Legislature(1995 - 1996)

02/19/1996 01:40 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                     HOUSE FINANCE COMMITTEE                                   
                        FEBRUARY 19, 1996                                      
                            1:40 P.M.                                          
                                                                               
  TAPE HFC 96 - 41, Side 1, #000 - end.                                        
  TAPE HFC 96 - 41, Side 2, #000 - end.                                        
  TAPE HFC 96 - 42, Side 1, #000 - end.                                        
  TAPE HFC 96 - 42, Side 2, #000 - end.                                        
  TAPE HFC 96 - 43, Side 1, #000 - #168.                                       
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House  Finance Committee                 
  meeting to order at 1:40 P.M.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley               Representative Martin                          
  Co-Chair Foster               Representative Mulder                          
  Representative Brown          Representative Navarre                         
  Representative Grussendorf    Representative Parnell                         
  Representative Kelly          Representative Therriault                      
  Representative Kohring                                                       
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Representative  David  Finkelstein;  Representative  Cynthia                 
  Toohey;  Chris  Christensen,  Staff  Counsel,  Alaska  Court                 
  System; Amy  Daugherty, Aid, Representative  Alan Austerman;                 
  Marveen  Coggins,  Aid, Representative  Cynthia  Toohey; Bob                 
  Bartholomew,  Assistant   Director,  Income  &   Excise  Tax                 
  Division,  Department of  Revenue; Neil  Slotnick, Assistant                 
  Attorney  General,  Department   of  Law;  Dennis   Poshard,                 
  Director,  Division  of  Charitable  Gaming,  Department  of                 
  Revenue.                                                                     
                                                                               
  SUMMARY                                                                      
                                                                               
  HB 307    An  Act prohibiting  the  sale  of pull-tabs;  and                 
            providing for an effective date.                                   
                                                                               
            CS HB 307 (FIN) was reported out of Committee with                 
            a "do pass" recommendation and  with a zero fiscal                 
            note by the Department of Revenue.                                 
                                                                               
  HB 397    An   Act  relating   to   the  seafood   marketing                 
            assessment; and providing for an effective date.                   
                                                                               
            HB  397   was  HELD   in  Committee  for   further                 
            consideration.                                                     
                                                                               
                                                                               
                                1                                              
                                                                               
                                                                               
  HB 437    An   Act   establishing   the  Judicial   Officers                 
            Compensation   Commission;    relating   to    the                 
            compensation of supreme  court justices, judges of                 
            the  court  of  appeals,  judges  of  the superior                 
            court, and  district court  judges; and  providing                 
            for an effective date.                                             
                                                                               
            HB  437   was  HELD   in  Committee  for   further                 
            consideration.                                                     
  HOUSE BILL 397                                                               
                                                                               
       "An Act relating  to the seafood  marketing assessment;                 
       and providing for an effective date."                                   
                                                                               
  AMY DAUGHERTY, AID, REPRESENTATIVE ALAN AUSTERMAN, testified                 
  that HB 397 was designed to more precisely align the current                 
  fisheries resource landing tax (AS 43.77) with the fisheries                 
  business tax  (AS 43.75)  and the  Alaska Seafood  Marketing                 
  Institute (ASMI)  assessment  provision  (AS  16.51).    The                 
  legislation is needed  to avoid  future legal questions  and                 
  would  add  a measure  of  fairness  to  the  tax.   HB  397                 
  clarifies that  landing tax is an occupational tax and would                 
  equalize tax rates  and credits with the  fisheries business                 
  tax.                                                                         
                                                                               
  Ms. Daugherty commented that within HB 397, the 3.3% landing                 
  tax would include  .3% for ASMI  and would established a  3%                 
  landing tax.  The  separate .3% would provide for  a seafood                 
  marketing  assessment   application.    This   action  would                 
  separate  the  marketing  assessment   in  the  landing  tax                 
  statutes and  would equalize the landing tax with the shore-                 
  based fisheries business tax.                                                
                                                                               
  The  legislation  specifies  that a  person  subject  to the                 
  landing  tax would be  liable for the  .3% seafood marketing                 
  assessment; all business which produces less than $50,000 in                 
  seafood products per calendar year  would be exempt from the                 
  assessment.  That would encourage  the small operator, value                 
  added processing.                                                            
                                                                               
  Representative Brown asked if the  tax would become eligible                 
  for an education tax credit through  this legislation and if                 
  that action would create  a greater loss of revenue  for the                 
  State.                                                                       
                                                                               
  NEIL  SLOTNICK, ASSISTANT  ATTORNEY  GENERAL, DEPARTMENT  OF                 
  LAW,  said the policy  reason for  extending the  tax credit                 
  would  be  driven by  the  compensatory tax  doctrine.   The                 
  interstate commerce laws originate in the U.S. Constitution.                 
  A compensatory tax is legal when  the two taxes balance out.                 
                                                                               
                                                                               
                                2                                              
                                                                               
                                                                               
  He added that under the compensatory tax doctrine, the taxes                 
  should be  the same.   The payers  of the  landing tax  have                 
  raised an argument,  indicating that  they are not  eligible                 
  for the same credits the fisheries business tax are eligible                 
  for.      Those   business   have   stated  that   this   is                 
  "discrimination".                                                            
                                                                               
  BOB BARTHOLOMEW,  ASSISTANT  DIRECTOR, INCOME  & EXCISE  TAX                 
  DIVISION,  DEPARTMENT  OF REVENUE,  explained  the education                 
  credit.   The  current fiscal  note that  the Department  of                 
  Revenue enclosed does not include an estimate of the revenue                 
  potentially lost due to the education credit.                                
                                                                               
  Representative Brown  voiced her  concern with the  proposed                 
  credits.  She recommended that the revenue loss be indicated                 
  on the fiscal  note and  requested further clarification  on                 
  either eliminating or expanding the credit.  Mr. Bartholomew                 
  noted that the Department does not have a strong position on                 
  elimination or expansion,  and will thus follow  the lead of                 
  the  Legislature.    He  noted  that  the  legislation  does                 
  indicate a specific position.                                                
                                                                               
  Mr. Slotnick explained that the  legislation would create an                 
  equalization  process  and   thus  make  the  work   of  the                 
  Department of Law  more simple.  Representative  Brown asked                 
  the total amount of taxes which  would be collected from the                 
  education credit.   Mr.  Bartholomew replied  that in  FY95,                 
  there were five taxes eligible  for the credit totaling $1.2                 
  million dollars corporate income tax credit.                                 
                                                                               
  Representative   Martin   echoed    Representative   Brown's                 
  concerns.   He asked if  the legislation would  be expanding                 
  the authority.  Mr. Bartholomew clarified  how the tax would                 
  work.   A small portion  of the tax  is self assessed.   The                 
  landing tax is  assessed by the Legislature.   Currently, it                 
  is  a  3.3% which  includes  an  assessment for  ASMI.   The                 
  legislation  will make  it clearer,  taking the  .3% of  the                 
  current assessment, and  moving it  into the ASMI  statutes.                 
  The  3%  State  tax  would  stay  in AS  43.77  Landing  Tax                 
  Statutes.   The  decision  to allow  or  not, the  education                 
  credit will be  a legislative policy call.   Mr. Bartholomew                 
  added that the fishermen or the  processor will pay the ASMI                 
  assessment to the Department of Revenue.                                     
                                                                               
  Co-Chair  Hanley pointed out that it  was a tax and would be                 
  accounted  for  as  general fund  dollars.    Representative                 
  Martin  questioned  the  specifics  of  the  lawsuit.    Mr.                 
  Slotnick explained  in Superior  Court, that  the point  was                 
  raised if  the landing tax was discriminatory because it was                 
  assessed at a rate of  3.3%, whereas, the fisheries business                 
  tax was assessed  at 3%.   The extra .3% which  was assessed                 
                                                                               
                                3                                              
                                                                               
                                                                               
  against the landers  was for ASMI, but  was not part of  the                 
  ASMI assessment.   This legislation would remedy  that issue                 
  and make them members of ASMI.                                               
                                                                               
  Representative Navarre  questioned if  the corporate  income                 
  taxes  could  be  used  to  fund  the fiscal  impact.    Mr.                 
  Bartholomew explained that  currently, the education  credit                 
  works by creating  a cap which  should not be exceeded,  and                 
  applying to all taxes.   A corporation would not  be able to                 
  give under two different tax categories and would be subject                 
  to the same cap.  The total contribution under the education                 
  credit  that  can  be  contributed  would be  $200  thousand                 
  dollars, subject to $150 thousand dollar credit.                             
                                                                               
