Legislature(2003 - 2004)

05/05/2003 09:16 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 05, 2003                                                                                            
                         9:16 A.M.                                                                                              
                                                                                                                                
TAPE HFC 03 - 76, Side A                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 9:16 A.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Richard Foster                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative   Harry   Crawford;    Randy   Ruaro,   Staff,                                                                   
Representative   Bill   Williams;   Josh   Applebee,   Staff,                                                                   
Representative  Tom  Anderson; Greg  O'Claray,  Commissioner,                                                                   
Department   of  Labor   and   Workforce  Development;   Gray                                                                   
Mitchell, Director,  Division of Labor Standards  and Safety,                                                                   
Department of Labor and Workforce Development                                                                                   
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 155    An  Act  relating  to  the  submission  of  payroll                                                                   
          information by contractors and subcontractors                                                                         
          performing work on a public construction contract;                                                                    
          and providing for an effective date.                                                                                  
                                                                                                                                
          CS HB 155 (FIN) was reported out of Committee with                                                                    
          "individual recommendations" and with a new fiscal                                                                    
          note by the Department of Labor and Work Force                                                                        
          Development.                                                                                                          
                                                                                                                                
HB 216    An  Act relating to  municipal taxation  of refined                                                                   
          fuel products.                                                                                                        
                                                                                                                                
          HB 216 was HEARD and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 155                                                                                                            
                                                                                                                                
     An   Act  relating   to   the  submission   of   payroll                                                                   
     information    by   contractors    and    subcontractors                                                                   
     performing work  on a public construction  contract; and                                                                   
     providing for an effective date.                                                                                           
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  #23-GH1119\S,                                                                   
Craver,  5/1/03,  as  the  version of  the  bill  before  the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
GREG  O'CLARAY,   COMMISSIONER,   DEPARTMENT  OF  LABOR   AND                                                                   
WORKFORCE   DEVELOPMENT,   provided   an  overview   of   the                                                                   
differences between the bills.   He pointed out that the only                                                                   
change had  been made to  Page 2, Line  26, and  that section                                                                   
was deleted.  It addressed "lease  hold improvements" and was                                                                   
controversial.                                                                                                                  
                                                                                                                                
GRAY  MITCHELL, DIRECTOR,  DIVISION  OF  LABOR STANDARDS  AND                                                                   
SAFETY,  DEPARTMENT  OF  LABOR   AND  WORKFORCE  DEVELOPMENT,                                                                   
offered to answer questions regarding the fiscal note.                                                                          
                                                                                                                                
Co-Chair Harris noted  that the bill would raise  revenue for                                                                   
the  State, however,  he asked  if  it would  be costing  the                                                                   
State more money for those contracts.                                                                                           
                                                                                                                                
Commissioner O'Claray replied  that was correct.  There would                                                                   
be a small increase  in costs to cover those  contract costs.                                                                   
Prior to the  bill, the State was "eating"  that cost through                                                                   
the general  fund  budget.  He  thought that  it amounted  to                                                                   
about 1% of the  contract price.  It will be  a "pure revenue                                                                   
generator" and  in the Murkowski Administration  terminology,                                                                   
it acts as a "user fee".  Prior  to this time, the Department                                                                   
had  not  been charging  contractors  for  investigation  and                                                                   
compliance  of the  certified  payroll for  the minimum  wage                                                                   
rate.   The legislation  has those that  use the  service pay                                                                   
for the services.                                                                                                               
                                                                                                                                
Co-Chair Harris pointed  out that the bill places  a user fee                                                                   
on contractors.   He questioned  if any of those  funds would                                                                   
be   available  for   further   training  and/or   retraining                                                                   
displaced workers.   Commissioner O'Claray replied  there was                                                                   
no money allocated  for that concern.  The  Administration is                                                                   
not "warm  and fuzzy"  about program  receipt authority.   He                                                                   
referenced  other special  funds  such as  the Worker's  Comp                                                                   
Safety Fund.                                                                                                                    
                                                                                                                                
Representative Croft asked which  fiscal note would accompany                                                                   
the bill.                                                                                                                       
                                                                                                                                
