Legislature(2015 - 2016)HOUSE FINANCE 519
04/14/2016 05:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB245 || HB250 | |
| Public Testomony: Hb 245 and Hb 250 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 245 | TELECONFERENCED | |
| += | HB 250 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 14, 2016
5:03 p.m.
5:03:12 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 5:03 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
Tomas Boutin, Self, Juneau; Ron Fuhrer, NEA Alaska, Juneau;
Drue Pearce, Self, Anchorage; Joelle Halle, AFLCIO,
Anchorage; Bill Corbus, Self, Juneau; Eleanor Andrews,
Alaska's Future, Juneau; Jorden Nigro, Self, Juneau; Tom
Brice, Self, Juneau; Paul Fuhs, Self, Juneau.
PRESENT VIA TELECONFERENCE
David Landry, Self, Anchorage; David Morgan, Self,
Anchorage; Gary Hutchison, Self, Fairbanks; Tam Agosti-
Gisler, Self, Anchorage; Ed Martin, Self, Cooper Landing;
Bev Hoffman, Self, Bethel; Dennis Knebel, Self, Anchorage;
Cindy Bettine, Business Owner, Big Lake; Jim Sykes, Self,
Palmer; Fred Sturman, Self, Soldotna; Nancy Hilstrand,
Self, Kachemak Bay; Patrick Dalton, Self, Delta Junction;
Matthew Blattmachr, Self, Anchorage; Tim Robinson, Self,
Palmer; Ross Mullins, Self, Cordova; Lisa Ellanna, Self,
Nome; Richard Green, Self, Fairbanks; Cynthia Henry, Self,
Fairbanks; Susan Sprinkle, Self, Fairbanks; Walter
Robinson, Self, Fairbanks; James Squyres, Self, Rural
Deltana; Paul Kendall, Self, Anchorage; Ed Martin III,
Self, Sterling; William Deaton, Self, Cordova; Bill
Lambert, Self, North Pole; Colleen Bickford, Self,
Anchorage; Sharon Dalton, Self, Delta Junction; Terrie
Gottstein, Self, Anchorage; Lauren Blanchett, Self,
Anchorage; Andy Holleman, President, Anchorage Education
Association, Anchorage; Alyse Galvin, Self, Anchorage;
Kelsi Pulcznski, Self, Anchorage; Olivia Pidgeon, Self,
Anchorage; Merrick Pierce, Self, Fairbanks; Pam Throop,
Self, Fairbanks; Earl Whitt, Self, Anchorage; Paul
Roderick, Self, Anchor Point; Robert McCoy, Self,
Anchorage; Jeremy Price, Americans for Prosperity,
Anchorage; Steve Gibson, Self, Homer; Deena Mitchell, Self,
Anchorage; Patrick Schlichting, Self, Delta Junction;
Jeanine St. John, Self, Anchorage; Jean Ellis, Self,
Petersburg; Linda Murphy, Self, Soldotna; Meg Nordale,
Self, Fairbanks; Willie Lewis, Self, Anchorage; Naja
Brandt, Self, Nome; Carl Kancir, Self, Anchorage; Jeff
Barnard, Self, Juneau; Richard Olsen, Self, Homer; Edward
Witbeck, Self, Kenai; David Otness, Self, Cordova; Garvin
Bucaria, Self, Wasilla; Bernie Hoffman, Self, Fairbanks;
Hollis Hall, Self, Fairbanks; Joel Switzer, Self,
Fairbanks; David Boyle, Self, Anchorage; Mike Swain, Self,
Anchorage; Garret Floyd Self Anchorage; Doug Goering,
Self, Fairbanks; Sara Willson, Self, Juneau; Deborah
Brollini, Self, Anchorage. George Pierce, Self, Kasilof;
Patricia Fisher, Self, Meadow Lakes;
SUMMARY
HB 245 PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS
HB 245 was HEARD and HELD in committee for
further consideration.
HB 250 INDIV. INCOME TAX: CREDITS; RETURNS
HB 250 was HEARD and HELD in committee for
further consideration.
Vice-Chair Saddler indicated that Representative Wilson was
present and that they would be hearing public testimony on
HB 245 and HB 250. He also encouraged testifiers to submit
their written testimony. He noted that time was limited to
2 minutes and asked that testimony remain civil and
respectful.
5:04:51 PM
HOUSE BILL NO. 245
"An Act relating to the Alaska permanent fund;
relating to appropriations to the dividend fund;
relating to income of the Alaska permanent fund;
relating to the earnings reserve account; relating to
the Alaska permanent fund dividend; making conforming
amendments; and providing for an effective date."
HOUSE BILL NO. 250
"An Act relating to the taxation of income of
individuals; repealing tax credits applied against the
tax on individuals under the Alaska Net Income Tax
Act; and providing for an effective date."
^PUBLIC TESTOMONY: HB 245 and HB 250
5:04:51 PM
DAVID LANDRY, SELF, ANCHORAGE (via teleconference),
supported a personal income tax. He felt that to solve the
problem there would actually have to be a higher income tax
than proposed which would be more equitable and better for
rural Alaska. He described his work experience reporting
that over the last 18 months he had clients come to him
with plans and then decided to defer. Uncertainty was a big
issue for contractors. He suggested getting an income tax
on the books as soon as possible for more predictability.
5:07:29 PM
DAVID MORGAN, SELF, ANCHORAGE (via teleconference), was a
member of Common Wealth North and was a professional
economist. He was currently looking at Gunnar Knapp's
report and referenced page 32. He noted that an income tax
would result in a higher loss of jobs by pulling out
dollars in the aggregate format. However, only half of
Alaskans paid federal income tax and only 25 percent
itemize their taxes. He disagreed with the fairness concept
of an income tax. He also thought using savings from the
Permanent Fund (PF) would be necessary along with
conducting further studies. He thanked the committee.
5:09:40 PM
GARY HUTCHISON, SELF, FAIRBANKS (via teleconference),
supported HB 245. He thought an income tax was important to
consider but did not believe the legislature should hurry
to implement it. He thought a tax needed to be applied in
conjunction with managing the State of Alaska's Public
Employment Retirement System (PERS) liability. If the state
was going to remove money from the economy with an income
tax he thought it was necessary for the state to have a
tool for management of its PERS and Teacher's Retirement
System (TRS) unfunded liabilities.