  Co-Chair Hanley asked  if it was  possible to add a  section                 
  which could specify that if the case was lost in court, that                 
  section would then be repealed.   Mr. Slotnick noted that if                 
  the Department of  Law loses  the current litigation,  there                 
  will be  no tax.  Mr. Bartholomew  added, there has been one                 
  tax  year filed  for 1994  and collected in  FY95.   Over $7                 
  million dollars has been collected, of which  50% was shared                 
  with the local governments.  Mr. Slotnick noted that  amount                 
  would be retroactive to 1994.                                                
                                                                               
  Mr. Bartholomew responded to Representative Brown's question                 
  regarding companies that are eligible  under the landing tax                 
  credit, who do not currently pay one of the other taxes.  He                 
  stated that  the difference  would be  the type of  business                 
  organization paying  the tax.     The status  selected by  a                 
  corporation for tax purposes is confidential information.                    
                                                                               
  Representative  Brown  spoke  to the  expansion  of  the tax                 
  credit within the legislation.  She asked if in Section #21,                 
  the tax  was being  lowered for  developing commercial  fish                 
  species.  Mr.  Bartholomew explained that under  the fishery                 
  business  tax,  there  exists  a  provision  for  developing                 
  commercial fish species as defined by the Department of Fish                 
  and  Game and having a different tax  rate.  The fiscal note                 
  reflects that .2  of 1%  which would amount  to $8  thousand                 
  dollars,  be used  for developing  species.   Representative                 
  Brown requested a current list of "developing species".  Mr.                 
  Bartholomew offered to provide that information.                             
                                                                               
  Co-Chair Hanley inquired the amount of  anticipated revenue.                 
  Mr. Bartholomew informed members that the potential would be                 
  $8 thousand dollars,  which would  switch the 3%  to 1%  for                 
  classification and  development purposes.   Co-Chair  Hanley                 
  summarized the three items used:                                             
                                                                               
       1.   To  equalize, which  would  include the  education                 
            tax;                                                               
                                                                               
                                                                               
                                4                                              
                                                                               
                                                                               
       2.   The ASMI assessment;                                               
                                                                               
       3.   Separating the rate from 3% to 1%.                                 
                                                                               
  Co-Chair Hanley noted the net impact would be zero.                          
                                                                               
  HB 397 was HELD in Committee for further consideration.                      
  HOUSE BILL 437                                                               
                                                                               
       "An Act establishing the Judicial Officers Compensation                 
       Commission;  relating to  the  compensation of  supreme                 
       court justices, judges of the  court of appeals, judges                 
       of the superior  court, and district court  judges; and                 
       providing for an effective date."                                       
                                                                               
  CHRIS  CHRISTENSEN,  STAFF  COUNSEL,  ALASKA  COURT  SYSTEM,                 
  testified  in support of  HB 437.   He stated  that the bill                 
  would establish a Judicial Officers Compensation Commission.                 
  The bill  was introduced by  the Judiciary Committee  at the                 
  request of the Alaska Supreme Court.                                         
                                                                               
  He added that the bill would  create a new Judicial Officers                 
  Compensation  Commission  to   assume  the  judicial  salary                 
  functions  of  the  existing   State  Officers  Compensation                 
  Commission.  The existing commission recommends compensation                 
  levels  for  judges   and  other   state  officers  to   the                 
  legislature;  those  proposals  frequently  go unheeded  for                 
  reasons unrelated to their merits.                                           
                                                                               
  In contrast, the commission created by HB 437 would have the                 
  authority to  actually  establish  compensation  levels  for                 
  supreme  court  justices, judges  of  the court  of appeals,                 
  judges of the superior court and district court judges.  The                 
  commission, appointed by the governor, could submit proposed                 
  salary  and per diem  for those officers  to the Legislature                 
  every  two  years.   These  compensation  levels  would take                 
  effect on the  date of the  first appropriation to fund  the                 
  increase, unless  disapproved by another  bill enacted  into                 
  law within 60 days of submission.                                            
                                                                               
  Mr. Christensen summarized:                                                  
                                                                               
       *    Eight states and the federal government  operate a                 
            compensation commission  which sets the  salary of                 
            certain public officials;                                          
                                                                               
       *    The   existing    State   Officers    Compensation                 
            Commission does not  have the  power to  establish                 
            salaries, only  to  make  recommendations  to  the                 
            legislature.                                                       
                                                                               
                                                                               
                                5                                              
                                                                               
                                                                               
       *    The  commission  created  by  HB  437  is  modeled                 
            closely   on  the   existing   commission.     Two                 
            differences are that the  new commission will have                 
            the power to  establish compensation for  justices                 
            and  judges, not  make  recommendations, and  will                 
            have  a   list  of   specific   factors  used   in                 
            consideration  of  fair compensation  for justices                 
            and judges.                                                        
                                                                               
       *    The commission would  have five members  appointed                 
            by the Governor  to four year terms.   Among those                 
            members  must be  a business  executive, a  person                 
            with   experience   in  personnel   management,  a                 
            representative    or    a    nonpartisan   voters'                 
            organization, an economist, and a lawyer.                          
                                                                               
       *    The commission meets every other year.                             
                                                                               
       *    The commission  may consider  the compensation  of                 
            justices of the supreme court, judges of the court                 
            of  appeals,  judges  of  the superior  court  and                 
            district court judges.                                             
                                                                               
       *    The legislature has 60 days in which to reject the                 
            order by enacting a law.                                           
                                                                               
  (Tape Change, HFC 96-41, Side 2).                                            
                                                                               
  Representative Parnell  asked why  judges should be  removed                 
  from   the  State  Officers   Compensation  Preview.     Mr.                 
  Christensen noted that judges get caught up in many  battles                 
  over  salaries.    With  passage  of  the  legislation,  the                 
  salaries  would  still  be  subject  to appropriation.    In                 
  response   to   Representative   Parnell,  Mr.   Christensen                 
  explained  that a  judge's  salary could  not be  changed by                 
  appropriation but instead by a change to the statute.                        
                                                                               
  The State Constitution  specifies that  a judges salary  can                 
  not   be  diminished  during   a  term  in   office.    That                 
  understanding  is  repeated  in  the  proposed  legislation,                 
  although, would  not apply  to magistrates.   A  magistrates                 
  salary is set by the Supreme Court.                                          
                                                                               
  Discussion followed referencing material on Page 4, Line 21,                 
  "opportunity for other earned income".  Representative Brown                 
  referenced Page  3, Line  30, noting  that 60  days was  not                 
  enough time to  pass a  bill through the  legislature.   Mr.                 
  Christensen replied that 60 days  was chosen as it  appeared                 
  also  in  the  Boundary  Commission   recommendations.    He                 
  elaborated that  in order for the proposed legislation to be                 
  in statute, it must be a bill, not a resolution.                             
                                                                               
                                                                               
                                6                                              
                                                                               
                                                                               
  Representative Parnell  questioned why  the fiscal notes  do                 
  not reflect any  increases for  personnel.  Mr.  Christensen                 
  replied,  until the  compensation commission  actually meets                 
  and orders  a change  in salary,  there would  be no  fiscal                 
  impact showing.  It would be speculative at this time.                       
                                                                               
  Representative Mulder asked  if it was a  problem attracting                 
  competent  people  to  serve  as  judges.   Mr.  Christensen                 
  pointed out that there are fewer private applicants applying                 
  for judgeships and  more people from the  attorney general's                 
  and public  defender's office.   He commented that  the less                 
  you pay people, the less qualified people will apply.                        
                                                                               
  Mr.  Christensen  continued,  the  legislative  intent   was                 
  initiated  during   the  Hickel  Administration   through  a                 
  salaries  commission  but  then  died  in the  Senate  Rules                 
  Committee.  The legislation was  again introduced last year,                 
  and after a  hearing in the Senate State  Affairs Committee,                 
  legislators  agreed   that  they   would  not   support  the                 
  legislation  if  "legislators"  remained  in  it.    It  was                 
  reintroduced this year with only judges included.                            
                                                                               
  Co-Chair Hanley asked  what would happen if  the Legislature                 
  did not take  action the first 60  days and there was  not a                 
  specific appropriation for judges salaries.  Mr. Christensen                 
  explained that issue has not yet been discussed.                             
                                                                               