Commissioner O'Claray responded  that the correct fiscal note                                                                   
indicates  a $2.5  million dollar  change in  revenue with  a                                                                   
total   general   fund   source    of   $53.9   dollars   for                                                                   
reclassification  of a position  within that Department,  who                                                                   
will receive  the on-line  and hard  copy certified  payroll.                                                                   
He  added   that  the  position   would  be  changed   to  an                                                                   
accounting-tech position.                                                                                                       
                                                                                                                                
Representative  Whitaker referenced  the fiscal  note in  the                                                                   
amount  of $2.5 million  general fund  dollars generated  per                                                                   
year.  He asked  if that fee would be paid  by contractors or                                                                   
through the  State contracts.   He accessed that  through the                                                                   
preparation of  the bids, each contractor would  include that                                                                   
cost and would be essentially  charging the State more money.                                                                   
                                                                                                                                
Commissioner O'Claray advised  that the money would come from                                                                   
a larger "pot".   There is a cap on each of  the fees with no                                                                   
more  than  $5,000  per  public   contract.    Representative                                                                   
Whitaker  inquired  if the  federal  dollar  amount would  be                                                                   
reduced for the charges.  He requested further explanation.                                                                     
                                                                                                                                
Commissioner  O'Claray  addressed  the "relativity"  of  that                                                                   
amount.   He used the example  of building a road,  a project                                                                   
in the amount of  a $20 million dollars, and  then adding the                                                                   
$5,000 fee to  that job.  Prior to the  proposed legislation,                                                                   
the Legislature was funding positions,  which were being used                                                                   
to investigate  and enforce  Title 36 laws.   That  money was                                                                   
coming  directly   from  the  general  fund.     Through  the                                                                   
legislation,   those   funds    would   come   from   federal                                                                   
construction dollars.                                                                                                           
                                                                                                                                
Co-Chair Harris  inquired what  the $2.5 million  dollars was                                                                   
intended  to be used  for.   Commissioner O'Claray  explained                                                                   
that  it was  his plan  to replace  the  entire general  fund                                                                   
budget for  the Division  of Labor  Standards and Safety  and                                                                   
that amount  would adequately  cover those  costs.   However,                                                                   
the Governor  has submitted  several user  fees and  position                                                                   
revenue generating  legislation and that HB  155 was included                                                                   
in those pieces.                                                                                                                
                                                                                                                                
Representative  Croft  MOVED  to  ADOPT  Amendment  #1,  #23-                                                                   
GH1119\S.1, Craver, 5/5/03.  (Copy on File).                                                                                    
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative Croft  acknowledged that there  had been "good                                                                   
work  done"  dividing  up  responsibilities  of  the  general                                                                   
contractors  and  the  sub  contractors.    The  way  current                                                                   
language  reads,  the  Department could  withhold  an  amount                                                                   
sufficient to  pay what needs to compensate  for enforcement.                                                                   
If a  one-sub contractor  was underpaying  their worker,  the                                                                   
difference  would   be  the  "hammer   that  you   have",  in                                                                   
opposition stating that they had  not properly filed or paid.                                                                   
Then  the entire  payment could  be withheld  until that  was                                                                   
remedied.    Representative  Croft  stated  that  the  entire                                                                   
payment should  be subject but  rather that he would  like to                                                                   
see  them  have the  right  to  withhold against  the  prime.                                                                   
Amendment #1 addresses that concern.                                                                                            
                                                                                                                                
Commissioner  O'Claray  responded  that  the  Department  had                                                                   
dealt   with  the   Associated   General  Contractors   (AGC)                                                                   
regarding the  compromise.  He indicated that  the Department                                                                   
would be  more comfortable  leaving the language  as is.   He                                                                   
acknowledged  that an "aggressive  approach to control  would                                                                   
happen" with some of the changes proposed.                                                                                      
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Croft, Joule, Moses                                                                                              
OPPOSED:       Stoltze, Whitaker, Chenault, Hawker, Meyer,                                                                      
               Williams, Harris                                                                                                 
                                                                                                                                
Representative Foster was not present for the vote.                                                                             
                                                                                                                                
The MOTION FAILED (3-7).                                                                                                        
                                                                                                                                
