Legislature(2015 - 2016)HOUSE FINANCE 519

04/08/2015 01:30 PM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 3:00 p.m. Today --
+= HB 88 FEES FOR TIRES TELECONFERENCED
Moved CSHB 88(FIN) Out of Committee
+= HB 116 EXTEND ALCOHOLIC BEVERAGE CONTROL BOARD TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+ HB 81 EXEMPTION: LICENSING OF CONTRACTORS TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 8, 2015                                                                                            
                         3:02 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
3:02:45 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 3:02 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                                                                                                                  
                                                                                                                                
Jane  Pierson, Staff,  Representative  Steve Thompson;  Anna                                                                    
Kim,  Tax  Division,  Department   of  Revenue;  Brandon  S.                                                                    
Spanos,  Deputy   Director,  Tax  Division,   Department  of                                                                    
Revenue;   Representative  Cathy   Tilton,  Sponsor;   Heath                                                                    
Hilyard,   Staff,   Representative   Cathy   Tilton;   Laura                                                                    
Stidolph, Staff, Representative  Kurt Olson; Micaela Fowler,                                                                    
Liaison,  Department  of  Commerce, Community  and  Economic                                                                    
Development;  Lacy  Sanders,  Analyst,  Legislative  Finance                                                                    
Division;  Cynthia Franklin,  Executive Director,  Alcoholic                                                                    
Beverage  Control Board,  Department of  Commerce, Community                                                                    
and Economic Development.                                                                                                       
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 81     EXEMPTION: LICENSING OF CONTRACTORS                                                                                   
                                                                                                                                
          HB 81 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 88     FEES FOR TIRES                                                                                                        
                                                                                                                                
          CSHB 88(FIN) was REPORTED out of committee with a                                                                     
          "do pass" recommendation and with one new fiscal                                                                      
          impact note from the Department of Revenue.                                                                           
                                                                                                                                
HB 116    EXTEND ALCOHOLIC BEVERAGE CONTROL BOARD                                                                               
                                                                                                                                
          HB 116 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
3:02:57 PM                                                                                                                    
                                                                                                                                
Co-Chair Thompson discussed the meeting agenda.                                                                                 
                                                                                                                                
HOUSE BILL NO. 88                                                                                                             
                                                                                                                                
     "An Act relating to remittance of tire fees; and                                                                           
     providing for an effective date."                                                                                          
                                                                                                                                
3:03:40 PM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for  HB  88,  Work  Draft  29-GH1044\W  (Nauman,                                                                    
4/6/15). There being NO OBJECTION, it was so ordered.                                                                           
                                                                                                                                
JANE   PIERSON,   STAFF,  REPRESENTATIVE   STEVE   THOMPSON,                                                                    
explained the changes in the  Committee Substitute (CS). The                                                                    
first change appeared on page 1,  lines 7 through 9 with the                                                                    
addition of the following language:                                                                                             
                                                                                                                                
     The department may only, on a form required under this                                                                     
     subsection, require a seller to provide information on                                                                     
     tires subject to the tax under this section.                                                                               
                                                                                                                                
Ms. Pierson  elaborated that the change  had originated from                                                                    
Co-Chair Neuman  based on a  lengthy form he  had previously                                                                    
shown the committee.  The second change appeared  on page 1,                                                                    
line 14  where the language  "not to exceed $900  a quarter"                                                                    
had been changed to "not to exceed $600 a quarter..."                                                                           
                                                                                                                                
Vice-Chair   Saddler  asked   for   verification  that   the                                                                    
department may only require a  seller to provide information                                                                    
on tires subject to the  tax. He asked for confirmation that                                                                    
the purpose  of the  language was  to limit  the information                                                                    
submitted  to the  department. Ms.  Pierson  replied in  the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Co-Chair  Thompson noted  that  Representative Kawasaki  had                                                                    
joined the  meeting. He remarked that  department staff were                                                                    
available for questions.                                                                                                        
                                                                                                                                
Representative  Kawasaki referred  to  the quarterly  return                                                                    
["Alaska Tire  Fees Quarterly Return" form  (copy on file)].                                                                    
He  thought  some   of  the  questions  on   the  form  were                                                                    
unnecessary and wondered who had developed the forms.                                                                           
                                                                                                                                
ANNA KIM, TAX DIVISION,  DEPARTMENT OF REVENUE, deferred the                                                                    
question to her colleague.                                                                                                      
                                                                                                                                
Co-Chair Neuman interjected  that he had gone  over the form                                                                    
with the Department  of Revenue (DOR). He  detailed that the                                                                    
department did not need to  know about tractor or ATV tires.                                                                    
The  requirements had  been slimmed  down to  the number  of                                                                    
passenger vehicles  and studded  tires the business  had and                                                                    
how many  it had sold.  He explained  that the fee  had been                                                                    
reduced  because  the  requirements had  been  slimmed  down                                                                    
significantly.                                                                                                                  
                                                                                                                                