  Representative Parnell recommended changing  the language on                 
  Page 3, Line 30, "within  60 days" to "when enacted in  law,                 
  within 120 legislative days".  That way it could be taken up                 
  at  any period  of time during  the legislative  session and                 
  then  the  appropriate  language  could  be inserted.    Mr.                 
  Christensen  indicated  that  an  order  would  have  to  be                 
  submitted within the  first 10  days of the  session by  the                 
  commission.   The  60  day period  was chosen  because other                 
  items in statute use that time frame.                                        
                                                                               
  Mr. Christensen  informed Committee members that  this issue                 
  has been considered in federal  courts on several occasions.                 
  In order for the delegation  to set constitutional salaries,                 
  the  courts  have  held that  there  must  be  a disapproval                 
  mechanism as well as an appropriation mechanism.                             
                                                                               
  Representative Brown questioned the decision making  process                 
  and  structure  within the  court  system.   Mr. Christensen                 
  responded that under the Constitution,  the supreme court is                 
  vested  with  ultimate  administrative  authority  over  the                 
  judicial branch.   He concluded  that judges salaries  total                 
  less that 25% of the court systems budget.                                   
                                                                               
  Representative  Brown questioned if  the list of recommended                 
  commission members needed to include lawyers and economists.                 
                                                                               
                                7                                              
                                                                               
                                                                               
  Mr. Christensen replied that the supreme court does not care                 
  what type of people  are included on the commission  as long                 
  as they are "public spirited" and have some knowledge of the                 
  concerns.  Representative  Parnell thought attorneys  should                 
  be included on the commission as they are better informed of                 
  the time and skill required for that type commitment.                        
                                                                               
  HB 437 was HELD in Committee for further consideration.                      
                                                                               
  (Tape Change, HFC 96-42, Side 1).                                            
  HOUSE BILL 307                                                               
                                                                               
       "An  Act  prohibiting   the  sale  of  pull-tabs;   and                 
       providing for an effective date."                                       
                                                                               
  REPRESENTATIVE CYNTHIA  TOOHEY, testified  in support  of HB
  307 noting that  the bill would simply  prohibit politicians                 
  and  other  political  entities  from  receiving  charitable                 
  gaming  proceeds.   She  said that  no  one should  consider                 
  politicians, or their  attempts to  influence the  electoral                 
  process, a legitimate use of charity money.                                  
                                                                               
  Representative Therriault MOVED that  9-LS1070\K, Luckhaupt,                 
  2/7/96, be the version before the Committee.  Representative                 
  Brown  OBJECTED  for  purposes  of  understanding  how  that                 
  version differs from  the prior versions  of the bill.   Co-                 
  Chair  Hanley  explained that  the original  bill prohibited                 
  pull  tabs;  the  Judiciary  version  prohibited  charitable                 
  gaming   except  for  raffles   for  political  parties  and                 
  candidates; the Finance  committee substitute prohibits  all                 
  charitable gaming including raffles.                                         
                                                                               
  Representative  Toohey  emphasized   that  politicians   and                 
  political parties should be removed  from receiving any kind                 
  of   charitable   money.      Representative   Brown   asked                 
  Representative  Toohey  if  she  continued  to  support  the                 
  original  version of  the  legislation  which excluded  pull                 
  tabs.  Representative Toohey disagreed  that was her intent.                 
  Representative Brown  removed her OBJECTION to  adopting the                 
  committee substitute.  There being  no further objection, CS                 
  HB  307  (FIN)  was  adopted   as  the  version  before  the                 
  Committee.                                                                   
                                                                               
  DENNIS  POSHARD,  DIRECTOR,   CHARITABLE  GAMING   DIVISION,                 
  DEPARTMENT OF REVENUE, commented that the Department has not                 
  taken  a  position  on  HB  307.    He  indicated  that  the                 
  Legislature will  need to  make the  policy calls  regarding                 
  that bill.   He  pointed  out Departmental  concerns of  the                 
  legislation.                                                                 
                                                                               
       1.   The  bill  deals  with  campaign  finance  reform.                 
                                                                               
                                8                                              
                                                                               
                                                                               
            Would the Department  of Revenue  be in charge  of                 
            policing  campaign  contributions.     Could   the                 
            problem  be  better  addressed through  Title  15,                 
            Alaska Public Offices Commission (APOC) statutes.                  
                                                                               
       2.   Will  the legislation  accomplish the intent.   He                 
            stressed  that  the  contributions   will  not  be                 
            audited through the Department.                                    
                                                                               
       3.   What would happen  assuming a violation  occurred.                 
            The only  recourse the Division  would have, would                 
            be to  take action  against the  charity's permit.                 
            There is no  action or recourse that  the Division                 
            can take against  the campaign  or candidate  that                 
            receives that money.                                               
                                                                               
  Mr. Poshard  reiterated that  when a  violation occurs,  the                 
  Division  will take  action  against the  charity's  permit.                 
  There will  be no  means of  recourse against the  candidate                 
  that receive the money.                                                      
                                                                               
  Mr. Poshard  spoke to the advantages of  placing the concern                 
  under   the  jurisdiction  of   the  Alaska   Public  Office                 
  Commission  (APOC).   APOC has  the expertise  to deal  with                 
  campaign financing law.   The  Division does  not have  that                 
  expertise, and  it is not the  focus of their  program.  Co-                 
  Chair  Hanley advised that  the intent would  be to prohibit                 
  the contribution.   Mr. Poshard  reminded Committee  members                 
  that  most  of the  groups  included  also report  to  APOC.                 
  Representative  Brown  recommended  that these  concerns  be                 
  considered in  the campaign finance reform and  a rewrite of                 
  the statutes.                                                                
                                                                               
  Mr. Poshard explained that the Department has done extensive                 
  research  in  how  other  organizations  establish   minimum                 
  returns to  the charity  and minimum returns  to the  State.                 
  The  Administration is  looking at  ways to  change  how the                 
  State initiates  this action.   Currently,  there is  a bill                 
  being drafted  which would  increase the  amount of  revenue                 
  received by  the State and the charity  and would streamline                 
  the auditing procedures.                                                     
                                                                               
  Representative Brown questioned the fundamental problem with                 
  a  political  candidate  receiving  money  from   charitable                 
  gaming,  agreeing   that  it   should  be   well  regulated.                 
  Representative Therriault  asked if  groups gathering  money                 
  for a political system are legitimate charities.                             
                                                                               
  Mr.  Poshard noted  that a prohibition  exists in  using net                 
  proceeds to pay a lobbyist.  There is no prohibition against                 
  a  charitable organization  to hire  a lobbyist,  but it  is                 
  illegal for them to pay the  lobbyist from the net proceeds.                 
                                                                               
                                9                                              
                                                                               
                                                                               
  Representative  Toohey  noted for  the  record that  she has                 
  received gaming contributions from pull tabs charities.                      
                                                                               
  Representative  Navarre  elaborated   on  comments  made  by                 
  Representative  Martin  pointing  out   that  corruption  in                 
  politics  goes   far  beyond  contributions   received  from                 
  charitable  gaming.  He voiced support for the original bill                 
  over the committee substitute.                                               
                                                                               
  Representative  Kohring mentioned  that Alaska  is the  only                 
  State which allows gaming proceeds to be used for  political                 
  contributions, and voiced  concern for  proceeds being  used                 
  for  political purposes.    Representative Toohey  corrected                 
  that few states do allow it.                                                 
                                                                               
  Representative Brown inquired  why the  bill was drafted  in                 
  such a way that the sanction would affect only the "charity"                 
  and  not  the  candidate receiving  the  funding.   Co-Chair                 
  Hanley indicated  that concern  was addressed  in the  bill.                 
  Representative Toohey pointed out that on Page 75, under the                 
  Section "Elections", the statutes clarifies this issue.  Mr.                 
  Poshard stated that  he did  not know if  the APOC  statutes                 
  contain a corresponding prohibition.                                         
                                                                               
  MARVEEN COGGINS, AID,  REPRESENTATIVE CYNTHIA TOOHEY, agreed                 
  that Alaska Legal Services specified that the candidate will                 
  not be responsible but rather the contributor would be.  She                 
  suggested that language  could be included stating  that the                 
  "candidate  can  not  knowingly  accept  contributions  that                 
  constitute in whole or part the net proceeds of a charitable                 
  gaming   organization".     Terry  Cramer,   Legal  Services                 
  attorney, recommended if that language  was adopted, that it                 
  be a new subsection to A.S. 15:17:070, labeled number (I).                   
                                                                               
