97  of  the                                                                    
Indirect   Expenditure  Report   under   revenue  where   it                                                                    
discussed  exploration incentive  credits.  He wondered  why                                                                    
the  exploration  incentive  credit  was  not  considered  a                                                                    
direct expenditure. He furthered  that the exemption for oil                                                                    
and gas was a direct expenditure. He restated his question.                                                                     
                                                                                                                                
Ms. Merrill  responded with the  example of  the exploration                                                                    
incentive credit. She reported  that the credit was foregone                                                                    
revenue  in  the   sense  that  the  state   was  trying  to                                                                    
incentivize behavior  without direct spending by  the state.                                                                    
For  example,  the  credit  could  be  applied  against  tax                                                                    
liability.  The  intent  of  the  credit  was  to  encourage                                                                    
geophysical work  on state  land so  the state  could manage                                                                    
its  lands  more effectively.  The  state  was not  directly                                                                    
giving anyone  money but was  reducing their  tax liability.                                                                    
She  stated that  based  on the  definition  of an  indirect                                                                    
expenditure the credits were considered indirect.                                                                               
                                                                                                                                
Representative  Guttenberg  remarked  that  the  exploration                                                                    
incentive credit  had not  been used  since 1978  [NOTE: Per                                                                    
page 97  of the Indirect  Expenditure Report the  credit was                                                                    
enacted  in  1978  and  was  last used  a  decade  ago].  He                                                                    
wondered  if there  was  a way  to compare  the  use of  the                                                                    
exploration incentive  credit to the use  of the alternative                                                                    
credit  for  exploration  or if  a  comparison  was  already                                                                    
available.  Mr. Stickel  responded that  the department  was                                                                    
not ready  to discuss  specific policy decisions  during the                                                                    
current presentation, but could  follow up with a comparison                                                                    
of the two different incentives.                                                                                                
                                                                                                                                
Representative Guttenberg  replied that  he would  discuss a                                                                    
comparison with Mr. Stickel at another time.                                                                                    
                                                                                                                                
2:21:30 PM                                                                                                                    
                                                                                                                                
Representative  Gara referred  to page  122 of  the Indirect                                                                    
Expenditure  Report. He  commented  that  under the  state's                                                                    
corporate tax there  was a varied tax rate  depending on how                                                                    
much profit  was made.  The tax  rate remained  low up  to a                                                                    
certain  amount  of profit  and  increased  above a  certain                                                                    
level of profit maxing out  at approximately 9 percent for a                                                                    
C corporation. If a business  wanted to avoid taxes it could                                                                    
become  an S  corporation. When  the state  used to  have an                                                                    
income tax all  the other businesses paid  taxes through the                                                                    
owner's personal  income tax. When the  state terminated the                                                                    
income  tax  all of  the  taxation  of  the other  forms  of                                                                    
corporations disappeared. He opined  that all a business had                                                                    
to do  was become  an S corporation  to avoid  paying taxes.                                                                    
The  report suggested  that the  S corporation  exemption be                                                                    
lifted. He  felt the committee  should consider  lifting the                                                                    
exemption  for  those  businesses  with  a  profit  of  $200                                                                    
thousand  or more.  He  asked Mr.  Stickel  for his  opinion                                                                    
about the S corporation exemption.                                                                                              
                                                                                                                                
Co-Chair Thompson commented that  Florida was the only state                                                                    
that  taxed S  corporations.  Representative Gara  furthered                                                                    
that  every  state  that  had an  income  tax  received  its                                                                    
revenue through an income tax.                                                                                                  
                                                                                                                                
Mr.   Anderson   interjected  that   Representative   Gara's                                                                    
question  was an  indicator  that  the Indirect  Expenditure                                                                    
Report was  successful in pointing  out items such as  the S                                                                    
corporation exclusion to help  make better policy decisions.                                                                    
Representative  Gara added  that  the termination  of the  S                                                                    
corporation exemption would affect him personally.                                                                              
                                                                                                                                
Representative   Gara   pointed   to   another   expenditure                                                                    
termination, the  reduced rate for capital  gains, listed on                                                                    
page 124.  He suggested that  companies could turn  a profit                                                                    
into a capital  gain through bookkeeping. The  tax on income                                                                    
classified  as  a capital  gain  was  4.5 percent  versus  9                                                                    
percent  on income  for an  S corporation.  He was  not sure                                                                    
about  the   particular  effects  of  the   termination  and                                                                    
surmised that the effect could be revenue neutral.                                                                              
                                                                                                                                
2:25:06 PM                                                                                                                    
                                                                                                                                
Representative  Munoz referred  to page  98 of  the Indirect                                                                    
Expenditure Report. She reported  that the tax credits under                                                                    
the Alaska's Clear and Equitable  Share (ACES) tax system in                                                                    
FY 13 equated  to $772 million. She asked  whether the state                                                                    
had further credits in FY 14.  If so, she wanted to know the                                                                    
amount. Also, she  asked for the dollar  amount generated in                                                                    
FY 14  from the  new tax  credits under  SB 21  [More Alaska                                                                    
Production Act  (MAPA) passed in  2013]. She wanted  to know                                                                    
how the two credits compared.  Mr. Stickel responded that in                                                                    
terms  of the  production tax  credits  in total  for FY  14                                                                    
there were  $888 million in  credits used  against liability                                                                    
and $593  million purchased by  the state. The total  for FY                                                                    
14 included  both the qualified capital  expenditure credits                                                                    
as well as  other production tax credits. He  stated that he                                                                    
would be happy to follow up with additional detail.                                                                             
                                                                                                                                