Co-Chair Thompson noted the form was much shorter.                                                                              
                                                                                                                                
Representative Kawasaki  believed that sometimes  forms were                                                                    
more  complex than  necessary. He  would not  be opposed  to                                                                    
similar language for all forms requested by the government.                                                                     
                                                                                                                                
Co-Chair Thompson  clarified the question. He  remarked that                                                                    
the form had been simplified significantly.                                                                                     
                                                                                                                                
BRANDON   S.   SPANOS,   DEPUTY  DIRECTOR,   TAX   DIVISION,                                                                    
DEPARTMENT  OF  REVENUE, affirmed  that  the  form had  been                                                                    
simplified.  He detailed  that  the  department had  removed                                                                    
page  2 related  to  inventory. Additionally,  clarification                                                                    
had been added  to line 1 to indicate that  the question was                                                                    
related  to tires  subject  to the  fee  the department  was                                                                    
asking about. Other clarifying changes  had been made to the                                                                    
form  instructions.  He  noted   that  the  forms  would  be                                                                    
published as soon as possible.                                                                                                  
                                                                                                                                
Representative  Gattis  communicated  that tire  dealers  in                                                                    
Mat-Su had been  working with the department  to improve the                                                                    
form.  She   had  confidence  that  the   changes  would  be                                                                    
beneficial.                                                                                                                     
                                                                                                                                
Co-Chair  Thompson remarked  that Representative  Guttenberg                                                                    
had joined the meeting.                                                                                                         
                                                                                                                                
Co-Chair Thompson OPENED and CLOSED public testimony.                                                                           
                                                                                                                                
Co-Chair  Neuman  MOVED  to  REPORT   CSHB  88(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
Representative Gara facetiously  OBJECTED for discussion. He                                                                    
joked that he  had not made any comments about  the bill. He                                                                    
WITHDREW his OBJECTION.                                                                                                         
                                                                                                                                
There being NO further  OBJECTION, CSHB 88(FIN) was REPORTED                                                                    
out of  committee with a  "do pass" recommendation  and with                                                                    
one new fiscal impact note from the Department of Revenue.                                                                      
                                                                                                                                
3:10:59 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:13:59 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 81                                                                                                             
                                                                                                                                
     "An Act relating to an exemption from the regulation                                                                       
     of construction contractors."                                                                                              
                                                                                                                                
3:14:10 PM                                                                                                                    
                                                                                                                                
Co-Chair  Thompson  relayed  that   the  committee  had  not                                                                    
previously  heard the  legislation;  therefore,  he did  not                                                                    
intend to report the bill from committee that day.                                                                              
                                                                                                                                
REPRESENTATIVE   CATHY  TILTON,   SPONSOR,   spoke  to   the                                                                    
legislation. She shared that she  had introduced the bill at                                                                    
the  request   of  the   Mat-Su  Homebuilders,   the  Alaska                                                                    
Homebuilders,  and the  Alaska Board  of Realtors.  She read                                                                    
from a prepared statement:                                                                                                      
                                                                                                                                
     After  speaking with  some  contractors, realtors,  and                                                                    
     certain  individuals throughout  our  state, it  became                                                                    
     clear that there are individuals  who are exploiting an                                                                    
     unintended   loophole   in   the   existing   statutory                                                                    
     language.  Thus creating  an uneven  playing field  for                                                                    
     licensed  professionals  who  abide   by  the  law  and                                                                    
     potentially    exposing    unwitting   homebuyers    to                                                                    
     substandard construction.                                                                                                  
                                                                                                                                
     In short,  HB 81 is  really a consumer  protection bill                                                                    
     and is not  a bill to restrict fair trade.  In order to                                                                    
     better understand  HB 81 it is  important to understand                                                                    
     what it is not and what it  does not do. HB 81 does not                                                                    
     prevent Alaskans  from building  their own home,  HB 81                                                                    
     does  not prevent  Alaskans from  ever  selling a  home                                                                    
     that they've  built, and HB  81 does not propose  a new                                                                    
     licensure. It is  not, nor was it ever my  intent to do                                                                    
     any of those things.                                                                                                       
                                                                                                                                
     Under  current   state  law  the   licensed  contractor                                                                    
     exemption  opens up  a  situation  where an  unlicensed                                                                    
     contractor   can   operate   a   substantial   business                                                                    
     enterprise  while  avoiding   licensure,  bonding,  and                                                                    
     insurance  requirements.  HB  81 provides  a  means  of                                                                    
     notifying  the  department  if an  owner/builder  sells                                                                    
     their  home  before  a   two-year  period  in  existing                                                                    
     statute. The department is not  required to take action                                                                    
     on the  notification, but simply  is provided  with the                                                                    
     ability to see if homes  were being built repeatedly by                                                                    
     someone without a licensure.                                                                                               
                                                                                                                                