  (Tape Change, HFC 96-42, Side 2).                                            
                                                                               
  Co-Chair  Hanley  noted   that  he  would  oppose   all  the                 
  amendments.   They are not part of  a comprehensive campaign                 
  reform.  Philosophically, he voiced  a concern with gambling                 
  money  being  used   in  politics.    Representative   Brown                 
  countered that the likelihood of campaign reform is evident.                 
                                                                               
                                                                               
  Representative  Brown spoke  to  Amendment #1.   [Attachment                 
  their money was  going.  Mr.  Poshard stated that it  should                 
  not  be  a  problem for  any  business  to  comply with  the                 
  amendment.  It would  be easy to announce who  would receive                 
  the net proceeds from each evenings session.                                 
                                                                               
                                                                               
                               10                                              
                                                                               
                                                                               
  Representative Brown MOVED to adopt  Amendment #1.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Brown, Grussendorf, Navarre, Therriault.                 
       OPPOSED:       Kelly, Kohring, Martin, Mulder, Parnell,                 
                      Hanley, Foster.                                          
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #2.                 
  [Attachment  #2].    She  noted  that  the  amendment  would                 
  identify where the pull tab money  would be going.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Grussendorf, Kelly, Navarre, Brown.                      
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
  Therriault,                   Foster, Hanley.                                
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative Brown MOVED to adopt Amendment #3 which would                 
  adjust upward  by 10%, the  amount of adjusted  gross income                 
  that  goes to charities from pull tab activity.  [Attachment                 
  comparison to other  states in the percentage  being donated                 
  to charities.   He stressed  that only 8.7%  is returned  on                 
  each  dollar  to  the  charity.     Currently,  some  states                 
  contribute up  to 34%  on bingo and  pull tab dollars.   Co-                 
  Chair Hanley OBJECTED to adoption of Amendment #3.                           
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Kohring, Navarre, Brown, Grussendorf.                    
       OPPOSED:       Kelly,    Martin,    Mulder,    Parnell,                 
                      Therriault, Hanley, Foster.                              
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative  Brown  spoke   to  Amendments  4,  5   &  6,                 
  [Attachments   4,5  &  6],   which  address  increasing  the                 
  operators license fee, the distributors license and the pull                 
  tab manufactures license.   Mr.  Poshard commented that  the                 
  fees  established have  not  been changed  in  a few  years.                 
  Gaming regulations are lower than other jurisdictions.                       
                                                                               
  Representative Mulder  questioned if the fees collected off-                 
  set  operations  within  the  Department  of Revenue.    Mr.                 
  Poshard replied, not entirely.   A 3% pull tab tax  and a 1%                 
                                                                               
                               11                                              
                                                                               
                                                                               
  fee on the  ideal net  proceeds are also  collected.   Those                 
  taxes,  in  addition to  the  fees,  are double  the  annual                 
  budget.                                                                      
                                                                               
  Representative Brown MOVED to adopt  Amendment #4.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
                      Therriault, Kelly, Foster, Hanley.                       
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative Brown WITHDREW Amendments #5 & #6.  She spoke                 
  to  Amendment #7.    [Attachment #7].   The  amendment would                 
  close a  loop-hole in  gaming activity.   Mr. Poshard  added                 
  that there is  a limit on  bingo activity.  More  than $1000                 
  dollars  can  not be  given away  on  one activity  or $5000                 
  dollar  per session.   There is  no statutory  limitation on                 
  pull tab prize pay-out.  Mr. Poshard recommended limiting it                 
  to $500 dollars.                                                             
                                                                               
  Representative Brown MOVED to adopt  Amendment #7.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Martin,  Mulder,  Parnell,   Therriault,                 
                      Kelly, Kohring, Hanley, Foster.                          
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative  Brown explained  Amendment #8.   [Attachment                 
  of charities which could participate.   Currently, there are                 
  more  charities  than  operators  available.    Mr.  Poshard                 
  elaborated that a  charity's maximum contract would  be $500                 
  thousand dollars  annually.  There are a number of charities                 
  seeking to have  the permit paid  by an operator.   Reducing                 
  the amount would then  force an operator to contract  with a                 
  greater number of  charities to conduct activity.   Co-Chair                 
  Hanley  questioned how many  permits would be  taken off the                 
  market.   Mr. Poshard responded  that there are 24 political                 
  groups who have permits.                                                     
                                                                               
  Representative  Navarre  spoke against  the  amendment.   He                 
  thought that  it would  force more  people  moving to  Multi                 
  Benefit Permitees (MBP),  thus reducing the number  of slots                 
  available.  MBP's have a greater  cap from which to operate.                 
                                                                               
                               12                                              
                                                                               
                                                                               
  Mr.    Poshard    agreed   with    Representative   Navarre.                 
  Representative Brown asked if charities  would be better off                 
  with an operator or with a MBP.  Mr. Poshard noted  that the                 
  rate of return would  be higher with an MBP,  although, they                 
  would  then be capable of contracting with  only six.  As an                 
  operator, they would be  able to contract with twelve.   The                 
  charity  could  make  twice as  much  money  under the  MBP,                 
  although only half the charities would receive benefit.                      
                                                                               
  Representative Brown  withdrew Amendment  #8 as  it was  her                 
  intention that the amendment benefit the charities.                          
                                                                               
  Representative  Brown  explained  Amendment  #9 which  would                 
  increase the tax from  3% to 5%  on the gross receipts  plus                 
  prizes awarded from  the pull tabs.   [Attachment #9].   She                 
  noted  that  this would  generate  $800 thousand  dollars in                 
  program receipts annually to the general fund.   Mr. Poshard                 
  advised that increasing  the tax would create new  funds for                 
  the State, a  tax collected by the distributors and remitted                 
  on a quarterly basis.                                                        
                                                                               
  Following comments by Representative  Martin, Representative                 
  Brown  suggested a  change  to delete  the  language in  the                 
  amendment "less prizes  awarded".   Mr. Poshard pointed  out                 
  with removal of  that language,  the tax  would become  much                 
  more  substantial.    He voiced  concern  that  the proposed                 
  percentage would change the gross  without also changing the                 
  return to the  permitees.  That would  dramatically decrease                 
  their net proceeds.                                                          
                                                                               
  Mr.  Poshard added,  that he  would prefer a  5% tax  on the                 
  gross,  changing how  the  charities receive  their payment.                 
  Currently, those conducting activity  would be expending the                 
  tax to the permitees.                                                        
                                                                               
                                                                               
  (Tape Change, HFC 96-43, Side 1).                                            
                                                                               
  Representative Brown  asked to replace  the deleted language                 
  with the language as originally written.                                     
                                                                               
  Representative Brown MOVED to adopt  Amendment #9.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Mulder,   Parnell,  Therriault,   Kelly,                 
                      Kohring, Martin, Foster, Hanley.                         
                                                                               
  Representative Grussendorf was not present for the vote.                     
                                                                               
                                                                               
                               13                                              
                                                                               
                                                                               
  The MOTION FAILED (2-8).                                                     
                                                                               
  Representative  Navarre   MOVED  to  adopt   Amendment  #10.                 
  [Attachment   #10].      Representative   Martin   OBJECTED.                 
  Representative Navarre pointed out that  the amendment was a                 
  portion of the  bill which passed from  Committee last year.                 
  Currently, a municipal  exemption has not been  applied for,                 
  resulting in  MBP's doing the  same thing  as operators  and                 
  competing  against small organizations,  driving them out of                 
  business.   The  amendment  is an  attempt  to  allow  those                 
  municipalities, if  they choose,  to regulate  the level  of                 
  gaming in their communities.                                                 
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #10.                  
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Parnell,  Therriault,   Kelly,  Kohring,                 
                      Martin, Mulder, Hanley, Foster.                          
                                                                               
  Representative Grussendorf was not present for the vote.                     
                                                                               
  The MOTION FAILED (2-8).                                                     
                                                                               
  Representative Martin MOVED to report CS HB 307 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.  There being NO OBJECTION,  it was                 
  so ordered.                                                                  
                                                                               
  CS  HB 307 (FIN)  was reported out  of Committee  with a "do                 
  pass" recommendation  and  with a  zero fiscal  note by  the                 
  Department of Revenue.                                                       
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 4:40 P.M.                                           
                     HOUSE FINANCE COMMITTEE                                   
                        FEBRUARY 19, 1996                                      
                            1:40 P.M.                                          
                                                                               