Representative Croft  MOVED to ADOPT Amendment #2.   (Copy on                                                                   
File).                                                                                                                          
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative  Croft  explained  that  the  amendment  would                                                                   
delete the  definition of contractor,  as there  currently is                                                                   
an adequate  definition in statute.   Additionally,  it would                                                                   
give the Commissioner of the Department  of Labor & Workforce                                                                   
Development  the authority  to receive  the money as  program                                                                   
receipts for  running that Department.   Representative Croft                                                                   
acknowledged that  the Administration does not  like the idea                                                                   
of program receipts, noting that  he had spoken to the Cheryl                                                                   
Frasca, Office  of Management and Budget, regarding  a reform                                                                   
of that idea.   He added that those fees are  as good as "any                                                                   
other" to have as program receipts.                                                                                             
                                                                                                                                
Commissioner O'Claray reiterated  that under the direction of                                                                   
the  Office  of  Management and  Budget  and  the  Governor's                                                                   
Office, he would not support the amendment.                                                                                     
                                                                                                                                
Representative   Croft   reiterated    that   the   fee   was                                                                   
appropriate.                                                                                                                    
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Croft, Joule, Moses, Harris                                                                                      
OPPOSED:       Whitaker, Chenault, Hawker, Meyer, Stoltze,                                                                      
               Williams                                                                                                         
                                                                                                                                
Representative Foster was not present for the vote.                                                                             
                                                                                                                                
The MOTION FAILED (4-6).                                                                                                        
                                                                                                                                
Representative Whitaker referenced  Page 2, Section 2, asking                                                                   
how many  primary contracts  there had  been per year,  which                                                                   
would  apply   to  that   section.    Commissioner   O'Claray                                                                   
responded around 1,000 contracts.                                                                                               
                                                                                                                                
Representative  Whitaker commented  that if  there were  that                                                                   
many,  how  would  the  fiscal   note  work.    Mr.  Mitchell                                                                   
explained  that they had  provided a  five-year average  with                                                                   
approximately 1,000 projects per  year.  The average value of                                                                   
those projects was roughly $250,000  per project and which is                                                                   
how the $2.5 million dollar fiscal note came to be.                                                                             
                                                                                                                                
Co-Chair Harris  pointed out  that the bill  called for  a 1%                                                                   
contract price not to exceed $5,000  dollars.  Representative                                                                   
Whitaker  replied  that  he  was  now  comfortable  with  the                                                                   
number.                                                                                                                         
                                                                                                                                
Vice-Chair  Meyer MOVED  to report  CS  HB 155  (FIN) out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so moved.                                                                                                                       
                                                                                                                                
CS  HB  155   (FIN)  was  reported  out  of   Committee  with                                                                   
"individual recommendations"  and with  a new fiscal  note by                                                                   
the Department of Labor & Workforce Development.                                                                                
                                                                                                                                
HOUSE BILL NO. 216                                                                                                            
     An Act relating to municipal taxation of refined fuel                                                                      
     products.                                                                                                                  
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  #23-LS0822\U,                                                                   
Cook,  5/4/03,  as  the  version   of  the  bill  before  the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
JOSH   APPLEBEE,   STAFF,   REPRESENTATIVE    TOM   ANDERSON,                                                                   
accompanied Randy Ruaro to the table.                                                                                           
                                                                                                                                
RANDY RUARO, STAFF, REPRESENTATIVE  BILL WILLIAMS, noted that                                                                   
changes  had been  made  to Section  3,  which addresses  the                                                                   
"scope" of the bill.  The previous  version was broad and the                                                                   
language  needed  to  be  narrowed so  that  the  bill  would                                                                   
prohibit tax  on both sale  transfers of fuel  refined within                                                                   
the boundaries of  the borough.  He stated  that the previous                                                                   
version   created  issues   across  the   State  within   the                                                                   
municipalities.   He  claimed that the  proposed version  was                                                                   
acceptable.                                                                                                                     
                                                                                                                                
Representative  Croft  questioned  the  changes.   Mr.  Ruaro                                                                   
stated  that  the entire  Section  3  had been  rewritten  to                                                                   
preclude taxes  on wholesale transfer of fuel  refined within                                                                   
the boundaries of a borough.                                                                                                    
                                                                                                                                