     The language before  you is a result of  a long process                                                                    
     of  working  with  the Homebuilders'  Association,  the                                                                    
     Department  of  Labor  and Workforce  Development,  and                                                                    
     individual Alaskans that  ally concerns of subjectivity                                                                    
     on the part of the  department, while making violations                                                                    
     to the exemption enforceable.                                                                                              
                                                                                                                                
     I  am  certain that  my  fellow  committee members  can                                                                    
     remember when they purchased their  first home and what                                                                    
     a  financial risk  that  is. It's  one  of the  biggest                                                                    
     financial obligations that  we make in our  life. HB 81                                                                    
     helps  us ensure  those homebuyers  that they  have the                                                                    
     expectations of a  uniform standard of professionalism.                                                                    
     HB   81  simply   seeks  to   reasonably  include   all                                                                    
     individuals engaged  in home construction as  a regular                                                                    
     course of business in the existing residential                                                                             
     contractor licensure.                                                                                                      
                                                                                                                                
3:17:40 PM                                                                                                                    
                                                                                                                                
Representative Gattis  communicated that  she had  signed on                                                                    
as a  co-sponsor during the  bill's early stages.  She noted                                                                    
that there were several things  she had questions about. She                                                                    
shared that  she had been  raised in  a house that  had been                                                                    
built  by  her  father   out-of-pocket.  She  spoke  to  her                                                                    
mother's complaint over  the years that the  house had never                                                                    
been completed. She discussed that  there were many Alaskans                                                                    
who built their own  homes out-of-pocket and sometimes never                                                                    
completed the  project. She  referenced the  two-year period                                                                    
in the bill.  She provided an example of a  family living in                                                                    
and building their  home. She wondered what  happened in the                                                                    
third year  if the  home was  still under  construction. She                                                                    
reasoned  that   some  homes  in   Alaska  had   been  under                                                                    
construction  for 10  to  15 years.  She  believed the  bill                                                                    
still had some struggles related  to the timeline (i.e. when                                                                    
construction   started,   stopped,    etcetera).   She   was                                                                    
supportive  of  the bill's  purpose,  but  wondered at  what                                                                    
point the house became "completed."                                                                                             
                                                                                                                                
HEATH HILYARD, STAFF,  REPRESENTATIVE CATHY TILTON, answered                                                                    
that  language had  been included  in the  most recent  bill                                                                    
version  (Work Draft  29-LS0346\E,  Strasbaugh, 3/19/15)  to                                                                    
ensure  that  Alaskans  were  not  unfairly  prevented  from                                                                    
selling their  home. He addressed questions  related to when                                                                    
a home was determined to be complete.                                                                                           
                                                                                                                                
3:20:24 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:22:29 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Thompson  set the  bill aside  [to obtain  the most                                                                    
recent CS].                                                                                                                     
                                                                                                                                
HB  81  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 116                                                                                                            
                                                                                                                                
     "An Act extending the termination date of the                                                                              
     Alcoholic Beverage Control Board; and providing for an                                                                     
     effective date."                                                                                                           
                                                                                                                                
3:22:45 PM                                                                                                                    
                                                                                                                                
LAURA  STIDOLPH, STAFF,  REPRESENTATIVE KURT  OLSON, relayed                                                                    
that  the bill  would  extend the  termination  date of  the                                                                    
Alcoholic Beverage Control (ABC) Board  to June 30, 2018. As                                                                    
requested, Cynthia  Franklin, Director of the  ABC Board had                                                                    
provided an updated fiscal note  with a cost analysis, which                                                                    
included  the breakdown  of expenditures.  She relayed  that                                                                    
department staff was present to speak to the fiscal note.                                                                       
                                                                                                                                
Representative  Wilson  referred  to the  fiscal  note.  She                                                                    
wondered if a $1.7 million  change in revenue was related to                                                                    
marijuana. She did  not see a breakout of  the numbers under                                                                    
the note's analysis section.                                                                                                    
                                                                                                                                
Ms.  Stidolph deferred  the question  to  the Department  of                                                                    
Commerce, Community and Economic Development.                                                                                   
                                                                                                                                
3:24:43 PM                                                                                                                    
                                                                                                                                
MICAELA FOWLER,  LIAISON, DEPARTMENT OF  COMMERCE, COMMUNITY                                                                    
AND ECONOMIC  DEVELOPMENT, relayed  that in addition  to the                                                                    
updated fiscal  note the department had  provided a document                                                                    
breaking out costs  related to alcohol and  costs related to                                                                    
marijuana.   She   elaborated   that  there   was   not   an                                                                    
appropriation request  specific to  marijuana in  the fiscal                                                                    
note. She  detailed that the  information had  been included                                                                    
because it  had been in  the governor's budget  request. She                                                                    
expounded that  the increment had  been stripped out  of the                                                                    
budget, but  if the money  was allocated elsewhere  it would                                                                    
be included in the ABC Board's budget.                                                                                          
                                                                                                                                