  TAPE HFC 96 - 41, Side 1, #000 - end.                                        
  TAPE HFC 96 - 41, Side 2, #000 - end.                                        
  TAPE HFC 96 - 42, Side 1, #000 - end.                                        
  TAPE HFC 96 - 42, Side 2, #000 - end.                                        
  TAPE HFC 96 - 43, Side 1, #000 - #168.                                       
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House Finance  Committee                 
  meeting to order at 1:40 P.M.                                                
                                                                               
  PRESENT                                                                      
                                                                               
                                                                               
                               14                                              
                                                                               
                                                                               
  Co-Chair Hanley               Representative Martin                          
  Co-Chair Foster               Representative Mulder                          
  Representative Brown          Representative Navarre                         
  Representative Grussendorf    Representative Parnell                         
  Representative Kelly          Representative Therriault                      
  Representative Kohring                                                       
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Representative  David  Finkelstein;  Representative  Cynthia                 
  Toohey;  Chris  Christensen,  Staff  Counsel,  Alaska  Court                 
  System; Amy  Daugherty, Aid, Representative  Alan Austerman;                 
  Marveen  Coggins,  Aid, Representative  Cynthia  Toohey; Bob                 
  Bartholomew,  Assistant   Director,  Income  &   Excise  Tax                 
  Division,  Department of  Revenue; Neil  Slotnick, Assistant                 
  Attorney  General,  Department   of  Law;  Dennis   Poshard,                 
  Director,  Division  of  Charitable  Gaming,  Department  of                 
  Revenue.                                                                     
                                                                               
  SUMMARY                                                                      
                                                                               
  HB 307    An  Act  prohibiting  the sale  of  pull-tabs; and                 
            providing for an effective date.                                   
                                                                               
            CS HB 307 (FIN) was reported out of Committee with                 
            a "do pass" recommendation and  with a zero fiscal                 
            note by the Department of Revenue.                                 
                                                                               
  HB 397    An   Act  relating   to   the  seafood   marketing                 
            assessment; and providing for an effective date.                   
                                                                               
            HB  397   was  HELD  in   Committee  for   further                 
            consideration.                                                     
                                                                               
  HB 437    An   Act   establishing   the  Judicial   Officers                 
            Compensation   Commission;    relating   to    the                 
            compensation of supreme court  justices, judges of                 
            the  court  of  appeals, judges  of  the  superior                 
            court,  and district  court judges;  and providing                 
            for an effective date.                                             
                                                                               
            HB  437  was   HELD  in   Committee  for   further                 
            consideration.                                                     
                                                                               
  HOUSE BILL 397                                                               
                                                                               
       "An Act  relating to the seafood  marketing assessment;                 
       and providing for an effective date."                                   
                                                                               
  AMY DAUGHERTY, AID, REPRESENTATIVE ALAN AUSTERMAN, testified                 
  that HB 397 was designed to more precisely align the current                 
  fisheries resource landing tax (AS 43.77) with the fisheries                 
                                                                               
                               15                                              
                                                                               
                                                                               
  business tax  (AS 43.75)  and the  Alaska Seafood  Marketing                 
  Institute  (ASMI)  assessment  provision  (AS  16.51).   The                 
  legislation is needed  to avoid  future legal questions  and                 
  would  add  a  measure  of fairness  to  the  tax.   HB  397                 
  clarifies that  landing tax is an occupational tax and would                 
  equalize tax rates  and credits with the  fisheries business                 
  tax.                                                                         
  Ms. Daugherty commented that within HB 397, the 3.3% landing                 
  tax would include  .3% for ASMI  and would established a  3%                 
  landing tax.  The  separate .3% would provide for  a seafood                 
  marketing  assessment   application.    This   action  would                 
  separate  the  marketing  assessment   in  the  landing  tax                 
  statutes and would equalize the landing tax with the  shore-                 
  based fisheries business tax.                                                
                                                                               
  The  legislation  specifies  that a  person  subject  to the                 
  landing tax  would be liable  for the .3%  seafood marketing                 
  assessment; all business which produces less than $50,000 in                 
  seafood products per  calendar year would be exempt from the                 
  assessment.  That would encourage  the small operator, value                 
  added processing.                                                            
                                                                               
  Representative Brown asked if the  tax would become eligible                 
  for an education tax credit  through this legislation and if                 
  that action would create  a greater loss of revenue  for the                 
  State.                                                                       
                                                                               
  NEIL  SLOTNICK,  ASSISTANT ATTORNEY  GENERAL,  DEPARTMENT OF                 
  LAW, said  the policy  reason for  extending the  tax credit                 
  would be  driven  by the  compensatory  tax doctrine.    The                 
  interstate commerce laws originate in the U.S. Constitution.                 
  A compensatory tax is legal when  the two taxes balance out.                 
                                                                               
                                                                               
  He added that under the compensatory tax doctrine, the taxes                 
  should be  the same.   The payers  of the  landing tax  have                 
  raised an argument,  indicating that  they are not  eligible                 
  for the same credits the fisheries business tax are eligible                 
  for.      Those   business   have   stated  that   this   is                 
  "discrimination".                                                            
                                                                               
  BOB  BARTHOLOMEW,  ASSISTANT DIRECTOR,  INCOME &  EXCISE TAX                 
  DIVISION,  DEPARTMENT  OF REVENUE,  explained  the education                 
  credit.   The  current  fiscal note  that the  Department of                 
  Revenue enclosed does not include an estimate of the revenue                 
  potentially lost due to the education credit.                                
                                                                               
  Representative  Brown voiced  her concern with  the proposed                 
  credits.  She recommended that the revenue loss be indicated                 
  on the fiscal  note and  requested further clarification  on                 
  either eliminating or expanding the credit.  Mr. Bartholomew                 
  noted that the Department does not have a strong position on                 
                                                                               
                               16                                              
                                                                               
                                                                               
  elimination  or expansion, and will  thus follow the lead of                 
  the  Legislature.    He  noted  that  the  legislation  does                 
  indicate a specific position.                                                
                                                                               
  Mr. Slotnick explained that the  legislation would create an                 
  equalization  process  and   thus  make  the  work   of  the                 
  Department of Law  more simple.  Representative  Brown asked                 
  the total amount of taxes which  would be collected from the                 
  education credit.   Mr.  Bartholomew replied  that in  FY95,                 
  there were five  taxes eligible for the credit totaling $1.2                 
  million dollars corporate income tax credit.                                 
                                                                               
  Representative   Martin   echoed    Representative   Brown's                 
  concerns.   He asked if  the legislation would  be expanding                 
  the authority.  Mr. Bartholomew  clarified how the tax would                 
  work.  A  small portion of  the tax is  self assessed.   The                 
  landing  tax is assessed by the  Legislature.  Currently, it                 
  is  a  3.3% which  includes  an  assessment for  ASMI.   The                 
  legislation  will make  it clearer,  taking the  .3%  of the                 
  current assessment, and  moving it  into the ASMI  statutes.                 
  The  3%  State  tax  would  stay  in AS  43.77  Landing  Tax                 
  Statutes.    The decision  to  allow or  not,  the education                 
  credit will be a  legislative policy call.  Mr.  Bartholomew                 
  added that the fishermen or the  processor will pay the ASMI                 
  assessment to the Department of Revenue.                                     
                                                                               
  Co-Chair  Hanley pointed out that it was  a tax and would be                 
  accounted  for  as  general  fund dollars.    Representative                 
  Martin  questioned  the  specifics  of  the  lawsuit.    Mr.                 
  Slotnick explained  in Superior  Court, that  the point  was                 
  raised if the landing tax was discriminatory because it  was                 
  assessed at  a rate of 3.3%, whereas, the fisheries business                 
  tax was  assessed at 3%.   The extra .3% which  was assessed                 
  against the landers  was for ASMI, but  was not part of  the                 
  ASMI assessment.   This legislation would remedy  that issue                 
  and make them members of ASMI.                                               
                                                                               
  Representative Navarre  questioned if  the corporate  income                 
  taxes  could  be  used  to  fund  the fiscal  impact.    Mr.                 
  Bartholomew explained that  currently, the education  credit                 
  works by creating  a cap which  should not be exceeded,  and                 
  applying to all taxes.   A corporation would not  be able to                 
  give under two different tax categories and would be subject                 
  to the same cap.  The total contribution under the education                 
  credit  that  can  be  contributed  would be  $200  thousand                 
  dollars, subject to $150 thousand dollar credit.                             
                                                                               