5:11:38 PM
GEORGE PIERCE, SELF, KASILOF (via teleconference), urged
the state not to take his Permanent Fund Dividend (PFD). He
supported cutting tax credits and thought the state gave
everything to the oil companies. He wanted the people of
Alaska to be able to vote on whether the state should use
their PFD. He thought it was time for the legislature to
impose an income tax and other taxes. He suggested that the
legislature needed fixing. He spoke against major projects.
Vice-Chair Saddler indicated that Representative Gattis,
Representative Munoz, and Representative Edgmon had joined
the meeting.
5:13:59 PM
TAM AGOSTI-GISLER, SELF, ANCHORAGE (via teleconference),
spoke in favor of the Percent of Market Value (POMV)
approach regarding the PF and supported an income tax. She
asked the legislature not to balance the budget strictly
with cuts.
Vice-Chair Saddler relayed that Co-Chair Thompson had
joined the meeting.
5:15:20 PM
ED MARTIN, SELF, COOPER LANDING (via teleconference), spoke
of a YouTube video in which five previous governors
discussed taxes. He spoke against a personal income tax. He
thought it was unfair. He did not feel like Alaskan's
should be taxed on their PFD. He suggested that the
legislature needed to cut more and reduce spending. He felt
that both the governor and the legislature needed to create
new wealth from Alaska's resource. He recommended selling
some of the state's land. He urged the use of the
Constitutional Budget Reserve (CBR).
5:18:48 PM
TOMAS BOUTIN, SELF, JUNEAU, opposed a personal income tax.
He spoke of producing less of what the state consumed than
any other state. He opined that the state could not support
itself with oil by taxing each other. He thought the
state's options were to increase production or reduce
consumption. State government was a measure of consumption
rather than production. He reported that fewer than half of
Alaskans paid a federal income tax. Therefore, a state
income tax would tax a minority of Alaskans and only those
who worked. He opined that taxing workers and job creators
set up an adverse selection: the people who would be likely
to leave. He mentioned the $11 billion debt the state
currently had. He thought an income tax would exacerbate
the state's problems.
5:21:47 PM
RON FUHRER, NEA ALASKA, JUNEAU, supported HB 245 and HB
250. He wondered what future would be left for Alaskans and
their children. He thought the deficit was too large to
address without restructuring how the state used the PF
earnings. He thought a sustainable draw was necessary to
preserve the dividend for future generations and to help
pay for essential services such as public safety and public
education. He supported passing a broad-based tax and urged
members to pass a long-term fiscal plan.
5:23:39 PM
BEV HOFFMAN, SELF, BETHEL (via teleconference), supported a
personal income tax and opposed tax credits for oil and
mining companies. She relayed some labor statistics for
2014. Reports documented an increase in resident wages of 4
percent to $13.9 billion. Non-resident wages increased 7
percent to 2.6 billion. The total wages for 2014 equaled
$16.5 billion which were going untaxed. She did not
understand why the deficit was such a problem. She did not
mind contributing even though she did not make a lot in
retirement. She counted on her PFD for paying for
electricity, heating fuel, and water. She supported capping
the PFD. She also suggested an "opt out" choice for Alaska
residents. She supported the use of the PF Earnings Reserve
Account (ERA) with the caveat that the fund continued to
grow. She encouraged members to continue eliminating
"fluff" in the budget. She urged members to work together
for all of Alaska.
Vice-Chair Saddler acknowledged Co-Chair Neuman and
Representative Pruitt at the table.
5:26:14 PM
DENNIS KNEBEL, SELF, ANCHORAGE (via teleconference),
supported HB 245. He urged members to act expediently and
to work together. He opined that a sustainable budget would
keep Alaskan's working. He also supported action to extend
the life of the CBR using a portion of the ERA to fill the
budget gap. Additional budget reductions and additional tax
measures would be necessary to resolve the state's fiscal
woes. He thanked members for their leadership.
5:27:52 PM
CINDY BETTINE, BUSINESS OWNER, BIG LAKE (via
teleconference), supported using the ERA to help bridge the
budget gap and added immediate action was necessary. She
thought every Alaskan should contribute. She did not have a
problem with other options to raise revenues, but dipping
into the ERA was the first right step. She appreciated the
work done by legislators and encouraged members to act in
the current session.
5:29:24 PM
PATRICIA FISHER, SELF, MEADOW LAKES (via teleconference),
supported HB 245 and encouraged members to take immediate
action to address the budget crisis. She believed a
comprehensive approach to solving the state's fiscal woes
was absolutely necessary and included restructuring the PF,
imposing taxes, and further cutting unnecessary
expenditures. She reemphasized the need to act
expeditiously.
5:30:34 PM
JIM SYKES, SELF, PALMER (via teleconference), had not heard
whether the budget gap could be solved without touching the
PFD. He thought it was possible. He encouraged members to
review the Institute of Social and Economic Research
(ISER)'s findings that it was less damaging to the economy
to pay the full PFD and tax it back rather than to transfer
half of the PFD directly to state government. He believed
the state could not afford to subsidize oil credits and
carry-forwards with PFD's. He urged the members to keep the
PFD and to continue inflation proofing the PF. He thought
the POMV at 5.2 percent was too high and was impossible to
reach. He stressed the importance of getting things done
correctly rather than quickly. He thought the PFD and
inflation proofing had been the glue that held things
together and urged the legislature not to touch them under
any conditions. He thanked members for their hard work.
5:32:40 PM
FRED STURMAN, SELF, SOLDOTNA (via teleconference), told of
two friends that had lost work. He invited members to
explain to his friends that the legislature wanted to take
their PFD's, impose an income tax, initiate a sales tax,
and take other measures in order to keep government
employees in their jobs making $150 thousand to $200
thousand. He continued that government had never produced
new money, but rather spent it. He suggested several
potential areas of government that could be reduced. He
reemphasized the need to reduce government.