Representative  Wilson  believed   the  fiscal  note  should                                                                    
reflect  that  it  only  pertained to  the  ABC  Board.  She                                                                    
observed  that the  fiscal note  included $1.7  million more                                                                    
(related to marijuana) if the  bill was passed. She believed                                                                    
the new fiscal  note included funds needed by  the ABC Board                                                                    
in  addition to  what  the department  anticipated would  be                                                                    
needed for  a marijuana board.  She believed Ms.  Fowler had                                                                    
testified that the bill was  not asking for funds related to                                                                    
marijuana. She  opined that the  correct fiscal  note should                                                                    
only  be $1.752  million  if it  only  included the  alcohol                                                                    
portion.                                                                                                                        
                                                                                                                                
Co-Chair  Thompson   agreed  with   Representative  Wilson's                                                                    
synopsis.                                                                                                                       
                                                                                                                                
Representative Wilson  wondered if the fiscal  note would be                                                                    
adjusted when  the bill was  moved from  committee. Co-Chair                                                                    
Thompson replied in the affirmative.                                                                                            
                                                                                                                                
Representative Wilson  relayed that she was  not comfortable                                                                    
with including the  marijuana portion if the  amount was not                                                                    
known. She thought  the change would make  the fiscal impact                                                                    
zero  since the  $1.7  million was  collected  in fees  from                                                                    
alcohol license owners.                                                                                                         
                                                                                                                                
Ms. Fowler  replied that  the department  would not  draft a                                                                    
note to show  a zero, but the cost of  alcohol licensing did                                                                    
offset the entire cost of the ABC Board.                                                                                        
                                                                                                                                
Representative  Wilson  thought   the  note  would  indicate                                                                    
$1.752 million  under total  operating expense,  but nothing                                                                    
would come from general funds.                                                                                                  
                                                                                                                                
LACY   SANDERS,  ANALYST,   LEGISLATIVE  FINANCE   DIVISION,                                                                    
replied that the fiscal note  was informational only and was                                                                    
not  requesting an  appropriation.  She  explained that  the                                                                    
department  had illustrated  what had  been included  in the                                                                    
governor's FY 16 request. She  elaborated that the ABC Board                                                                    
technically  included the  marijuana  regulation, which  was                                                                    
included on  the fiscal note.  She explained  that marijuana                                                                    
regulation  was  currently  under  the purview  of  the  ABC                                                                    
Board.  The fiscal  note provided  an  accurate picture  and                                                                    
would not issue an appropriation.                                                                                               
                                                                                                                                
Representative Wilson observed that  the fiscal note did not                                                                    
include any indicator that it  was purely informational. She                                                                    
pointed out  that there was  a bill for the  marijuana board                                                                    
that she  anticipated would  have its  own fiscal  note. She                                                                    
had  not heard  of an  informational only  fiscal note.  She                                                                    
wondered if there would be a  problem if the fiscal note was                                                                    
limited to the bill's continuation  of the ABC Board and any                                                                    
generated fees associated with the board.                                                                                       
                                                                                                                                
Ms. Sanders answered  that there would be  a separate fiscal                                                                    
note  for  the board.  She  explained  that the  information                                                                    
included  in   the  current  fiscal  note   was  related  to                                                                    
regulation  of   marijuana,  which  was  not   a  board  for                                                                    
marijuana.  She clarified  that  a marijuana  board had  not                                                                    
been  established, which  would  happen  through a  separate                                                                    
bill. The  regulation of marijuana  had been set  up through                                                                    
the  [statewide]  voter  initiative  that  had  passed.  She                                                                    
furthered that  the department's budget reflected  money for                                                                    
the regulation of marijuana, not a board for marijuana.                                                                         
                                                                                                                                
Representative  Wilson asked  for verification  that if  the                                                                    
bill  passed  with the  current  fiscal  note the  committee                                                                    
would be  approving an additional  cost to the  General Fund                                                                    
of $1.5 million.                                                                                                                
                                                                                                                                
3:31:18 PM                                                                                                                    
                                                                                                                                
Ms. Sanders replied  in the negative. She  explained that if                                                                    
an appropriation  was required it  would be included  in the                                                                    
note's   first    column   titled    "FY2016   Appropriation                                                                    
Requested."  She clarified  that the  funds appeared  in the                                                                    
second   column  titled   "Included  in   Governor's  FY2016                                                                    
Request."  She   explained  that  the  increment   had  been                                                                    
included  in  the  governor's budget  as  submitted  to  the                                                                    
legislature.                                                                                                                    
                                                                                                                                
Representative  Edgmon noted  that the  initiative had  said                                                                    
"may"  create  an ABC  Board,  which  was reflected  in  the                                                                    
fiscal note. Ms. Sanders answered  that the establishment of                                                                    
a board  was in  a separate bill  before the  committee. The                                                                    
current legislation  pertained to  the extension of  the ABC                                                                    
Board and  its purview currently included  the regulation of                                                                    
marijuana.                                                                                                                      
                                                                                                                                