  Co-Chair Hanley asked  if it was  possible to add a  section                 
  which could specify that if the case was lost in court, that                 
  section would then be repealed.   Mr. Slotnick noted that if                 
  the Department of  Law loses  the current litigation,  there                 
  will be  no tax.  Mr. Bartholomew  added, there has been one                 
                                                                               
                               17                                              
                                                                               
                                                                               
  tax year filed  for 1994  and collected  in FY95.   Over  $7                 
  million dollars has been collected,  of which 50% was shared                 
  with the local governments.  Mr. Slotnick  noted that amount                 
  would be retroactive to 1994.                                                
                                                                               
  Mr. Bartholomew responded to Representative Brown's question                 
  regarding companies that are eligible  under the landing tax                 
  credit, who do not currently pay one of the other taxes.  He                 
  stated that  the difference  would be the  type of  business                 
  organization paying  the tax.     The status  selected by  a                 
  corporation for tax purposes is confidential information.                    
                                                                               
  Representative  Brown  spoke  to the  expansion  of  the tax                 
  credit within the legislation.  She asked if in Section #21,                 
  the tax  was being  lowered for  developing commercial  fish                 
  species.  Mr.  Bartholomew explained that under  the fishery                 
  business  tax,  there  exists  a  provision  for  developing                 
  commercial fish species as defined by the Department of Fish                 
  and Game  and having a different tax  rate.  The fiscal note                 
  reflects that .2  of 1%  which would amount  to $8  thousand                 
  dollars,  be  used for  developing species.   Representative                 
  Brown requested a current list of "developing species".  Mr.                 
  Bartholomew offered to provide that information.                             
                                                                               
  Co-Chair Hanley inquired the amount of anticipated  revenue.                 
  Mr. Bartholomew informed members that the potential would be                 
  $8 thousand dollars,  which would  switch the 3%  to 1%  for                 
  classification and  development purposes.   Co-Chair  Hanley                 
  summarized the three items used:                                             
                                                                               
       1.   To  equalize,  which would  include  the education                 
            tax;                                                               
                                                                               
       2.   The ASMI assessment;                                               
                                                                               
       3.   Separating the rate from 3% to 1%.                                 
                                                                               
  Co-Chair Hanley noted the net impact would be zero.                          
                                                                               
  HB 397 was HELD in Committee for further consideration.                      
                                                                               
  HOUSE BILL 437                                                               
                                                                               
       "An Act establishing the Judicial Officers Compensation                 
       Commission;  relating to  the  compensation of  supreme                 
       court justices, judges of the  court of appeals, judges                 
       of the superior  court, and district court  judges; and                 
       providing for an effective date."                                       
                                                                               
  CHRIS  CHRISTENSEN,  STAFF  COUNSEL,  ALASKA  COURT  SYSTEM,                 
  testified  in support of  HB 437.   He stated  that the bill                 
  would establish a Judicial Officers Compensation Commission.                 
                                                                               
                               18                                              
                                                                               
                                                                               
  The bill was  introduced by the  Judiciary Committee at  the                 
  request of the Alaska Supreme Court.                                         
                                                                               
  He added that the bill would  create a new Judicial Officers                 
  Compensation  Commission  to  assume  the  judicial   salary                 
  functions  of  the   existing  State  Officers  Compensation                 
  Commission.  The existing commission recommends compensation                 
  levels  for  judges   and  other   state  officers  to   the                 
  legislature;  those  proposals  frequently go  unheeded  for                 
  reasons unrelated to their merits.                                           
                                                                               
  In contrast, the commission created by HB 437 would have the                 
  authority  to  actually  establish  compensation levels  for                 
  supreme  court  justices, judges  of  the court  of appeals,                 
  judges of the superior court and district court judges.  The                 
  commission, appointed by the governor, could submit proposed                 
  salary and  per diem for  those officers to  the Legislature                 
  every  two  years.   These  compensation  levels  would take                 
  effect on the  date of the  first appropriation to fund  the                 
  increase,  unless disapproved  by another bill  enacted into                 
  law within 60 days of submission.                                            
                                                                               
  Mr. Christensen summarized:                                                  
                                                                               
       *    Eight states and the federal government operate  a                 
            compensation commission  which sets the  salary of                 
            certain public officials;                                          
                                                                               
       *    The   existing    State   Officers    Compensation                 
            Commission  does not have  the power  to establish                 
            salaries,  only  to  make  recommendations to  the                 
            legislature.                                                       
                                                                               
       *    The  commission  created  by  HB  437  is  modeled                 
            closely   on  the   existing   commission.     Two                 
            differences are  that the new commission will have                 
            the power to  establish compensation for  justices                 
            and  judges, not  make  recommendations, and  will                 
            have   a  list   of   specific  factors   used  in                 
            consideration  of  fair compensation  for justices                 
            and judges.                                                        
                                                                               
       *    The commission would  have five members  appointed                 
            by  the Governor to four year  terms.  Among those                 
            members  must be  a business  executive, a  person                 
            with   experience   in  personnel   management,  a                 
            representative    or    a    nonpartisan   voters'                 
            organization, an economist, and a lawyer.                          
                                                                               
       *    The commission meets every other year.                             
                                                                               
       *    The commission  may consider  the compensation  of                 
                                                                               
                               19                                              
                                                                               
                                                                               
            justices of the supreme court, judges of the court                 
            of  appeals,  judges  of  the  superior court  and                 
            district court judges.                                             
                                                                               
       *    The legislature has 60 days in which to reject the                 
            order by enacting a law.                                           
                                                                               
  (Tape Change, HFC 96-41, Side 2).                                            
                                                                               
  Representative Parnell  asked why  judges should  be removed                 
  from  the   State  Officers  Compensation   Preview.     Mr.                 
  Christensen noted that judges get caught up  in many battles                 
  over  salaries.    With  passage  of  the  legislation,  the                 
  salaries  would  still  be  subject  to appropriation.    In                 
  response   to   Representative   Parnell,  Mr.   Christensen                 
  explained  that  a judge's  salary could  not be  changed by                 
  appropriation but instead by a change to the statute.                        
                                                                               
  The State Constitution  specifies that  a judges salary  can                 
  not  be   diminished  during  a   term  in  office.     That                 
  understanding  is  repeated  in  the  proposed  legislation,                 
  although, would  not apply  to magistrates.   A  magistrates                 
  salary is set by the Supreme Court.                                          
                                                                               
  Discussion followed referencing material on Page 4, Line 21,                 
  "opportunity for other earned income".  Representative Brown                 
  referenced Page  3, Line  30, noting  that 60  days was  not                 
  enough time to  pass a  bill through the  legislature.   Mr.                 
  Christensen replied that  60 days was chosen  as it appeared                 
  also  in  the  Boundary  Commission  recommendations.     He                 
  elaborated that in order for the proposed legislation to  be                 
  in statute, it must be a bill, not a resolution.                             
                                                                               
  Representative  Parnell questioned  why the fiscal  notes do                 
  not reflect any  increases for  personnel.  Mr.  Christensen                 
  replied,  until the  compensation commission  actually meets                 
  and orders  a change  in salary,  there would  be no  fiscal                 
  impact showing.  It would be speculative at this time.                       
                                                                               
  Representative Mulder asked  if it was a  problem attracting                 
  competent  people  to  serve  as  judges.   Mr.  Christensen                 
  pointed out that there are fewer private applicants applying                 
  for judgeships and  more people from the  attorney general's                 
  and public  defender's office.   He commented that  the less                 
  you pay people, the less qualified people will apply.                        
                                                                               
  Mr.  Christensen  continued,  the  legislative  intent   was                 
  initiated  during   the  Hickel  Administration   through  a                 
  salaries  commission  but  then  died  in the  Senate  Rules                 
  Committee.  The legislation was  again introduced last year,                 
  and after a  hearing in the Senate  State Affairs Committee,                 
  legislators  agreed   that  they   would  not   support  the                 
                                                                               
                               20                                              
                                                                               
                                                                               
  legislation  if  "legislators"  remained  in  it.    It  was                 
  reintroduced this year with only judges included.                            
                                                                               
  Co-Chair Hanley asked  what would happen if  the Legislature                 
  did not take  action the first 60  days and there was  not a                 
  specific appropriation for judges salaries.  Mr. Christensen                 
  explained that issue has not yet been discussed.                             
                                                                               
