Legislature(2021 - 2022)ADAMS 519
03/15/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB322 | |
| HB158 | |
| HB395 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 322 | TELECONFERENCED | |
| += | HB 395 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 158 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
March 15, 2022
1:31 p.m.
1:31:05 PM
CALL TO ORDER
Co-Chair Merrick called the House Finance Committee meeting
to order at 1:31 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen
Representative Steve Thompson (via teleconference)
Representative Adam Wool
MEMBERS ABSENT
None
ALSO PRESENT
Kerry Crocker, Staff, Speaker Louise Stutes; David Ignell,
Self, Juneau; Representative Mike Prax; Emily Nauman,
Deputy Director, Legislative Legal Services, Alaska State
Legislature.
PRESENT VIA TELECONFERENCE
Corey Bigelow, Operations Manager, Permanent Fund Dividend
Division, Department of Revenue; Pat Alexander, Self,
Sitka; Frank Lee, Self, Douglas; Wanda Culp, Self, Juneau;
Shannon Adamson, Alaska Regional Representative, Masters
Mates and Pilots, Juneau; Gerry Hope, Transportation
Director, Sitka Tribe of Alaska, Sitka.
SUMMARY
HB 158 PFD CONTRIBUTIONS TO GENERAL FUND
CSHB 158(FIN) was REPORTED out of committee with
five "do pass" recommendations and with six "no
recommendation" recommendations and with one
previously published indeterminate fiscal note:
FN1 (REV).
HB 322 AK MARINE HWY SYSTEM VESSEL REPL. FUND
HB 322 was HEARD and HELD in committee for
further consideration.
HB 395 FUNDS: AK MARINE HWY SYSTEM
HB 395 was HEARD and HELD in committee for
further consideration.
Co-Chair Merrick reviewed the agenda for the day.
HOUSE BILL NO. 322
"An Act relating to the Alaska marine highway system
vessel replacement fund; and providing for an
effective date."
1:31:50 PM
KERRY CROCKER, STAFF, SPEAKER LOUISE STUTES, introduced
himself and had no opening comments.
1:32:20 PM
Vice-Chair Ortiz asked Mr. Crocker to summarize the
difference between HB 322 and HB 395.
Mr. Crocker reported that the main difference was who would
be permitted to spend the money once it was appropriated.
He explained that under HB 322, the legislature retained
the authority to appropriate the money. Under HB 395, the
legislature still had the authority to appropriate the
money, but the commissioner of the Department of
Transportation and Public Facilities (DOT) retained control
of the money after it had been appropriated.
1:33:04 PM
Co-Chair Merrick OPENED public testimony
1:33:14 PM
DAVID IGNELL, SELF, JUNEAU, was unsure of the bill he was
testifying on. He wanted to testify to the bill that gave
the DOT commissioner the right to appropriate
transportation funds.
Co-Chair Merrick would have Mr. Ignell testify on the next
bill on the agenda, HB 395.
1:34:37 PM
Co-Chair Merrick CLOSED public testimony
Co-Chair Merrick indicated amendments were due by
Wednesday, March 16, 2022 by 5:00 p.m.
HB 322 was HEARD and HELD in committee for further
consideration.
1:35:00 PM
AT EASE
1:36:13 PM
RECONVENED
Co-Chair Merrick indicated the committee would take up
HB 158. She invited the sponsor of the bill to testify.
HOUSE BILL NO. 158
"An Act relating to contributions from permanent fund
dividends to the general fund."
1:36:42 PM
REPRESENTATIVE MIKE PRAX introduced HB 158 and explained
that it instructed the Permanent Fund Dividend (PFD)
Division of the Department of Revenue (DOR) to include a
check box on the electronic PFD application. The intention
of the box was to make it easier for individuals who wished
to return their PFD check to the general fund. He added
that the check box worked the same as the check box for the
Pick.Click.Give. program.
1:37:37 PM
Representative Rasmussen appreciated the legislation. She
had mentioned the idea in the prior legislature and was
excited to see Alaskans participate in the program.
Vice-Chair Ortiz asked the Representative Prax if he had
detected any opposition from others who had benefited
through the Pick.Click.Give. option.
Representative Prax responded that he had heard rumors of
opposition but had received no formal opposition.
1:39:00 PM
Representative Wool wondered if people making the donation
would still have to pay taxes on the funding.
Representative Prax responded that there was no change in
the tax status even if it was donated back to the state. It
would be considered a charitable contribution. He relayed
that Legislative Legal Services determined that
contributing a PFD check back to the state was handled the
same as a charitable contribution.
Representative Wool wondered about the funding
ramifications of the donations for the agencies that would
receive them.