Co-Chair Thompson  noted that the initiative  called for the                                                                    
ABC Board  to oversee marijuana unless  a separate marijuana                                                                    
board was established. He reasoned  that the legislature had                                                                    
not  established a  marijuana board;  therefore, the  fiscal                                                                    
note was correct.                                                                                                               
                                                                                                                                
Vice-Chair Saddler  had never  seen an  informational fiscal                                                                    
note. He  asked for  verification that  if the  first column                                                                    
was  blank  it meant  a  note  was informational  only.  Ms.                                                                    
Sanders answered in the affirmative.  She elaborated that if                                                                    
additional money was necessary it  would appear in the first                                                                    
column.  She added  that the  term "informational  only" was                                                                    
frequently  used internally  within the  Legislative Finance                                                                    
Division office.                                                                                                                
                                                                                                                                
Representative  Pruitt  asked   to  clarify  the  difference                                                                    
between  the marijuana  and the  ABC  Board as  well as  the                                                                    
sources  of  funds.  He  pointed  to  the  fiscal  note  and                                                                    
surmised  that the  total  cost for  the  ABC Board  without                                                                    
marijuana in the current year  was $1.7 million. He remarked                                                                    
that the separate request was  for close to $1.6 million. He                                                                    
pointed to the  change in revenues and wondered  if it would                                                                    
cost the state more for the ABC Board without marijuana.                                                                        
                                                                                                                                
Ms.  Sanders   answered  that  the  fiscal   note  currently                                                                    
reflected  the revenue  generated  from alcohol  regulation.                                                                    
She  relayed that  eventually the  department would  develop                                                                    
regulations  for  marijuana  and would  potentially  collect                                                                    
fees  to cover  the  costs, the  cost  was indeterminate  at                                                                    
present.  She elaborated  that ultimately  there would  be a                                                                    
funding source change in future budgets.                                                                                        
                                                                                                                                
Representative   Pruitt   asked    for   verification   that                                                                    
eventually  the   fund  source  covering  cost   related  to                                                                    
marijuana would not be General  Fund. Ms. Sanders replied in                                                                    
the affirmative.  She added that  most likely  funding would                                                                    
come from  program receipts (code  1005), which  would cover                                                                    
the entire agency.                                                                                                              
                                                                                                                                
CYNTHIA  FRANKLIN,  EXECUTIVE DIRECTOR,  ALCOHOLIC  BEVERAGE                                                                    
CONTROL  BOARD,   DEPARTMENT  OF  COMMERCE,   COMMUNITY  AND                                                                    
ECONOMIC  DEVELOPMENT,  affirmed   the  intention  for  both                                                                    
substances to  be funded by program  receipts once marijuana                                                                    
establishments were up and running.                                                                                             
                                                                                                                                
Representative  Pruitt  assumed  there was  more  than  $1.7                                                                    
million  in "General  Fund program"  that  was derived  from                                                                    
alcohol. He asked if the  alcohol tax revenue would only pay                                                                    
for alcohol related costs and  not any costs associated with                                                                    
marijuana.                                                                                                                      
                                                                                                                                
Ms. Franklin answered in the  affirmative. She detailed that                                                                    
over the  past several fiscal  years there had  been dollars                                                                    
returned  to the  General Fund  that  were program  receipts                                                                    
from alcohol that had not been  spent in the ABC budget. She                                                                    
referred to  current legislation (SB  99 related to  ABC and                                                                    
alcohol  regulation). She  discussed  that  in future  years                                                                    
there  was potentially  a need  for the  alcohol funds;  the                                                                    
department   had  not   considered  using   alcohol  program                                                                    
receipts to fund marijuana costs.                                                                                               
                                                                                                                                
3:37:58 PM                                                                                                                    
                                                                                                                                
Co-Chair Neuman  stated that  some would  prefer to  see the                                                                    
initial startup  funds for the establishment  [of marijuana]                                                                    
to come  from the taxation  of marijuana sales.  He wondered                                                                    
if marijuana board legislation did  not pass, whether it was                                                                    
possible  to develop  a CS  that  would allow  the state  to                                                                    
recoup  the funds  associated with  marijuana when  it began                                                                    
taxing the substance.                                                                                                           
                                                                                                                                
Ms. Franklin deferred the question to Ms. Sanders.                                                                              
                                                                                                                                
Ms.  Sanders  answered  that  she   was  uncertain  how  the                                                                    
specifications  would be  established in  a CS.  She relayed                                                                    
that  the ABC  Board  would set  up  regulations that  would                                                                    
include the fees  that would be paid and  anything in excess                                                                    
of the operating  costs would be deposited  into the General                                                                    
Fund.  She was  not certain  when the  ABC Board  planned to                                                                    
begin collecting fees.                                                                                                          
                                                                                                                                