5:35:07 PM
DRUE PEARCE, SELF, ANCHORAGE, spoke in support of HB 245.
She stated that the fiscal crisis facing the state was
dire. During the time she served as a legislator she
recalled making substantial budget cuts when oil prices
were $9.50 per barrel. However, at that time the state did
not face a lack of reserves as it did currently. She
stressed that the state could not afford the government it
had. She commended the legislature for making the cuts that
it had. However, the problems the state faced was only
partly due to over-spending. The committee substitute
represented a major step in protecting the state's economic
future. She supported structured use of the PF to help
close the deficit. She supported action in the current
session to extend the life of the CBR by using a portion of
the ERA to fill the budget hole. She was an owner of a
small Anchorage-based business and was concerned about
protecting her investment and keeping her business doors
open. She stated that support in the current session would
protect private sector jobs and investment. She was sure
the enormity of the budget gap was overwhelming. She
implored the committee to act expeditiously, otherwise the
price would be huge.
5:37:48 PM
JOELLE HALLE, AFLCIO, ANCHORAGE, relayed that her
organization was proud to be participating in the Alaska's
Future group. She stated that the organization was fully
supportive of restructuring the PF to make sure the state
could pay for the services it provided and to ensure there
was a dividend in the future. She stated that one of the
ways to protect the dividend into the future was to
restructure the fund presently. The option would provide a
meaningful contribution of about $1.7 billion or $1.8
billion to filling the state's $4 million budget gap. In
light of some of the current conversations she surmised
that the most regressive thing that the legislature could
do was nothing. She implored members to take action. She
thanked committee members for their time and service.
5:39:44 PM
BILL CORBUS, SELF, JUNEAU, relayed that he had been the
commissioner of the Department of Revenue from 2003 to
2006. He urged the committee to support HB 245; it was a
good compromise and was an important ingredient to solve
the state's fiscal dilemma.
Vice-Chair Saddler announced that Representative Gara had
joined the meeting.
5:40:52 PM
ELEANOR ANDREWS, ALASKA'S FUTURE, JUNEAU, relayed that she
had been in Juneau over 50 years and had raised her
children and grandchildren. She had been the commissioner
of Department of Administration (DOA) during the crash in
1986. Following her employment with the state she was a
very successful business person. She stated that Alaska was
a place of opportunity, but if the state did not act to use
part of the ERA to fill the gap and strategically plan a
sustainable budget for the future she predicted the state
would experience a similar crash to that in 1986 and 1987.
It had been her displeasure to help the governor sequester
50 percent of the operating budget. She reported that not
one city or village received a municipal grant. She had to
meet with vendors to get them to agree to accepting pennies
on the dollar for payment for their services. The state
could barely fund its defense agencies. She remembered
being in Anchorage when whole subdivisions emptied as
people lost their jobs. The banks could not handle the keys
dropped off for people's mortgages. She thought the state
had some time to plan what would happen. She was aware
there would be a reduced budget and there would not be big
mega projects. She thought it was important to look at what
was essential, what was constitutionally required, what was
statutorily required, and what would keep the economy from
bottoming out. She opined that she would much rather have
people and herself receive half of the dividend and to look
forward to it. She supported restructuring the PF.
5:43:18 PM
NANCY HILSTRAND, SELF, KACHEMAK BAY (via teleconference),
supported HB 250. She wanted to see self-determination come
back to the state similar to what existed in the 70's. She
hoped the legislature would reinstate the state income tax.
She reported having a value-added fish processing plant
with 60 employees. About 50 percent of her employees came
from out-of-state. She thought it was important that they
paid into Alaska's economy before leaving rather than
taking it all with them. She believed the same tax should
apply to oil, mining, logging, and fishing companies. She
thanked the legislature for its work and hoped action would
be taken soon.
5:44:37 PM
PATRICK DALTON, SELF, DELTA JUNCTION (via teleconference),
reported that David Ramsey had anecdotal evidence that
millionaires were leaving states with income taxes. He
continued that when the multi-millionaires left states to
avoid income taxes they also took many jobs with them. He
thought it was a big fallacy for the state to try to tax
its way out of its fiscal hole. He thought the larger
problem was that the state was spending too much without a
base to support it. He relayed that the state had two
historical models of economic science. He mentioned the tax
cuts accompanied by deregulation in the early 80's and tax
cuts in the roaring 20's. He wanted the legislature to stop
taxing and start cutting the state budget. He thanked the
committee for listening to his testimony and hoped the
legislature would consider the issues carefully.
5:46:44 PM
MATTHEW BLATTMACHR, SELF, ANCHORAGE (via teleconference),
addressed HB 245 and noted that there was no silver bullet
to dealing with the state's fiscal crisis. He agreed that a
multi-faceted approach was needed. He thought that cutting
spending and implementing new sources of revenue were
necessary. He commented that the PF was created for a rainy
day. He believed it was a rainy day as well as the right
time to consider restructuring the PF. He spoke to HB 250.
He thought multiple sources of revenue were needed to pay
for state government. He noted that HB 250 had some
unintended consequences to functioning and profitable
industries in Alaska, specifically the trust and estates
industry where it generated a significant amount of free
revenue to the state. The revenue would go away over night
with an income tax bill without certain provisions in
place. He thanked the committee for its work and for the
opportunity to testify.
Vice-Chair Saddler asked if he opposed HB 250 or if he
wanted to see it amended.
Mr. Blattmacher stated that he was in support of the
concept behind HB 250 but wanted to see it amended.
5:49:12 PM
TIM ROBINSON, SELF, PALMER (via teleconference), did not
believe the budget crisis would end with only one action.
He thought a global approach was needed which included
imposing an income tax. He believed that the plane loads of
people coming to Alaska to work could certainly contribute
their fair share towards the infrastructure they were
using. He opined they paid nothing in Alaska and took from
the state. He spoke of a testifier from the previous day
who told of not making any money in the oil industry for
more than eight years. He thought that if a person worked
at something for 8 years and did not make money they would
likely give it up. The testifier was fighting against
amending the tax credits. He stated the oil industry needed
to be taxed by the state remarking that it was Alaska's
oil. He stated that it was a rainy day, but the PF needed
to be protected. He favored increasing income taxes and oil
taxes. He claimed that they would not be taxes but rather a
share of Alaska's revenue. He remarked that BP's president
received +a $3 million raise in the prior year.