  Representative Parnell recommended  changing the language on                 
  Page 3, Line 30, "within 60  days" to "when enacted in  law,                 
  within 120 legislative days".  That way it could be taken up                 
  at  any period of  time during  the legislative  session and                 
  then  the  appropriate  language  could  be inserted.    Mr.                 
  Christensen  indicated  that  an  order  would  have  to  be                 
  submitted within the  first 10  days of the  session by  the                 
  commission.    The 60  day period  was chosen  because other                 
  items in statute use that time frame.                                        
                                                                               
  Mr. Christensen  informed Committee members that  this issue                 
  has been considered in federal  courts on several occasions.                 
  In order for the delegation  to set constitutional salaries,                 
  the  courts have  held  that  there  must be  a  disapproval                 
  mechanism as well as an appropriation mechanism.                             
                                                                               
  Representative Brown questioned the  decision making process                 
  and  structure  within the  court  system.   Mr. Christensen                 
  responded that under the Constitution,  the supreme court is                 
  vested  with  ultimate  administrative  authority  over  the                 
  judicial branch.   He concluded  that judges salaries  total                 
  less that 25% of the court systems budget.                                   
                                                                               
  Representative Brown  questioned if the  list of recommended                 
  commission members needed to include lawyers and economists.                 
  Mr. Christensen replied that the supreme court does not care                 
  what type of people  are included on the commission  as long                 
  as they are "public spirited" and have some knowledge of the                 
  concerns.  Representative  Parnell thought attorneys  should                 
  be included on the commission as they are better informed of                 
  the time and skill required for that type commitment.                        
                                                                               
  HB 437 was HELD in Committee for further consideration.                      
                                                                               
  (Tape Change, HFC 96-42, Side 1).                                            
                                                                               
  HOUSE BILL 307                                                               
                                                                               
       "An  Act   prohibiting  the  sale  of   pull-tabs;  and                 
       providing for an effective date."                                       
                                                                               
  REPRESENTATIVE CYNTHIA  TOOHEY, testified  in support of  HB
  307 noting that  the bill would simply  prohibit politicians                 
  and  other  political  entities  from  receiving  charitable                 
                                                                               
                               21                                              
                                                                               
                                                                               
  gaming  proceeds.   She  said  that no  one  should consider                 
  politicians,  or their attempts  to influence  the electoral                 
  process, a legitimate use of charity money.                                  
                                                                               
  Representative Therriault MOVED that  9-LS1070\K, Luckhaupt,                 
  2/7/96, be the version before the Committee.  Representative                 
  Brown  OBJECTED  for  purposes  of  understanding  how  that                 
  version differs from  the prior versions  of the bill.   Co-                 
  Chair Hanley  explained  that the  original bill  prohibited                 
  pull  tabs;  the  Judiciary  version  prohibited  charitable                 
  gaming  except   for  raffles  for   political  parties  and                 
  candidates; the  Finance committee substitute  prohibits all                 
  charitable gaming including raffles.                                         
                                                                               
  Representative  Toohey  emphasized   that  politicians   and                 
  political parties should be removed  from receiving any kind                 
  of   charitable   money.      Representative   Brown   asked                 
  Representative  Toohey  if  she  continued  to  support  the                 
  original  version of  the  legislation  which excluded  pull                 
  tabs.  Representative Toohey disagreed  that was her intent.                 
  Representative Brown removed  her OBJECTION to adopting  the                 
  committee substitute.  There being  no further objection, CS                 
  HB  307   (FIN)  was  adopted  as  the  version  before  the                 
  Committee.                                                                   
                                                                               
  DENNIS  POSHARD,  DIRECTOR,   CHARITABLE  GAMING   DIVISION,                 
  DEPARTMENT OF REVENUE, commented that the Department has not                 
  taken  a  position  on  HB  307.    He  indicated  that  the                 
  Legislature will  need to  make the  policy calls  regarding                 
  that bill.    He pointed  out Departmental  concerns of  the                 
  legislation.                                                                 
                                                                               
       1.   The  bill  deals  with  campaign  finance  reform.                 
            Would the Department  of Revenue  be in charge  of                 
            policing  campaign  contributions.     Could   the                 
            problem  be  better  addressed through  Title  15,                 
            Alaska Public Offices Commission (APOC) statutes.                  
                                                                               
       2.   Will the  legislation accomplish the  intent.   He                 
            stressed  that  the  contributions   will  not  be                 
            audited through the Department.                                    
                                                                               
       3.   What would happen  assuming a violation  occurred.                 
            The  only recourse the  Division would have, would                 
            be to  take action  against the  charity's permit.                 
            There is no  action or recourse that  the Division                 
            can take  against the  campaign or  candidate that                 
            receives that money.                                               
                                                                               
  Mr. Poshard  reiterated that  when a  violation occurs,  the                 
  Division will  take  action against  the  charity's  permit.                 
  There will be  no means  of recourse  against the  candidate                 
                                                                               
                               22                                              
                                                                               
                                                                               
  that receive the money.                                                      
                                                                               
  Mr. Poshard spoke to the  advantages of placing the  concern                 
  under  the   jurisdiction  of  the   Alaska  Public   Office                 
  Commission (APOC).   APOC  has the  expertise  to deal  with                 
  campaign financing  law.   The Division  does not  have that                 
  expertise,  and it is  not the focus of  their program.  Co-                 
  Chair Hanley  advised that the  intent would be  to prohibit                 
  the  contribution.  Mr.  Poshard reminded  Committee members                 
  that most  of  the  groups included  also  report  to  APOC.                 
  Representative Brown  recommended  that  these  concerns  be                 
  considered in the campaign finance  reform and a rewrite  of                 
  the statutes.                                                                
                                                                               
  Mr. Poshard explained that the Department has done extensive                 
  research  in  how  other   organizations  establish  minimum                 
  returns to  the charity and  minimum returns  to the  State.                 
  The  Administration is  looking at  ways  to change  how the                 
  State initiates  this action.   Currently,  there is a  bill                 
  being drafted  which would  increase the  amount of  revenue                 
  received by the State and  the charity and would  streamline                 
  the auditing procedures.                                                     
                                                                               
  Representative Brown questioned the fundamental problem with                 
  a  political  candidate  receiving   money  from  charitable                 
  gaming,  agreeing   that  it   should  be   well  regulated.                 
  Representative  Therriault asked  if groups  gathering money                 
  for a political system are legitimate charities.                             
                                                                               
  Mr.  Poshard noted that  a prohibition  exists in  using net                 
  proceeds to pay a lobbyist.  There is no prohibition against                 
  a charitable  organization to  hire a  lobbyist,  but it  is                 
  illegal for them to pay the  lobbyist from the net proceeds.                 
                                                                               
                                                                               
  Representative  Toohey  noted for  the  record that  she has                 
  received gaming contributions from pull tabs charities.                      
                                                                               
  Representative  Navarre  elaborated   on  comments  made  by                 
  Representative  Martin  pointing  out   that  corruption  in                 
  politics  goes   far  beyond  contributions   received  from                 
  charitable gaming.  He voiced  support for the original bill                 
  over the committee substitute.                                               
                                                                               
  Representative  Kohring mentioned  that Alaska  is the  only                 
  State which allows  gaming proceeds to be used for political                 
  contributions, and  voiced concern  for proceeds  being used                 
  for  political purposes.    Representative Toohey  corrected                 
  that few states do allow it.                                                 
                                                                               
  Representative Brown inquired  why the  bill was drafted  in                 
  such a way that the sanction would affect only the "charity"                 
                                                                               
                               23                                              
                                                                               
                                                                               
  and  not  the  candidate receiving  the  funding.   Co-Chair                 
  Hanley indicated  that concern  was addressed  in the  bill.                 
  Representative Toohey pointed out that on Page 75, under the                 
  Section "Elections", the statutes clarifies this issue.  Mr.                 
  Poshard stated that  he did  not know if  the APOC  statutes                 
  contain a corresponding prohibition.                                         
                                                                               
  MARVEEN COGGINS, AID, REPRESENTATIVE CYNTHIA TOOHEY,  agreed                 
  that Alaska Legal Services specified that the candidate will                 
  not be responsible but rather the contributor would be.  She                 
  suggested that language  could be included stating  that the                 
  "candidate  can  not  knowingly  accept  contributions  that                 
  constitute in whole or part the net proceeds of a charitable                 
  gaming  organization".     Terry   Cramer,  Legal   Services                 
  attorney, recommended if that language  was adopted, that it                 
  be a new subsection to A.S. 15:17:070, labeled number (I).                   
                                                                               