Ms.  Franklin relayed  that the  first [marijuana]  licenses                                                                    
would be issued in May  2016. The departments estimated that                                                                    
the first  tax coming in  from the licenses would  be around                                                                    
July   2016.  She   recalled  recent   testimony  from   the                                                                    
Department of  Revenue, Tax Division  that the  first monies                                                                    
from marijuana would be collected in 2017.                                                                                      
                                                                                                                                
Co-Chair Neuman  noted his preference  that any  excess fees                                                                    
go back to cover the cost of the initial [marijuana] setup.                                                                     
                                                                                                                                
Representative  Gara   asked  what   had  happened   to  the                                                                    
governor's  FY 16  request that  had included  $3.3 million.                                                                    
Ms.  Sanders answered  that the  governor  had requested  an                                                                    
appropriation for $1.7 million.  She detailed that the money                                                                    
had been removed from the  House and Senate operating bills.                                                                    
There  were other  avenues under  discussion that  would get                                                                    
the funds into the division's budget for FY 15 and FY 16.                                                                       
                                                                                                                                
Representative  Gara  did  not  want  anyone  to  walk  away                                                                    
thinking  there was  no cost  for  marijuana regulation.  He                                                                    
noted there would  be a period where the  state was spending                                                                    
money prior  to collecting  it. He reasoned  that developing                                                                    
regulations would only  use state staff. He  wondered why it                                                                    
would cost money to adopt regulations.                                                                                          
                                                                                                                                
Ms.  Franklin answered  that the  cost  was associated  with                                                                    
staff  costs  and  the  establishment  of  a  database.  She                                                                    
explained that  everyone would  want significant  data about                                                                    
marijuana  licenses   and  information  related   to  moving                                                                    
forward  with implementing  the  voter's initiative  safely.                                                                    
She relayed that the division  was a paper-based agency that                                                                    
was  unable to  provide data  currently on  liquor licensing                                                                    
without  investing a  substantial  amount of  staff time  in                                                                    
research.  Additionally, there  were  costs associated  with                                                                    
tracking  the substance  in order  to verify  that retailers                                                                    
were  selling marijuana  that had  been grown  legally in  a                                                                    
licensed cultivation  facility. The governor's  request that                                                                    
had been stripped  out of the operating  budget had included                                                                    
an  additional  six  staff  positions  in  addition  to  the                                                                    
existing ten  positions statewide that were  responsible for                                                                    
regulating  the 1,875  liquor licenses.  She continued  that                                                                    
the  division had  a PowerPoint  presentation comparing  the                                                                    
requested staff with those in  other states. She stated that                                                                    
the division's  staff working on  liquor licenses  was quite                                                                    
small  and the  additional  request was  small. She  relayed                                                                    
that  the division  had reciprocal  service agreements  with                                                                    
the Department of Law and paid  by the hour for its lawyer's                                                                    
time.  She  summarized  that  the   cost  came  out  of  the                                                                    
division's  budget to  write the  regulations and  to safely                                                                    
enforce its licensing rules.                                                                                                    
                                                                                                                                
3:44:15 PM                                                                                                                    
                                                                                                                                
Representative Gara expressed distaste  at the idea of state                                                                    
agencies  charging each  other  for costs.  He believed  the                                                                    
costs were  pretend and confusing. He  understood that there                                                                    
would  be some  staff  required to  initiate the  commercial                                                                    
licenses  prior to  May. He  did not  know how  involved the                                                                    
board  would be  in enforcing  against people  pretending to                                                                    
grow  pot  for  personal   use  who  were  actually  selling                                                                    
commercially.  He wondered  if the  department needed  staff                                                                    
for that purpose and why  state troopers and police were not                                                                    
sufficient for that role.                                                                                                       
                                                                                                                                
Ms. Franklin  answered that there  were two reasons  the ABC                                                                    
utilized five enforcement officers  statewide and why it was                                                                    
requesting  three  additional  officers. First,  the  agency                                                                    
became  a de  facto expert  statewide related  to the  rules                                                                    
designated around  the substance. For example,  if a citizen                                                                    
called their local law enforcement  officer because they saw                                                                    
someone  riding a  bike selling  beers, the  law enforcement                                                                    
officer would in turn call the  ABC Board to ask whether the                                                                    
activity  was  legal. She  explained  that  there were  many                                                                    
rules  under  Title  4  associated   with  alcohol;  it  was                                                                    
difficult to understand  them all. She stated  that it would                                                                    
be even more difficult with  marijuana if it remained in the                                                                    
controlled  substances act,  for  local  law enforcement  to                                                                    
know the  rules and  how to  apply them  on the  street. She                                                                    
communicated that enforcement  officers were responsible for                                                                    
education,  inspection of  licensees  to ensure  compliance,                                                                    
and  for enforcing  against individuals  selling alcohol  or                                                                    
marijuana  without a  license. There  were some  examples of                                                                    
businesses  that   had  opened   without  a   licenses.  She                                                                    
continued that  ABC received the related  calls and pressure                                                                    
from the  other individuals wanting  to open a  business who                                                                    
saw  the  issue  as unfair  competition.  Additionally,  ABC                                                                    
received  calls  from  law  enforcement  and  citizens.  She                                                                    
explained that  the troopers' priority  list varied  by day.                                                                    
The agency's  priority was public safety  and enforcement of                                                                    
the rules around  the substances. She noted  that the agency                                                                    
had  an  officer present  for  testimony.  She relayed  that                                                                    
enforcement had been added by  all states that had legalized                                                                    
marijuana  at  statewide  and  local  levels.  She  did  not                                                                    
believe  the substance  could  be  safely regulated  without                                                                    
officers making sure the rules were followed.                                                                                   
                                                                                                                                