5:51:53 PM
ROSS MULLINS, SELF, CORDOVA (via teleconference), spoke in
support of HB 245 and HB 250. He supported the use of the
PF and was in favor of an income tax to help spread the
pain of the dividend cuts. The income tax would help in a
progressive manner and would counteract some of the
regressive aspects of the PFD reductions. He strongly
supported the governor's approach. He thought a POMV
approach was much more risky. He opined that the budget
reserves and all revenues should go to the PF, which would
be the future of the state. It had been a significant factor
in the state's growth. He believed the fund should be looked
to for future revenues. He believed appropriate sideboards
were necessary to protect the PF restricting spending.
5:54:58 PM
LISA ELLANNA, SELF, NOME (via teleconference), spoke in
support of HB 250, but disagreed with the proposed tax
matrix. She was a single mother of four children and did
not receive any state assistance or child support. She
noted that it was a fact for many people in the state. She
fully supported a state income tax and believed it would
tie people to their government. She believed it would
increase government accountability and public voice. She
strongly disagreed with the matrix where married couples
were paying less taxes than single parents. Married couples
had 2 times more earning power and because of that they
should be paying more than single parents. She asked that
the structure of tax be crafted in an ethical way. She
thanked the members for the opportunity to share.
5:57:43 PM
RICHARD GREEN, SELF, FAIRBANKS (via teleconference),
testified in support of HB 245 and HB 250. He thought it
was critical to address the budget deficit in the current
session by reducing the state's operating budget and using
the ERA to pay for services. He asked the committee to
never underestimate the common sense and memory of the
Alaskan voter. He reiterated his support for both bills.
5:59:12 PM
CYNTHIA HENRY, SELF, FAIRBANKS (via teleconference), spoke
in support of HB 245 and in opposition to HB 250. She
appreciated the hard work of the legislature in the current
session. She operated a retail business in Alaska with
multiple mall locations in Anchorage. She felt that the
fate of her business was at the mercy of a healthy economy.
She observed decreased mall traffic where her businesses
were located and a cautiousness among customers. She opined
that the ripple effect of reduced consumer spending was
accelerating and permeating the Alaska economy. She asked
that the legislature vote against implementing a personal
income tax. Companies in the oil industry were already
cutting back and leaving the state. She had grave concerns
about the impact of the job losses and uncertainty for
Alaska's small businesses such as hers. She felt that
imposing a personal income tax would exacerbate an already-
weak economy. She thought that after cuts to state
government, the best tool the state had to address the
deficit was to use a portion of the ERA to pay for
government services. She suggested that the remaining
deficit should be funded by the CBR. She thought that in
following her suggestions the life of the CBR would be
extended and a sustainable dividend program would be
maintained. Acting immediately would save the dividend,
avoid a recession, and maintain the state's bond rating.
Enacting legislation utilizing earnings from the PF
combined with a draw from the CBR would provide some
certainty for the private sector that the legislature was
managing the state's fiscal challenge. As a result, private
sector jobs would be protected and private sector support
of investment would continue.
6:01:16 PM
SUSAN SPRINKLE, SELF, FAIRBANKS (via teleconference), spoke
in support of HB 250 and wanted an income tax imposed. She
stated that according to a 2014 report, $2.6 billion in
wages were paid to non-residents working in Alaska. Non-
residents worked in many different industries including the
oil, fishing, seafood, logging, and mining industries. She
encouraged taxing for the use of public services. She
stressed that solely making cuts would not solve the
state's fiscal issues. She believed the state should pay
its way. She mentioned being in favor of supporting the
university system appropriately. She wanted to see the
research system remain intact at the university.
6:03:44 PM
WALTER ROBINSON, SELF, FAIRBANKS (via teleconference), had
grave concerns over the state's fiscal challenges and
believed it was necessary to address the problems in the
current year. He believed state services were very
important to a healthy economy. Both of his children were
home schooled and needed support for the state that
supported home school programs. He supported HB 245 and HB
250. He asked members to take immediate action and do what
was right.
6:05:08 PM
JAMES SQUYRES, SELF, RURAL DELTANA (via teleconference),
spoke against using the earnings reserves and an income
tax. He opposed both bills. He was a self-described Article
1, Section 2 Alaskan. He stated that the government was too
bloated and inefficient. He mentioned that when bills were
passed out of committee without notice to Alaskans about
changes distrust formed. He also noted that trust was
impeded because of testimony from the public being so
limited in committee hearings. He knew of some people who
had worked years on a particular issue only to have their
time before the committee reduced to a very short period,
sometimes being cut off or dropped from the teleconference
line. He questioned whether legislators were actually
listening to Alaskans. He thought the legislature currently
had tools to address the deficit without HB 245 and HB 250.
He did not support the bills.
6:07:09 PM
PAUL KENDALL, SELF, ANCHORAGE (via teleconference), spoke
against both bills. He wondered what the legislature would
do if the stock market dropped significantly and the oil
companies decided to shut down the pipeline. He asked if
legislators would hunt Alaskans down to pay for the
retirement compensation for unionized employees. He thought
it was unbelievable that the state was in its current
situation. He spoke in favor of a capital move and believed
the legislature needed to meet for 90 days to 6 months to
be able to answer some probing and challenging questions.
He spoke to defining essential services. He believed there
were five life essential services including water, sewer,
trash, and electricity, and communications. In terms of
necessity and in his estimation, everything else was
debatable.
6:09:40 PM
ED MARTIN III, SELF, STERLING (via teleconference), spoke
in opposition to HB 245 and HB 250. He stressed that Alaska
was a resource-rich state. He thought it was a shame that
only 1 percent of Alaska land was held in private
ownership. He thought it was time to let loose of some of
the state's resources like timber. He suggested that Alaska
was on a three-legged stool: oil, fish, and tourism. He
compared taxing Alaskans and taking away their dividend to
giving a man a fish which he would eat for a day rather
than teaching him how to fish so he could feed himself for
a lifetime. He wondered where the state would be sitting in
five years if the state took the money in the current year.