Representative Prax reiterated that the PFD check would
return to the general fund if a person opted into the
program. There was no instruction to send funding to
specific agencies. The money would go back to the general
fund and the legislature would appropriate it as normal.
1:42:00 PM
Representative Thompson MOVED to ADOPT Amendment 1, 32-
LS0746\A.4, Nauman, 3/1/22 (copy on file):
Page 1, line 1 :
Delete the second occurrence of "fund"
Insert "and permanent funds"
Page 1, line 4:
Delete "fund"
Insert "and permanent funds"
Page 1, line 7, following the first and second
occurrences of "fund":
Insert "or the principal of the permanent fund"
Page 1, line 14, following "fund":
Insert "or the principal of the permanent fund"
Co-Chair Merrick OBJECTED for discussion.
Representative Thompson reviewed the amendment. The
amendment provided an additional option for donating the
money to the corpus of the permanent fund rather than the
general fund.
1:43:22 PM
Vice-Chair Ortiz thought the amendment was favorable. He
asked if the amendment would require additional personnel.
Representative Thompson noted that there would have to be
some technology changes, but it would not add costs.
1:44:10 PM
Representative Carpenter asked if there was a process for
accepting funds into the corpus.
1:44:53 PM
COREY BIGELOW, OPERATIONS MANAGER, PERMANENT FUND DIVIDEND
DIVISION, DEPARTMENT OF REVENUE (via teleconference), asked
Representative Carpenter to restate his question.
Representative Carpenter rephrased and asked whether the
division had a way to regularly receive returned PFD checks
and incorporate the monies back into the corpus of the
fund. He asked if this could be achieved as is or if the
system needed a technical upgrade.
Mr. Bigelow replied that he could not answer the question
for the PFD corporation, but that the PFD division needed
to do some additional work in order to send those funds to
the Alaska Permanent Fund Corporation (APFC).
Representative Carpenter asked if there was anything that
would prevent the corporation from being able to accept the
funds.
Mr. Bigelow thought that there was nothing preventing the
corporation from setting up a mechanism to accept the
funds.
1:47:02 PM
Representative Prax relayed there would not be any written
checks and that the process would be done electronically.
Representative Wool noted that the possibility of receiving
a tax deduction for a charitable donation had been
mentioned earlier. He thought some sort of donation receipt
would be required.
Representative Prax expected that the program would be
designed to trigger a donation receipt when a person made
the decision to donate. The division would send a receipt
for a contribution, and it would be mechanically simple. He
was unsure whether the division was authorized to accept a
personal check. He thought that currently, anyone was
permitted to write a check to the general fund and did not
think anything would change.
1:49:42 PM
Representative Carpenter asked if Representative Wool was
suggesting that the check going to the state general fund
or permanent fund would be considered a tax deduction as a
qualified charitable donation.
Representative Prax agreed that that was his understanding.
Co-Chair Merrick asked Mr. Bigelow to comment on whether
the division was able to provide documentation for the
donation of a person's PFD to the corpus or to the general
fund.
Mr. Bigelow believed the division would have to come up
with a procedure since it was not something that was done
regularly. He did not foresee that being a problem.
Co-Chair Merrick asked whether an organization currently
had to provide a receipt if a person made a donation
through the Pick.Click.Give. program.
Mr. Bigelow believed that there was something in statute
that required that the PFD division provide that
information. He noted that he had to check the statute to
confirm. Applicants were provided with additional
information on 1099 tax forms as well.
Co-Chair Merrick noted that she was trying to get someone
from Legislative Legal Services online.
Representative Johnson provided a personal example of a
misunderstanding regarding her PFD check. She was required
to provide additional documentation to the division, and
the division provided documentation back to her. The state
already was making other deposits into the corpus of the
permanent fund. She opined that it did not seem
complicated.
1:53:08 PM
AT EASE
1:58:03 PM
RECONVENED
Co-Chair Merrick indicated that Emily Nauman with
Legislative Legal Service was online for questions.
1:58:15 PM
Representative Rasmussen asked Ms. Nauman to comment on the
bill regarding donating to the corpus of the permanent
fund. She wondered whether it was classified as a donation
to a government entity considering the money would be
reinvested and redistributed as a dividend rather than for
the purpose of the government.
EMILY NAUMAN, DEPUTY DIRECTOR, LEGISLATIVE LEGAL SERVICES,
ALASKA STATE LEGISLATURE, believed that a donation made by
an individual would be taxed the same as a donation back to
the general fund. It would be taxable but also would be
deductible if an individual chose to itemize their
deductions.