3:47:45 PM                                                                                                                    
                                                                                                                                
Representative  Gara discussed  that currently  personal use                                                                    
was  the only  thing the  state had.  He stated  that a  law                                                                    
enforcement  officer   understood  the   difference  between                                                                    
personal  and   commercial  use  and  arrested   people  not                                                                    
following the  law. He understood  staff would be  needed to                                                                    
begin issuing licenses  in May; however, he  did not believe                                                                    
enforcement would be needed  beyond enforcement officers. He                                                                    
could  identify  $1.2  million   that  would  do  much  more                                                                    
important  things. He  did  not  support funding  additional                                                                    
enforcement  officers before  any commercial  establishments                                                                    
were in  place. He  stated that  including marijuana  on the                                                                    
fiscal  note   was  confusing   and  could   be  authorizing                                                                    
positions the state did not yet need.                                                                                           
                                                                                                                                
Co-Chair Neuman wondered  if the ABC Board  was currently up                                                                    
to date on  any complaints that had been  submitted or other                                                                    
day-to-day items.  Ms. Franklin answered that  the board had                                                                    
addressed the  issues in the audit  and was up to  date with                                                                    
its current workload.                                                                                                           
                                                                                                                                
Representative Wilson  did not understand why  the ABC Board                                                                    
was taking questions on the  marijuana issue until something                                                                    
had been put  in place. She asked for  verification that the                                                                    
issue  resided with  the Department  of Public  Safety (DPS)                                                                    
until  the  regulations  were   drafted.  For  example,  she                                                                    
believed  enforcement would  fall  to DPS  if an  individual                                                                    
began  selling  marijuana  commercially  before  regulations                                                                    
were in place.                                                                                                                  
                                                                                                                                
Ms. Franklin  answered that  it was  a public  safety issue,                                                                    
but ABC  still received calls.  She detailed that ABC  was a                                                                    
responsive state agency and could  not have employees refuse                                                                    
to respond  to questions.  She elaborated that  citizens and                                                                    
law enforcement  agencies had  contacted the  division about                                                                    
businesses that had started  up prematurely. Currently under                                                                    
statute ABC officers had  specific enforcement authority and                                                                    
a specific commission from the  commissioner of DPS over the                                                                    
criminally  punishable   provisions  in  AS  Title   4.  The                                                                    
division  had  told callers  they  would  have to  call  the                                                                    
troopers  related to  the three  businesses that  had gotten                                                                    
out ahead. However, that did  not mean that the division did                                                                    
not need to know the  answers. She relayed that the division                                                                    
relied on  local law enforcement  when it came  to enforcing                                                                    
Title  4 provisions;  the agency's  five officers  statewide                                                                    
could  not provide  enforcement  alone. She  added that  the                                                                    
same would  be true  for the  three marijuana  officers. She                                                                    
stressed the  imperative nature of the  enforcement of rules                                                                    
around alcohol  and marijuana. She discussed  that marijuana                                                                    
was  still   illegal  federally;  therefore,  in   order  to                                                                    
implement the  voters' initiative, the agency  had to ensure                                                                    
strict  compliance  with  guidance   given  by  the  federal                                                                    
government in the Cole  Memorandum. The memorandum addressed                                                                    
strict  regulation and  enforcement, including  ensuring the                                                                    
substance did not  get into the hands of minors  and that it                                                                    
was  not  diverted  across state  lines.  The  division  had                                                                    
originally intended  to ask for  five officers;  however, in                                                                    
light of  the challenging  fiscal climate, the  division had                                                                    
limited its  request to three  officers. She  reiterated the                                                                    
imperative nature of enforcement.                                                                                               
                                                                                                                                
3:52:46 PM                                                                                                                    
                                                                                                                                
Representative   Wilson   was   uncomfortable   having   the                                                                    
substances  [alcohol and  marijuana] combined.  She did  not                                                                    
want the  state jumping  the gun  by regulating  things that                                                                    
had   not  gone   through  the   legislative  process.   She                                                                    
understood that some of the  funds requested by the governor                                                                    
[shown  in the  fiscal note]  had been  stripped out  of the                                                                    
budget; therefore,  she wondered where  to look to  find the                                                                    
most current budget information.                                                                                                
                                                                                                                                