He believed in creating new wealth. He suggested giving
Alaska's land to the people predicting they would produce.
It was both a short-term and long-term solution. He also
mentioned the burden for a small business owner to have to
do the paperwork accompanying taxes. He opposed both pieces
of legislation. He felt the state should sell down its
assets before coming to the people for a hand-out.
6:12:06 PM
WILLIAM DEATON, SELF, CORDOVA (via teleconference), spoke
in opposition of HB 245 and HB 250. He believed the
legislature needed to reduce the scope and size of
government and government spending. He suggested one of the
cuts should be defunding Planned Parenthood. He implored
the state to cut government spending. Small business
owners, such as himself, did not want to pay additional
taxes on the money they made. He encouraged the legislature
to make the hard decisions quickly.
6:13:17 PM
BILL LAMBERT, SELF, NORTH POLE (via teleconference), spoke
in opposition to HB 245 and HB 250. He thought every state
agency should be accountable for their electricity, sewer,
and water. He would love to see every Alaskan with land
rights of 3 acres. It would encourage an expansion across
the state. He thanked the committee.
6:15:27 PM
COLLEEN BICKFORD, SELF, ANCHORAGE (via teleconference), was
concerned about the state's fiscal future. She spoke in
support of HB 250. She thought it was crucial to use a
portion of the ERA for the budget. She was not fully in
support of HB 245 as written, but supported the general
concept. She appreciated the opportunity to testify.
6:16:32 PM
SHARON DALTON, SELF, DELTA JUNCTION (via teleconference),
spoke in opposition to HB 245 and HB 250. She opposed new
taxes and relayed that people lived in Alaska for personal
freedom. She stated that cuts needed to be made to
government. She pointed out that taxes would lead her to
shut the doors to her family's small business and
potentially move to the Lower 48. She believed the constant
sense of entitlement needed to be stopped. She mentioned a
96 page plan online that would balance the budget without
any taxation. She thought the legislature was driving
people out of the state with more taxes.
Vice-Chair Saddler conveyed that Representative Kawasaki
had joined the meeting.
6:18:39 PM
TERRIE GOTTSTEIN, SELF, ANCHORAGE (via teleconference), was
in support of HB 250 but did not believe the bill went far
enough. She thought a multi-faceted approach was necessary
to solve the state's budget crisis. She did not support a
sales tax because she believed it disproportionately
impacted rural communities. She stated making changes to
the PF was necessary, but it was an important source of
cash to rural communities. She thought the governor's plan
would sustain the PF. She mentioned a video produced by
youth in Alaska that likened Alaskans to trust fund kids.
She stated that new revenue sources were necessary. She
thought an income tax was the fairest way to generate
revenue and would capture money from out-of-state workers.
She wanted to pay her way and thought most Alaskans felt
the same.
6:21:23 PM
LAUREN BLANCHETT, SELF, ANCHORAGE (via teleconference),
spoke in support of HB 245 and HB 250. She was not married
to the details in HB 245, but supported the concept of
restructuring the PF. She favored a balanced approach which
included generating new revenue sources, restructuring the
PF, instituting an income tax, and making additional cuts
to government spending. However, she did not want to see
the education system or certain other critical services
decimated. She reiterated her support for HB 245 and HB
250.
6:22:36 PM
ANDY HOLLEMAN, PRESIDENT, ANCHORAGE EDUCATION ASSOCIATION,
ANCHORAGE, (via teleconference), testified in support of HB
245 and HB 250. He relayed that an income tax should be a
small part of a package of taxes. Although multiple taxes
were not something people liked, it meant that everyone
would be paying something. He thought it was crucial to
make use of the ERA, generate moderate other revenues, and
make other moderate reductions as part of an overall
package. He advocated making changes in the current year.
He opined that long-term residents were ready to support
the legislature in his concept and offered the support of
his members as well.
6:23:37 PM
JORDEN NIGRO, SELF, JUNEAU, spoke in support of HB 245 and
HB 250. She stated that some people were leaving because of
the economy. She grew up in Juneau and it was her home. She
was not leaving and wanted to be part of the solution. She
thought both of the bills gave Alaskans the opportunity to
be part of the solution. She was aware that there was not a
simple answer but believed many people wanted to stay.
6:25:11 PM
ALYSE GALVIN, SELF, ANCHORAGE (via teleconference), spoke
in favor of HB 250 and opposed HB 245. She believed an
income tax was more equitable than a cap on the PFD. Also,
an income tax would capture revenues from out-of-state
workers. She thought it was important for all people to
pull together to do their part. She stated that the
solution should not come from one section or another or
only from the state's savings account. She continued that
drawing exclusively from savings diminished the chance of
using the reserves in the future. She asked members to
support HB 250.
KELSI PULCZNSKI, SELF, ANCHORAGE (via teleconference),
spoke in opposition to HB 250. She believed it was absurd
that the legislature was considering an income tax to fund
the state's extravagant spending. She was a recipient of
the Alaska Performance Scholarship but believed the program
should be cut. She stated that without the program her life
would be harder. However, she saw the program as a luxury
that could not be afforded by the state. She stressed the
need to downsize state government and services; every
department had waste that to cut. She referred to the
irresponsible spending associated with the Anchorage
Legislative Information Office and the expense of the
building. She thought education, healthcare, and state
services should be reduced significantly. Instituting a
broad-based tax told her that Alaskan lawmakers had given
up. They had given up on responsible spending, right sizing
government, their constituents, and themselves. She urged
members to oppose HB 250.
6:29:50 PM
OLIVIA PIDGEON, SELF, ANCHORAGE (via teleconference), spoke
in strong opposition to HB 250. She remarked that the state
had a plethora of extra services it did not need. She
thought education, healthcare, and state services could
stand to take cuts. She spoke to irresponsible spending at
the University of Alaska Anchorage. She was a college
student and was her own sole provider. She opined that
state government was trying to tax its way out of a $4
billion deficit. She thought that passing HB 250 would
perpetuate the fiscal problem. She asked members not to
support the legislation.