1:59:31 PM
Representative Rasmussen asked if Alaskans would know that
the donation was considered deductible.
Ms. Nauman felt comfortable with her assessment that the
tax would be the same.
Co-Chair Merrick asked if the State of Alaska was
considered a non-profit organization.
Ms. Nauman indicated that government entities were slightly
different than non-profit organizations with tax-deductible
donations. For the purposes of federal revenue taxes, a
donation to the state government would be considered as a
donation to a different type of entity.
Co-Chair Merrick asked for confirmation that the donation
would still be considered tax deductible.
Ms. Nauman clarified that a donation to the state
government would still be considered tax deductible.
Representative Josephson asked if there was something in
the [federal Tax Cuts and Jobs Act] congressional action of
2019 that made tax deductions to non-profits less
advantageous to donors.
Ms. Nauman responded that there were many changes made in
the Tax Cuts and Jobs Act that changed the structure of the
process of filing individual income taxes. She explained
that fewer people were itemizing their standard deductions
in their taxes under this act.
Representative Wool shared his understanding that the tax
law prevented the deduction of state taxes from federal
taxes. He wondered whether state taxes being non-deductible
meant giving money back to the general fund. He questioned
how it was different than a charitable contribution, and if
a state income tax would be considered tax deductible.
Ms. Nauman indicated that under the current federal tax
laws, a donation to the general fund or permanent fund as
proposed in Amendment 1 would be deductible. If a state
were to implement an income tax, it would depend on state
laws to determine whether similar donation activity would
be deductible.
Representative Wool pondered if a person lived in Alaska or
any state with a state [income] tax, was it still
deductible from an individual's federal taxes.
Ms. Nauman indicated it was her understanding that state
and local taxes were deductible and itemized in the same
way as donations. If a person were to take the standard
deductions, their state taxes might not be separately
deductible from federal taxes. She prefaced that everyone
filed their individual income taxes differently, and the
decision to itemize or not itemize certain expenditures was
at the discretion of the individual.
Co-Chair Merrick reminded the committee that Ms. Nauman was
not an accountant or tax preparer, but an attorney.
Co-Chair Merrick WITHDREW her OBJECTION to Amendment 1.
There being NO further OBJECTION, Amendment 1 was ADOPTED.
2:04:52 PM
Representative Wool commented that he was conflicted with
the bill. The bill enabled Alaskans to donate their PFDs
back to the state. He wondered how many people would choose
to give the money back to the state. He assumed that most
people who went through the trouble of applying for the PFD
would keep the check. He thought the idea of the bill was
good but that it was used in an argument that he did not
support.
Co-Chair Merrick noted that the bill allowed people to make
donations in $25 increments.
Representative Rasmussen appreciated the bill because it
gave people more choices. She appreciated Representative
Thompson's amendment. She would be supporting the bill.
2:08:30 PM
Representative Edgmon commented that the concept was
interesting. He noted it was unlikely that people would
donate back to the government. He hoped he was wrong.
Representative Prax stated that he could not estimate what
people's response would be. He noted that people were
applying for the dividend during the same time period the
legislature was deliberating the budget, and that people
based their donation decisions off those deliberations. He
thought part of the problem was that the state was losing
revenue. He expected that quite a few more people would
donate back to the state.
Co-Chair Merrick thought that with 20 co-sponsors there
might be 20 more donations.
Representative Edgmon thought the bill would be de minimis.
However, if it gave Alaskans purpose and had minimal
associated costs, he would support the bill.
Co-Chair Merrick indicated the cost to the bill was about
$43,600 to implement the proposed changes.
Representative Josephson stated that the fiscal note was
concerning. He thought that the bill was benign and did not
solve any of the state's fiscal problems. He did not
understand why someone would make a donation to the general
fund when Pick.Click.Give. allowed for specified donations.
He remarked that he would never make such a donation. He
did not think there was harm in the bill, but did not know
what the benefit would be either.
2:13:27 PM
Representative Carpenter had a dissenting opinion. He had
heard from many people that state programs were more
important than the PFD. The bill would allow for people to
apply their PFD checks towards state programs instead of
keeping the checks for themselves. He hoped that people who
reached out to the legislature and stated this opinion
would have a way to "put their money where their mouth is."
Representative Wool thought the bill would prove to be a
test of psychology. He hoped the experiment would be worth
the cost and suggested a sunset.
Co-Chair Foster MOVED to report CSHB 158(FIN) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 158(FIN) was REPORTED out of committee with five "do
pass" recommendations and with six "no recommendation"
recommendations and with one previously published
indeterminate fiscal note: FN1 (REV).
2:16:00 PM
AT EASE
2:18:29 PM
RECONVENED
Co-Chair Merrick called the meeting back to order.