Ms. Sanders answered that currently  in the House and Senate                                                                    
versions  of  the  operating  budget   (HB  72),  there  was                                                                    
$1,752,400 and  $23,000 in interagency receipts.  There were                                                                    
other  options to  get  the marijuana  funding  for the  ABC                                                                    
Board. She  pointed to the  estimated supplemental  cost for                                                                    
FY  15.  She  explained  that  the  governor's  budget  also                                                                    
included money for marijuana  regulation in the supplemental                                                                    
bill  and $1.5  million for  FY 16  in the  operating budget                                                                    
request. The  funding could  be added  to another  bill that                                                                    
would establish  a marijuana  control board  or it  could be                                                                    
added to the supplemental budget.                                                                                               
                                                                                                                                
Representative  Wilson was  concerned that  the fiscal  note                                                                    
included items  that did  not reflect  the bill.  She stated                                                                    
that the  bill was about  the continuation of the  ABC Board                                                                    
and making sure it was cost neutral.                                                                                            
                                                                                                                                
3:55:33 PM                                                                                                                    
                                                                                                                                
Ms.  Sanders  equated  the voters'  initiative  [related  to                                                                    
marijuana]  to a  bill. She  addressed that  it was  not the                                                                    
normal  legislative  process,  but  because  the  initiative                                                                    
passed there had  been no opportunity for  the department to                                                                    
attach  an  appropriating  fiscal note  to  the  initiative.                                                                    
Therefore, the department's inclusion  of the funding in the                                                                    
governor's budget  was technically correct. She  stated that                                                                    
while it may  be included in another  fiscal note, currently                                                                    
regulation of  marijuana was  under the  purview of  the ABC                                                                    
Board;  therefore, it  was  technically  correct to  include                                                                    
marijuana in the fiscal note.                                                                                                   
                                                                                                                                
Representative Munoz  asked whether it  was best to  use the                                                                    
ABC  Board  or  to  establish   a  separate  board  for  the                                                                    
regulation  of marijuana.  She wondered  if there  were cost                                                                    
savings associated  with maintaining the function  under the                                                                    
ABC Board.                                                                                                                      
                                                                                                                                
Ms.  Franklin replied  that the  governor had  introduced HB
123 that would create a  marijuana control board. For fiscal                                                                    
savings,  the  bill  represented  a two  board,  one  agency                                                                    
structure. She detailed that the  ABC Board was comprised of                                                                    
five volunteers and met five  times annually. The idea would                                                                    
be  to  duplicate  the structure  for  a  marijuana  control                                                                    
board.  The  bill  proposed that  marijuana  board  meetings                                                                    
would occur the  day following ABC Board  meetings to reduce                                                                    
staff  travel  costs;  both boards  were  required  to  meet                                                                    
across the  state to  provide public  access to  the boards.                                                                    
The  department  was  supportive  of  a  separate  marijuana                                                                    
control  board. She  explained that  the makeup  of the  ABC                                                                    
Board  was specialized  to  alcohol  and contained  industry                                                                    
representation.  She  continued   that  increasing  industry                                                                    
representation  would  swell  the  board to  9  members  for                                                                    
alcohol and  marijuana, which would not  bring a significant                                                                    
cost  savings.  There were  other  ways  to provide  a  cost                                                                    
savings by housing both boards under the same division.                                                                         
                                                                                                                                
HB  116  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Thompson  discussed the schedule for  the following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:59:54 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:59 p.m.                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
HB 116 NEW FN DCCED.pdf HFIN 4/8/2015 1:30:00 PM
HB 116
03.30.15 DCCED HB 116 Follow Up.pdf HFIN 4/8/2015 1:30:00 PM
HB 116
HB 61 Air Force Definitions.PDF HFIN 4/8/2015 1:30:00 PM
HB 61
HB 61 Army Definitions.PDF HFIN 4/8/2015 1:30:00 PM
HB 61
HB 61 Coast Guard Definition Valor.PDF HFIN 4/8/2015 1:30:00 PM
HB 61
HB 61 Description of Valor Awards.PDF HFIN 4/8/2015 1:30:00 PM
HB 61
HB 61 Letters of Support.PDF HFIN 4/8/2015 1:30:00 PM
HB 61
HB61 Sponsor Statement FIN.pdf HFIN 4/8/2015 1:30:00 PM
HB 61
HB 88 CS WorkDraft FIN version W.pdf HFIN 4/8/2015 1:30:00 PM
HB 88
Letter re HB 81.pdf HFIN 4/8/2015 1:30:00 PM
HB 81
HB 81 Opposition Letter.pdf HFIN 4/8/2015 1:30:00 PM
HB 81
HB 81- Letter of Opposition- James Squyres-February 24.docx HFIN 4/8/2015 1:30:00 PM
HB 81