6:31:14 PM
MERRICK PIERCE, SELF, FAIRBANKS (via teleconference),
offered// that state spending needed to be curtailed prior
to the implementation of the bills. He spoke to excessive
spending by the legislature in the areas of travel and per
diem. He also criticized the $32 million expenditure for
the Anchorage LIO. He stated that the severance tax policy
did not capture a fair share of oil revenues. He provided
some figures related to the state's oil tax system. He
alluded to the ramifications of a reduction of the PFD by
$1000 per person. It equated to a hit to the Fairbanks
North Star Borough in the amount of $100 million. He
relayed that 2500 people had left over the previous 1.5
years and noted all of the vacant office space. He
discouraged an income tax or a raid on the PF until further
reductions were made.
6:33:24 PM
PAM THROOP, SELF, FAIRBANKS (via teleconference),
appreciated Gavel-to-Gavel. She believed that most Alaskans
would not be opposed to an income tax or the use of the PF
if oil and gas companies had been asked to pay more of
their share. She implored the committee to take a look at
the issue. She did not think it would hurt the oil
companies to pitch in especially when the people of Alaska
were being asked to contribute. She stated that BP had
shutdown 3 of its 5 rigs. Conoco Phillips laid off people
within weeks of the passage of SB 21. She stated that SB 21
had not done what it was supposed to do. She could not
support either bill until something was done with oil and
gas tax credits.
6:35:41 PM
EARL WHITT, SELF, ANCHORAGE (via teleconference), did not
see anything in HB 250 that precluded a personal income tax
to military members, whether active guard or reserve. He
wondered if he was correct.
Vice-Chair Saddler replied in the affirmative.
Mr. Whitt encouraged the committee look into an amendment
to exempt active duty military, guard, and reserve members
from paying an income tax. He spoke to other states that
had exempted military service members from income taxes. He
thanked the committee for all that it did.
6:37:59 PM
PAUL RODERICK, SELF, ANCHOR POINT (via teleconference),
suggested that if the state was going to impose an income
tax it should consider a larger percentage, as the cost of
administering it would be the same. He supported HB 250. He
opposed HB 245. He wanted the PF left alone. He thought the
legislature was moving too fast to make good decisions. He
did not believe the state had cut enough. He remarked that
no one wanted to lose anything, but thought it was
necessary. He thought it would be important to address how
the potential changes would affect people at the low income
level. He thanked the committee.
6:40:20 PM
ROBERT MCCOY, SELF, ANCHORAGE (via teleconference), spoke
in opposition to HB 250. He believed an income tax would
penalize the most productive people in the state. He
thought the PFD was one of the worse things instated. He
believed that having an income tax and keeping the PFD took
money from productive people and placed it in the hands of
2 and 3 year-olds who were not yet productive. He spoke in
support of curtailing or restructuring the PFD favoring HB
245. He added that he thought a sales tax was fair. He
reiterated his opposition to an income tax.
Vice-Chair Saddler asked if Mr. McCoy was in support or
opposition to HB 245.
Mr. McCoy was in favor of HB 245.
6:43:16 PM
JEREMY PRICE, AMERICANS FOR PROSPERITY, ANCHORAGE (via
teleconference), spoke in opposition to HB 250. The group
supported the reduction of the size of state government
which would only come through real reform with substantive
legislation overhauling ever growing and unsustainable
programs. The group also supported using PF savings and
earnings before taxes. He proclaimed that Alaskans did not
pay their fair share in taxes he asked for the
consideration of the following: According to the Tax
Foundation, Alaska had one of the highest corporate tax
rates in the entire country at 9.43 percent. Also,
according to the Tax Foundation, Alaska was one of the
highest states with the percentage of private sector
workers who were employed by pass through businesses where
the employer was paying taxes through the individual income
tax code rather than the corporate tax code. Over 58
percent of private sector workers in Alaska were employed
through these self-employed businesses; limited liability
corporations, sole proprietorships and "S" corporations
where owners paid taxes through the individual income tax
code. As such, increasing income taxes on these individuals
would harm small businesses disproportionately. The biggest
risk takers in the state were those who had created a small
business. They had invested the most and had the most to
lose with an individual income tax. These small business
owners were also the job creators in Alaska. He provided a
personal perspective about his family business. He had
watched his parents struggle to keep their business afloat
during tough economic times. Presently, he thought it was
harder than ever to grow a successful business. He implored
the committee to keep from making it more difficult.
6:45:46 PM
TOM BRICE, SELF, JUNEAU, spoke in support of HB 245 and HB
250. He spoke to an income tax and noted that $2.6 billion
worth of wages were leaving the state with out-of-state
workers. He opined that those workers should contribute
some of their earnings to help pay for services. He
provided examples of state services he appreciated. He
thought both bills helped move the state forward.
6:48:25 PM
PAUL FUHS, SELF, JUNEAU, wanted to address the issues of
fairness and repressiveness. He noted he had read the
report put out by the Rasmussen group. He thought it was
very shallow and, it was clear that someone did not really
understand how the state's budget operated. He thought it
was regressive to take $1000 from people particularly from
the lowest end of the income scale. He wondered how the
state would pay for the services without turning the
state's savings into revenue producing assets. The part of
the budget that was designated general funds (DGF) was paid
for by the people of Alaska. The state's entire regulatory
structure was paid for by fees collected from Alaskans. In
2016 Alaska paid for services in the amount of $877
million. The largest piece of unrestricted general funds
(UGF) was Medicaid and school funding - services people
depended on. The state paid $7 thousand per Medicaid
recipient. In urban areas, the state paid $20 thousand per
student and in rural areas the state paid $30 thousand per
student for education. Personally he was willing to pay an
income tax even though it would only raise about $200
million and did not fit the state's budget gap. He
suggested that unless legislation such as HB 245 was
adopted the state would not get any closer to solving its
fiscal problems. Ironically, the people that needed some of
the programs the most would likely suffer the most.
Vice-Chair Saddler asked for clarification on Mr. Fuhs'
positions on the bills.