HOUSE BILL NO. 395
"An Act relating to the Alaska marine highway system
fund and the Alaska marine highway system vessel
replacement fund; establishing the Alaska marine
highway system fund and the Alaska marine highway
system vessel replacement fund outside the general
fund; authorizing the commissioner of transportation
and public facilities to expend money from the Alaska
marine highway system fund and the Alaska marine
highway system vessel replacement fund; and providing
for an effective date."
2:18:37 PM
Co-Chair Merrick asked if members had questions.
2:18:55 PM
Co-Chair Merrick OPENED public testimony.
DAVID IGNELL, SELF, JUNEAU, spoke in opposition of HB 395
because it seemed to give the commissioner of the
Department of Transportation and Public Facilities (DOT)
authority to spend a significant amount of money. He noted
that the bill was introduced less than a week ago and
questioned why public testimony had been scheduled so
quickly. He expressed that it seemed like someone was
trying to "pull a fast one" with the bill. It reminded him
of the events that led up to the defunding of the Alaska
Marine Highways System (AMHS). He thought that the bill
would be detrimental to rural communities. He requested
that public hearing of the bill be postponed until the
people of Alaska were more aware of it, and for the public
to be given a "reasonable opportunity to be heard" through
public testimony.
Co-Chair Merrick indicated that the committee was not
trying to rush the bill hearing process. She relayed that
the hearing had been noticed in the previous week and that
this was the first hearing of the bill.
Mr. Ignell stated that he had spent only a few minutes
looking at the bill. He shared his understanding of the
bill hearing process in that once public testimony was
closed for a bill, the public had no more opportunities for
input. He thought the amount of time given for public
testimony was insufficient.
Co-Chair Merrick asked the testifier to keep his comments
focused on the bill. She explained that the committee
procedurally held public testimony and then would decide
whether to draft amendments based on the testimony. She
invited the next testifier to begin.
2:25:55 PM
PAT ALEXANDER, SELF, SITKA (via teleconference), agreed
with Mr. Ignell that the legislation had been brought forth
too quickly. She thought the monies were being moved to
another account to avoid the sweep provision. She was
interested in protecting the funds so that they would only
be spent to support AMHS and not diverted to any other
purpose. She asked for clarification on the legislation.
Co-Chair Merrick indicated committee hearings could be
revisited online.
Representative Rasmussen asked if the testifier objected to
creating a separate account that was outside of the general
fund to disallow the fund from being sweepable. The reason
the legislation was brought forward was because there had
been previous accounts that fell under the general fund
that were subject to the sweep and it did not achieve the
three-quarter vote threshold. It was clear in the bill that
the money was for a specific purpose. It also specified to
what purpose the commissioner could use the funding.
Ms. Alexander did not want the money to be swept into the
general fund. She wanted to ensure that the money would be
spent on AMHS.
2:30:16 PM
Representative Rasmussen thought the bill accomplished what
the testifier was hoping for it to accomplish.
Co-Chair Merrick indicated that HB 395 dealt with the
sweepability of AMHS, but HB 322 also dealt with that
matter. They were two versions of the bill with slight
differences.
2:31:15 PM
Representative Josephson noted that there were differences
in the bill. He wondered if Ms. Alexander's and Mr.
Ignell's testimony came from a place of well-deserved
confusion because the administration was not in favor of
additional AMHS funding earlier in the term. He wondered
whether the testifiers were suspicious of the
administration because of its prior opposition to funding
AMHS.
Ms. Alexander was concerned that the money would be used
for a purpose other than AMHS because of the state's dire
fiscal position.
Representative Josephson clarified that neither bill could
guarantee that funds would be used for designated purposes.
He explained that it was a presumptive designation. It came
down to a question of control of the funds, and whether the
legislature or the commissioner should be made responsible
for those funds.
2:33:35 PM
FRANK LEE, SELF, DOUGLAS (via teleconference), spoke in
support of funding the AMHS for as long as possible. He
indicated that the funds should be allocated for AMHS and
should not be allocated for any other purpose. There had
been historic problems maintaining the ferries due to lack
of funds. He stated that AMHS was important to sustain
Alaskan communities and was a lifeline for Southeast
Alaska.