Representative  Munoz responded  that the  information would                                                                    
be helpful. She  also asked if the $593 million  was used to                                                                    
purchase  the old  credits under  the previous  ACES system.                                                                    
Mr.  Stickel  responded that  the  money  was primarily  the                                                                    
qualified  capital  expenditure  credits and  net  operating                                                                    
loss credits.                                                                                                                   
                                                                                                                                
Representative  Munoz  asked for  a  comparison  of the  two                                                                    
credits and  how they  compare under  ACES versus  MAPA. Mr.                                                                    
Stickel commented  that the department  was producing  a few                                                                    
work products that could be provided to the committee.                                                                          
                                                                                                                                
Co-Chair  Thompson  directed  Mr.  Stickel  to  provide  the                                                                    
information to his office.                                                                                                      
                                                                                                                                
Representative  Kawasaki  referenced the  qualified  capital                                                                    
expenditure credit.  He indicated that it  was a substantial                                                                    
number and that  it had grown more than  LFD had considered.                                                                    
At the  beginning of the  current session LFD  reported that                                                                    
the number  would decline  due to SB  21. He  commented that                                                                    
the credit was primarily  for investment and maintenance for                                                                    
the existing  infrastructure. However, he purported  that it                                                                    
did  not make  any suggestions  or recommendations  to apply                                                                    
the tax to Cook Inlet. He  wanted to know what percentage of                                                                    
each  of the  years was  applied  to Cook  Inlet versus  the                                                                    
North Slope.                                                                                                                    
                                                                                                                                
Mr.  Stickel responded  that in  terms of  the credits  used                                                                    
against  tax  liability, it  was  applied  primarily to  the                                                                    
North  Slope.  The  credits  purchased  by  the  state  were                                                                    
divided about equally between the  North Slope and non-North                                                                    
Slope areas. There  would be more detail  in the information                                                                    
he would  provide to the  committee. He reiterated  that the                                                                    
department's  report  provided a  list  of  credits for  the                                                                    
legislature to consider.                                                                                                        
                                                                                                                                
Representative   Kawasaki  asked   about   the  well   lease                                                                    
expenditure credit and noted the  specific reference to Cook                                                                    
Inlet and the  lack of public information.  He was concerned                                                                    
with being able  to make a qualified decision  as to whether                                                                    
legislative intent was  met without having access  to all of                                                                    
the  facts.   He  wondered   if  DOR   had  access   to  the                                                                    
information.  If so,  he  wanted  to know  how  it would  be                                                                    
conveyed to the legislature.                                                                                                    
                                                                                                                                
Mr.  Stickel   responded  that   the  department   had  some                                                                    
confidentiality restraints in  reporting certain credits. He                                                                    
suggested if  there was a tax  credit in which only  one tax                                                                    
payer took  the credit,  the department  would have  to hold                                                                    
that information in confidence. He  pointed out that DOR had                                                                    
made an  extensive effort to  ensure that the  maximum level                                                                    
of  detail  regarding  the  credits   was  provided  to  the                                                                    
legislature. He reassured the committee  that there would be                                                                    
additional  detail on  some of  the credits  provided beyond                                                                    
what was in the Indirect Expenditure Report.                                                                                    
                                                                                                                                
2:30:16 PM                                                                                                                    
                                                                                                                                
Representative   Pruitt  wondered   how  many   people  were                                                                    
employed  by the  state to  administer the  tax credits.  He                                                                    
expressed his concerns about the  related costs. Mr. Stickel                                                                    
did not have the number  immediately at hand. He deferred to                                                                    
Mr. Burnett.                                                                                                                    
                                                                                                                                
JERRY  BURNETT,  DEPUTY   COMMISSIONER,  TREASURY  DIVISION,                                                                    
DEPARTMENT OF  REVENUE, reported that the  department was in                                                                    
the  process of  putting  together the  information for  Co-                                                                    
Chair Thompson  for the subcommittee. He  indicated that the                                                                    
information would be available within a week.                                                                                   
                                                                                                                                
Representative Pruitt asked Mr.  Burnett about the relevance                                                                    
of  the report.  He wanted  to  know if  the department  was                                                                    
interested in  taking the information  that it  gathered and                                                                    
giving the legislature a starting  point from which to work.                                                                    
He believed that tax credits were  not tax cuts. He asked if                                                                    
the department  would be  willing to lead  the state  on the                                                                    
issue.                                                                                                                          
                                                                                                                                
Mr. Burnett  responded that the  department had  been having                                                                    
several  internal discussions  on the  subject and  would be                                                                    
getting  back  to  the  committee.  He  furthered  that  the                                                                    
department was  not averse to  providing some  leadership in                                                                    
certain areas.                                                                                                                  
                                                                                                                                
Representative Pruitt appreciated Mr. Burnett's comments.                                                                       
                                                                                                                                
Co-Chair Thompson expressed his  pleasure in seeing interest                                                                    
in the  legislation and the Indirect  Expenditure Report. He                                                                    
opined that  the report  would be  a valuable  reference. He                                                                    
reviewed the schedule for the following day.                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:34:05 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:34 p.m.                                                                                          

Document Name Date/Time Subjects
Chapter 61 SLA 15 HB0306Z.pdf HFIN 2/10/2015 1:30:00 PM
LINK to Indirect Expenditure Report.pdf HFIN 2/10/2015 1:30:00 PM
LINK-DOR Indirect Expenditure Preliminary Report.pdf HFIN 2/10/2015 1:30:00 PM
2015 Indirect Expenditure Report Summary.pdf HFIN 2/10/2015 1:30:00 PM
HFinance DOR IER Presentation_MGM_20150210.pdf HFIN 2/10/2015 1:30:00 PM
DOR response HFIN Indirect Expenditure.pdf HFIN 2/10/2015 1:30:00 PM