Mr. Fuhs responded that he was willing to pay an income
tax, but did not know if it was the best policy for the
state. He supported HB 245 or some version that turns the
state's saving into revenue producing assets.
6:50:36 PM
STEVE GIBSON, SELF, HOMER (via teleconference), relayed
that he was a small business owner. He believed HB 245 was
on the right track, but he supported Representative
Seaton's version. He thought it was better to use a 15
percent federal income tax liability, otherwise, it would
not be a very serious effort at imposing a tax. He offered
that the state should consider an income tax and other
taxes before considering the use of the PFD, especially if
the state was going to associate it with royalties instead
of the stock market. He thought the oil field did not look
hopeful in the future. He thought it would be a poor idea
to invest in a sovereign wealth fund in the long run. He
realized that because of the revenue shortfall the state
would have to appropriate some of the PF, but it was not a
long term plan. He furthered that an income tax was a much
more equitable revenue generator than a sales tax.
6:53:02 PM
DEENA MITCHELL, SELF, ANCHORAGE (via teleconference),
strongly supported an income tax, which she believed was
the most simple and equitable way to tax and bring in
revenue. She added that the tax should be at a higher
amount than 6 percent. She supported the POMV method to
access the PF. She was very willing to pay for the services
she received and supported HB 245 and HB 250.
6:54:02 PM
PATRICK SCHLICHTING, SELF, DELTA JUNCTION (via
teleconference), spoke in support of an income tax. He
believed it was the civic responsibility of all Alaskans to
support the state and that everyone should have skin in the
game. He was disheartened with cuts that had been made. He
spoke to unplowed roads by Department of Transportation and
Public Facilities due to a lack of funds. He stated that an
income tax would capture revenues from out-of-state workers
who enjoyed the infrastructure and benefits of Alaska - a
small price to pay. He suggested that the state would find
a level of tax that people could afford. As far as the PF,
he thought it was meant to be used at some point. He
offered that currently Alaskans had trust issues with the
legislature. He spoke to the expense of the LIO in
Anchorage and how the issues surrounding it had created
distrust. He favored an income tax.
6:56:39 PM
JEANINE ST. JOHN, SELF, ANCHORAGE (via teleconference),
remarked that the state had been fortunate to live on oil
for a long time but should not count on it in the future.
She supported HB 245 or some version of using the ERA. He
also supported reducing the PFD. In general, she supported
HB 250. She agreed that an income tax was necessary and
that people should have skin in the game. However, she was
concerned that there had not been a lot of time to discuss
the issue. She believed the point earlier about military
exemption required consideration. She believed it was
urgent to come up with a structure to use monies from the
ERA. She thanked the committee.
6:58:55 PM
JEAN ELLIS, SELF, PETERSBURG (via teleconference), spoke in
support of an income tax under HB 250. She was opposed to a
state sales tax. She supported HB 245 and believed a
restructuring of the PF was important. She opined that
capping the PFD at $1000 was more than people received in
some years in the past and more than people might receive
in future years.
7:00:22 PM
LINDA MURPHY, SELF, SOLDOTNA (via teleconference), spoke in
support of HB 245 and HB 250. She stated that it was
critical for the legislature to do something immediately.
She was in support of a state income tax, giving everyone
skin in the game. She did not want to see the PFD go away
completely but thought HB 245 was a well thought out piece
of legislation. She urged members to support the bills.
Vice-Chair Saddler asked her position on an income tax.
Ms. Murphy replied that she was in favor of an income tax.
7:01:53 PM
MEG NORDALE, SELF, FAIRBANKS (via teleconference), was
concerned about the fiscal challenges of the state and was
and the future of Alaska. She believed it was time to make
the hard decisions required to address Alaska's fiscal
issues. A healthy state economy was crucial for a vigorous
and healthy private sector economy. She spoke in support of
implementing a fiscal plan using a portion of the ERAs,
making cuts to spending, and generating new revenues. She
opined that HB 245 would provide fiscal stability for
Alaska's future. She felt the private sector's future
depended on the legislature's proactive work during the
session. She believed the worst decision was no decision
and a poorly timed one was no different. She urged support
for HB 245 and HB 250.
7:04:06 PM
WILLIE LEWIS, SELF, ANCHORAGE (via teleconference), spoke
about climate change. He noted that oil was down and he
referred to supply and demand. He wanted to know why the
discussion was not about renewable energy. He wanted to
know why the state had to hold hands with the oil companies
when oil was declining.
7:06:15 PM
NAJA BRANDT, SELF, NOME (via teleconference), spoke about
the income tax. She believed that it was unfair for single
parents to have to pay more than married couples. She
stated that her mother was a single parent and had a hard
time with money. She reiterated that it was not fair.
7:07:07 PM
CARL KANCIR, SELF, ANCHORAGE (via teleconference), spoke in
opposition of HB 245, HB 250, and a sales tax. He felt that
money had been spent in excess.
7:08:16 PM
JEFF BARNARD, SELF, JUNEAU (via teleconference), believed
it was time for the legislature to grow a backbone and to
address the state's issues. He suggested that the state
needed to do something other than drawing from the PF. He
favored broad-based taxes. He encouraged members to act
immediately.
7:09:14 PM
RICHARD OLSEN, SELF, HOMER (via teleconference), he urged
the legislature to set a precedent. He did not support to
the use of the PF. He emphasized that there was a reason
for the word "permanent".
7:11:46 PM
EDWARD WITBECK, SELF, KENAI (via teleconference),
recommended taxing the coal companies and mining companies
25 percent rather than 6 percent. He suggested halting the
oil incentives and about multiple oil companies including
BlueCrest and Furie who received credits. He encouraged
further taxing the industry.
7:13:57 PM
DAVID OTNESS, SELF, CORDOVA (via teleconference), spoke
against dipping into the PFD and expecting people in rural
Alaska to prop up the economy of the urban areas. He
thought that was what HB 245 was doing. He did not want the
proposed legislation passed in a hurry. He thought it was a
drastic step reaching into the PF. It was something the
state fought for long and hard. He did not think the
legislation had to pass in the current year.