2:35:15 PM
WANDA CULP, SELF, JUNEAU (via teleconference), commented
that the State of Alaska was corporate-based due to Alaska
Native Claims Settlement Act (ANCSA). She added that
Southeast Alaska was still suffering from the governor's
last withdrawal of the AMHS and that it was more expensive
than ever to travel on the ferry. She noted that DOT used
federal and state transportation funding and that it must
not be abused. She suggested that [federal] Indian-based
funding had most likely been absorbed by DOT. She stated
that Native people deserved equal access to AMHS and the
road system, otherwise it was akin to genocide. She
wondered if the governor's action of taking from the AMHS
was specifically to accommodate the corporate-rooted
infrastructure in the northern areas of the state rather
than accommodating the Tongass National Forrest. It seemed
that the funding the governor took was used for business
corporations. She spoke of the high cost of travel by air
and wanted to keep the AMHS out of the governor's hands.
She emphasized the importance of equality, and that the
state needed to step back.
2:39:28 PM
SHANNON ADAMSON, ALASKA REGIONAL REPRESENTATIVE, MASTERS
MATES AND PILOTS, JUNEAU (via teleconference), spoke in
support of AMHS. She spoke in support of HB 322 and in
opposition to HB 395. She opined that AMHS needed stability
and predictability, and HB 322 provided AMHS with the
knowledge that future vessels would be available on a
yearly basis. Although HB 395 provided some protection to
the funds, it allowed the DOT commissioner to spend some of
the funds without much oversight. She was concerned that
the current management system would have control of the
funds, which was troubling because management had problems
making decisions that were in the best interest of the
vessels and the communities. The bill failed to provide
some protections of the fund from the political cycle which
had always been a problem for AMHS. She concluded that HB
322 would be a huge step forward.
2:41:44 PM
GERRY HOPE, TRANSPORTATION DIRECTOR, SITKA TRIBE OF ALASKA,
SITKA (via teleconference), indicated that the Sitka Tribe
of Alaska had submitted comments in writing and had been
solicited by AMHS over the past few decades regarding the
winter and summer ferry schedules. He noted the declining
service of AMHS to Sitka. He thought the bill had a good
intent except for the control of funding. The concept of
money being set aside for the specific purpose of AMHS was
appreciated. However, he thought the wheels came off the
bill by putting too much authority into the hands of the
commissioner. He liked the concept of the bill but noted
the constitutional requirement for funds to not be
designated for a specific purpose.
2:44:48 PM
Vice-Chair Ortiz noted that there were two different bills
before the committee, HB 395 and HB 322, but that both
bills did essentially the same thing. The main difference
was that the control of the funds was in the hands of the
commissioner of DOT under HB 396. Under HB 322, the
authority rested in the hands of the legislature. He asked
whether Mr. Hope had a preference between the bills.
Mr. Hope preferred the authority be in the hands of the
legislature but acknowledged that things could change in
the future. He stated that more heads were better than one.
He questioned the role of the newly created AMHS board
because it was unclear.
2:47:05 PM
Co-Chair Merrick CLOSED public testimony.
2:47:14 PM
Representative Thompson asked Co-Chair Foster about the new
timeline since the Department of Revenue had released the
spring revenue forecast.
Co-Chair Merrick asked Representative Thompson to hold his
question until the committee was done with HB 395.
Representative Wool appreciated Co-Chair Merrick's decision
to bring both bills forward at the same time. He thought
the committee would be taking action on one bill at a time
because the bills were very different. He thought there was
no rush to move the bills forward without first having deep
discussions.
Co-Chair Merrick set an amendment deadline for March 16,
2022.
2:49:15 PM
Co-Chair Foster indicated amendments on the budget would be
due by March 18, 2022. The committee would begin taking up
amendments on Monday, March 21, 2022 and planned to discuss
amendments through Thursday, March 24, 2022. He hoped that
the budget would be moved out no later than the following
week. The committee would have hearings twice a day until
amendments were completed. The budget would be moved to the
House floor from March 28, 2022 to March 31, 2022.
2:51:17 PM
Representative Thompson thanked Co-Chair Foster for laying
out the timeframe.
Co-Chair Merrick reviewed the agenda for the following
meeting.
Representative Rasmussen asked Co-Chair Foster when the
committee substitute (CS) would be taken up.
Co-Chair Foster thought that the spring revenue forecast
was supposed to have been released earlier that morning,
and the intention was to base a CS on that forecast. More
money was coming into the state and there was more funding
available for appropriation. There would be a rollout of
the changes the following afternoon.
HB 395 was HEARD and HELD in committee for further
consideration.
Co-Chair Merrick adjourned the meeting.
ADJOURNMENT
2:53:05 PM
The meeting was adjourned at 2:53 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 158 Amendment 1 Thompson 030822.pdf |
HFIN 3/15/2022 1:30:00 PM |
HB 158 |
| HFIN HB158 DOR response 03.25.22.pdf |
HFIN 3/15/2022 1:30:00 PM |
HB 158 |