Representative  Croft  noted   that  language  from  the  "Q"                                                                   
version  would be  deleting  fuel used  in  the aircraft  and                                                                   
leaving  in  the  wholesale  transfer  portion.    Mr.  Ruaro                                                                   
replied that  the initial  difference was  in regard  to what                                                                   
the prohibition  actually could  apply to.   In the  previous                                                                   
"Q" version, it would apply to  any borough around the State,                                                                   
whereas,  the current  version  allows it  to  be limited  to                                                                   
boroughs where  the prohibition  applies.   He added  that in                                                                   
the  previous  version, fewer  boroughs  could  apply.   That                                                                   
language is listed on Page 1, Lines 11 & 12.                                                                                    
                                                                                                                                
Co-Chair Harris asked  if the bill dealt with  an increase to                                                                   
the fuel  tax.  Mr.  Ruaro responded  that the bill  does not                                                                   
levy a fuel tax.                                                                                                                
                                                                                                                                
Representative Joule inquired  why would the Legislature want                                                                   
to remove  a tool from the  municipalities.  He  thought that                                                                   
section  would   "hurt"  the   municipalities.     Mr.  Ruaro                                                                   
clarified that it had been a policy  decision.  He noted that                                                                   
Mr.  Cook had  addressed  the idea  in  a previous  committee                                                                   
hearing.   Representative  Joule understood  that the  bill's                                                                   
language currently only affects a few areas in the State.                                                                       
                                                                                                                                
Representative  Croft  advised   that  the  policy  was  more                                                                   
logical  than  that.   It  currently  states that  the  "only                                                                   
boroughs that can not access the  tax, would be the ones that                                                                   
have the  refinement in their  district".  He  commented that                                                                   
it  would be  best to  indicate only  boroughs that  actually                                                                   
refine  it,  could tax  it.    By passing  the  "U"  version,                                                                   
Fairbanks could  not tax but every other  municipality could.                                                                   
Representative  Croft  warned  that there  will  be  problems                                                                   
within the multiple jurisdictions.                                                                                              
                                                                                                                                
Representative  Whitaker agreed  with Representative  Croft's                                                                   
interpretation.    In  response   to  Representative  Joule's                                                                   
concerns, he admitted that he  too had concerns.  He believed                                                                   
that it would  be challenged and overturned.   The conclusion                                                                   
is that the only tax that remains  in place would be the ones                                                                   
imposed within  the boundaries of  the borough.  He  noted, a                                                                   
broader statewide  concern is that  by allowing a  borough to                                                                   
tax,  then  the  transfer  of  goods  becomes  essentially  a                                                                   
"restraint  of  trade".    He   believed  that  would  create                                                                   
problems for the  State.  He added that the  legislation does                                                                   
have significant merit.  Representative  Whitaker agreed with                                                                   
the concerns voiced by Representative Croft.                                                                                    
                                                                                                                                
Mr.  Ruaro referenced  the May  29th,  2002, letter  received                                                                   
from  attorney, Mr.  Avrum Gross,  regarding  the ability  of                                                                   
successive  jurisdictions to tax.   The  version of  the bill                                                                   
does not  give authority to  the successive jurisdictions  to                                                                   
impose a  tax.  (Letter  in Packet).   He reiterated  that in                                                                   
the proposed bill, that question would be left unanswered.                                                                      
                                                                                                                                
Representative  Croft noted  that it  would remove the  right                                                                   
that municipalities  know they have and leave  the right that                                                                   
we are not sure they have.  He  did not understand the "fix".                                                                   
                                                                                                                                
Co-Chair Williams  noted that he would like to  hold the bill                                                                   
in Committee until some of the  questions have been answered.                                                                   
                                                                                                                                
Co-Chair Harris noted that the  "Q" version deals with turban                                                                   
powered  aircraft.  He  asked why  that had  not been  in the                                                                   
proposed version.     Mr. Ruaro replied  that section  of the                                                                   
"Q"  version was  part  of a  tax  that would  occur  outside                                                                   
borough  boundaries  and  have   refineries  in  them.    The                                                                   
committee substitute  was changed  to apply only  to boroughs                                                                   
with refineries within their boundaries.                                                                                        
                                                                                                                                
Co-Chair  Williams  noted  that  HB  216  would  be  HELD  in                                                                   
Committee for further consideration.                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 9:58 A.M.                                                                                          
                                                                                                                                
                                                                                                                                

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