7:15:48 PM
AT EASE
7:30:13 PM
RECONVENED
GARVIN BUCARIA, SELF, WASILLA (via teleconference), opposed
HB 250. He thought it was hasty to be imposing a state tax
and would cost more in administrative fees. He also opposed
HB 245 and supported keeping the existing PF program. The
structure of the PF program administered investments far
more effectively that the Department of Revenue. He favored
drastic cuts to state spending including funding for mega
projects. Additionally he opposed new bonding. He supported
the oil production tax incentives, as he wanted the
industry to remain healthy. He recommended balancing the
budget with CBR monies and other slush funds. He advised
members not to be intimidated by the current governor who
had a pipedream regarding the natural gas pipeline. He
spoke against funding many of the mega projects. He
reiterated his opposition to both pieces of legislation.
7:33:11 PM
BERNIE HOFFMAN, SELF, FAIRBANKS (via teleconference),
agreed that a multifaceted approach was needed to close the
state's budget gap. She did not support the 5 percent draw
from the PF. She recommended a 20 percent reduction in
state expenses across the board without cherry picking and
suggested imposing a 10 percent sales tax. She thought oil
tax credits needed to be modified. She further recommended
tripling the gas tax, doubling the taxes on alcohol and
tobacco, and suspend all large projects. She recommended a
sales tax exempting food, water, prescriptions, and
healthcare. She suggested tapping the PFD but only for
education without using it to build structures. She spoke
of using the overflow of the Power Cost Equalization fund
to close the budget gap.
7:35:37 PM
HOLLIS HALL, SELF, FAIRBANKS (via teleconference), spoke in
favor of both pieces of legislation. He thought HB 245
would allow all Alaskans to share the burden. He believed
HB 250 would allow those that were more affluent and those
out-of-state workers to share some of the costs of running
the state. He was pleased with the House's actions. He
thanked the committee for working hard.
7:36:31 PM
JOEL SWITZER, SELF, FAIRBANKS (via teleconference), spoke
in favor of HB 250. He felt that out-of-state workers made
up a large portion of the workforce and as beneficiaries
could help support state government. He wanted to see the
PF left alone, as it had been a model for other governments
around the world including Saudi Arabia. He opposed HB 245.
7:38:19 PM
DAVID BOYLE, SELF, ANCHORAGE (via teleconference), was
opposed to HB 250. He did not want to pay for the 1 percent
art program. He also did not want to pay for college
students under the Alaska Performance Scholarship Program
because in 18 years they should have accumulated well over
26 thousand of PFD payments they could be used to pay for
college. He did not want to pay for the LIO in Anchorage or
for annual merit pay increases. He mentioned a number of
other things he did not want to pay for. He reviewed the
fiscal note which advocated hiring an additional 44 full-
time state employees and another 16 part-time employees to
administer an income tax. He thought the governor was
trying to grow government in the Department of Revenue and
the Department of Health and Social Services. He opposed HB
250 and urged members to not let the governor rush members
into a panic. Rather, he encouraged then to take their time
and make good decisions. He respected the work the
legislature was doing.
7:40:10 PM
MIKE SWAIN, SELF, ANCHORAGE (via teleconference), opposed
HB 245. He suggested amending HB 250 to a flat income tax.
He mentioned that the PF was a rainy day account. He did
not believe PF monies were intended to fund government. He
thought HB 245 was an implementation of continuing
government revenue and as such opposed it. He relayed that
because the share of Alaska's wealth within the PF was an
investment return, the PFD was of more value than the
current day oil investments. Alaska's PFD was a return of
value of an investment, good or bad, rather than an
expense. Incorporating a link between the PFD directly to
oil royalties would be a direct tax, redistributing royalty
oil tax directly to the public. The PFD was vital because
it was a return on an investment.
7:42:51 PM
GARRET FLOYD, SELF, ANCHORAGE (via teleconference), spoke
in favor of HB 245 and HB 250. He asked legislators to make
the tough calls that had to be made. He advocated broad-
based taxes. He urged members to pass both pieces of
legislation and thanked them for their service.
7:44:19 PM
DOUG GOERING, SELF, FAIRBANKS (via teleconference), relayed
one aspect of the PFD program. He understood that in the
previous year the state distributed roughly $1.4 billion in
PFD checks. His guess was that $700 million of that payout
went to the federal government as federal tax liability.
While he was in favor of raising revenues by both some
restructuring of the PFD payout program and a state income
tax he urged members to think carefully about how the two
programs were structured. He believed that there was a way
they could be structured such that the federal tax
liability would be significantly reduced, if not
eliminated. As a result, several $100 million would remain
in Alaska rather than leaving the state as was currently
the case. He thought handing out a dividend and then
collecting state income tax on that dividend bolstered
federal revenues needlessly. He offered that the two bills
could be combined in such a way that the federal tax
liability would be significantly reduced. He thanked
members for their service and their time.
7:46:23 PM
SARA WILLSON, SELF, JUNEAU (via teleconference), supported
the use of the PF for government operations. She opposed a
personal income tax due to administrative costs. She also
questioned whether the numerous out-of-state workers would
comply with the proposed regulation to pay a percentage of
federal income tax. She suggested that the income tax be
implemented similar to the way Social Security taxes were
deducted. She thought it would involve less bureaucratic
and administrative costs. She thanked the committee.
7:47:27 PM
AT EASE
7:47:48 PM
RECONVENED
DEBORAH BROLLINI, SELF, ANCHORAGE (via teleconference),
spoke against HB 245 and HB 250. She felt that if Alaska
wanted to increase revenues it needed to increase oil
production through the Trans-Alaska Pipeline System (TAPS).
She believed Alaskans needed to be reminded where state
revenue was generated. She thanked members for their time.
7:49:36 PM
Vice-Chair Saddler CLOSED public testimony.
HB 245 was HEARD and HELD in committee for further
consideration.
HB 250 was HEARD and HELD in committee for further
consideration.
Vice-Chair Saddler reminded members that amendments for HB
245, HB 250, and HB 249 were due by Friday, April 15, 2016,
at 5:00PM.
ADJOURNMENT
7:50:22 PM
The meeting was adjourned at 7:50 p.m.
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