  (Tape Change, HFC 96-42, Side 2).                                            
                                                                               
  Co-Chair  Hanley  noted   that  he  would  oppose   all  the                 
  amendments.  They are not  part of a comprehensive  campaign                 
  reform.  Philosophically, he voiced  a concern with gambling                 
  money   being  used  in   politics.    Representative  Brown                 
  countered that the likelihood of campaign reform is evident.                 
                                                                               
                                                                               
  Representative Brown  spoke to  Amendment  #1.   [Attachment                 
  their money was  going.  Mr.  Poshard stated that it  should                 
  not  be  a  problem for  any  business  to  comply with  the                 
  amendment.  It would  be easy to announce who  would receive                 
  the net proceeds from each evenings session.                                 
                                                                               
  Representative Brown MOVED to adopt  Amendment #1.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Brown, Grussendorf, Navarre, Therriault.                 
       OPPOSED:       Kelly, Kohring, Martin, Mulder, Parnell,                 
                      Hanley, Foster.                                          
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #2.                 
  [Attachment  #2].    She  noted  that  the  amendment  would                 
  identify where the pull tab money  would be going.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Grussendorf, Kelly, Navarre, Brown.                      
                                                                               
                               24                                              
                                                                               
                                                                               
       OPPOSED:       Kohring,   Martin,   Mulder,    Parnell,                 
  Therriault,                   Foster, Hanley.                                
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative Brown MOVED to adopt Amendment #3 which would                 
  adjust upward by  10%, the amount  of adjusted gross  income                 
  that goes to charities from pull tab activity.   [Attachment                 
  comparison to other  states in the percentage  being donated                 
  to charities.   He stressed  that only 8.7%  is returned  on                 
  each  dollar  to  the  charity.     Currently,  some  states                 
  contribute up  to 34% on  bingo and pull  tab dollars.   Co-                 
  Chair Hanley OBJECTED to adoption of Amendment #3.                           
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Kohring, Navarre, Brown, Grussendorf.                    
       OPPOSED:       Kelly,    Martin,    Mulder,    Parnell,                 
                      Therriault, Hanley, Foster.                              
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative  Brown  spoke   to  Amendments  4,  5   &  6,                 
  [Attachments  4,5   &  6],  which   address  increasing  the                 
  operators license fee, the distributors license and the pull                 
  tab manufactures license.   Mr.  Poshard commented that  the                 
  fees  established  have not  been  changed in  a  few years.                 
  Gaming regulations are lower than other jurisdictions.                       
                                                                               
  Representative Mulder questioned if  the fees collected off-                 
  set  operations  within  the  Department  of Revenue.    Mr.                 
  Poshard replied,  not entirely.  A 3% pull  tab tax and a 1%                 
  fee on the  ideal net  proceeds are also  collected.   Those                 
  taxes, in  addition  to  the  fees, are  double  the  annual                 
  budget.                                                                      
                                                                               
  Representative Brown MOVED to adopt  Amendment #4.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
                      Therriault, Kelly, Foster, Hanley.                       
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative Brown WITHDREW Amendments #5 & #6.  She spoke                 
  to Amendment  #7.   [Attachment #7].    The amendment  would                 
  close a  loop-hole in  gaming activity.   Mr.  Poshard added                 
  that there is  a limit on  bingo activity.  More  than $1000                 
                                                                               
                               25                                              
                                                                               
                                                                               
  dollars  can  not be  given away  on  one activity  or $5000                 
  dollar per  session.   There is  no statutory  limitation on                 
  pull tab prize pay-out.  Mr. Poshard recommended limiting it                 
  to $500 dollars.                                                             
                                                                               
  Representative Brown MOVED to adopt  Amendment #7.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Martin,  Mulder,   Parnell,  Therriault,                 
                      Kelly, Kohring, Hanley, Foster.                          
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative Brown  explained Amendment  #8.   [Attachment                 
  of charities which could participate.   Currently, there are                 
  more  charities  than  operators  available.    Mr.  Poshard                 
  elaborated that a  charity's maximum contract would  be $500                 
  thousand dollars annually.  There are a number of  charities                 
  seeking to have  the permit paid  by an operator.   Reducing                 
  the amount would then  force an operator to contract  with a                 
  greater number of  charities to conduct activity.   Co-Chair                 
  Hanley questioned  how many permits  would be taken  off the                 
  market.  Mr.  Poshard responded that there are  24 political                 
  groups who have permits.                                                     
                                                                               
  Representative Navarre  spoke  against the  amendment.    He                 
  thought that  it would  force  more people  moving to  Multi                 
  Benefit Permitees (MBP),  thus reducing the number  of slots                 
  available.  MBP's have a greater  cap from which to operate.                 
  Mr.    Poshard    agreed   with    Representative   Navarre.                 
  Representative Brown asked if charities  would be better off                 
  with an operator or with a MBP.  Mr. Poshard noted  that the                 
  rate of return would  be higher with an MBP,  although, they                 
  would  then be capable of contracting with  only six.  As an                 
  operator, they would be  able to contract with twelve.   The                 
  charity  could make  twice  as  much  money under  the  MBP,                 
  although only half the charities would receive benefit.                      
                                                                               
  Representative Brown  withdrew Amendment  #8 as  it was  her                 
  intention that the amendment benefit the charities.                          
                                                                               
  Representative  Brown  explained  Amendment  #9 which  would                 
  increase the tax from  3% to 5%  on the gross receipts  plus                 
  prizes awarded from  the pull tabs.   [Attachment #9].   She                 
  noted  that  this would  generate  $800 thousand  dollars in                 
  program receipts  annually to the general fund.  Mr. Poshard                 
  advised that increasing  the tax would create  new funds for                 
  the State, a tax collected by  the distributors and remitted                 
                                                                               
                               26                                              
                                                                               
                                                                               
  on a quarterly basis.                                                        
                                                                               
  Following comments by Representative  Martin, Representative                 
  Brown  suggested  a change  to  delete the  language  in the                 
  amendment "less prizes  awarded".   Mr. Poshard pointed  out                 
  with removal  of that  language, the  tax would  become much                 
  more  substantial.    He voiced  concern  that  the proposed                 
  percentage would change the gross  without also changing the                 
  return to the  permitees.  That would  dramatically decrease                 
  their net proceeds.                                                          
                                                                               
  Mr. Poshard added,  that he  would prefer  a 5%  tax on  the                 
  gross, changing  how the  charities  receive their  payment.                 
  Currently, those conducting activity would  be expending the                 
  tax to the permitees.                                                        
                                                                               
                                                                               
  (Tape Change, HFC 96-43, Side 1).                                            
                                                                               
  Representative Brown asked  to replace the  deleted language                 
  with the language as originally written.                                     
                                                                               
  Representative Brown MOVED to adopt  Amendment #9.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Mulder,   Parnell,  Therriault,   Kelly,                 
                      Kohring, Martin, Foster, Hanley.                         
                                                                               
  Representative Grussendorf was not present for the vote.                     
                                                                               
  The MOTION FAILED (2-8).                                                     
                                                                               
  Representative  Navarre   MOVED  to  adopt   Amendment  #10.                 
  [Attachment   #10].      Representative   Martin   OBJECTED.                 
  Representative Navarre pointed out that  the amendment was a                 
  portion of the bill which  passed from Committee last  year.                 
  Currently, a municipal  exemption has not been  applied for,                 
  resulting  in MBP's  doing the  same thing as  operators and                 
  competing against small  organizations, driving them out  of                 
  business.    The  amendment is  an  attempt  to allow  those                 
  municipalities, if  they choose,  to regulate  the level  of                 
  gaming in their communities.                                                 
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #10.                  
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Parnell,  Therriault,   Kelly,  Kohring,                 
                      Martin, Mulder, Hanley, Foster.                          
                                                                               
                                                                               
                               27                                              
                                                                               
                                                                               
  Representative Grussendorf was not present for the vote.                     
                                                                               
  The MOTION FAILED (2-8).                                                     
                                                                               
  Representative Martin MOVED to report CS HB 307 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.  There being  NO OBJECTION, it was                 
  so ordered.                                                                  
                                                                               
  CS HB  307 (FIN)  was reported out  of Committee with  a "do                 
  pass"  recommendation and  with a  zero fiscal  note by  the                 
  Department of Revenue.                                                       
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 4:40 P.M.                                           
                                                                               
                                                                               
                               28                                              

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