Legislature(2003 - 2004)

05/14/2003 01:41 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 14, 2003                                                                                            
                          1:41 PM                                                                                               
                                                                                                                                
TAPE HFC 03 - 92, Side A                                                                                                        
TAPE HFC 03 - 92, Side A (was not used.)                                                                                        
TAPE HFC 03 - 93, Side A                                                                                                        
TAPE HFC 03 - 93, Side B                                                                                                        
TAPE HFC 03 - 94, Side A                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 1:41 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Ethan Berkowitz                                                                                                  
Representative Mike Chenault                                                                                                    
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Beth Kerttula                                                                                                    
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Croft                                                                                                            
Representative Joule                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative   Vic    Kohring;   Larry    Persily,   Deputy                                                                   
Commissioner,   Department   of   Revenue;   Kevin   Ritchie,                                                                   
Executive Director, Alaska Municipal  League; John MacKinnon,                                                                   
Deputy Commissioner, Department  of Transportation and Public                                                                   
Facilities;  Robynn  Wilson, Department  of  Revenue;  Joanne                                                                   
Roomsberg,   Juneau  Sales  Tax   Administrator;  Rod   Peck,                                                                   
President,  Alaska Travel  Industry  Association; Paul  Fuhs,                                                                   
Yukon Pacific;  Randy Ruaro, Staff, Co-Chair  Williams; Susan                                                                   
Burke, Attorney, Williams Petroleum;  Richard Schmitz, Staff,                                                                   
Senator Cowdery; Anne Carpeneti,  Assistant Attorney General,                                                                   
Legal  Services  Section, Criminal  Division,  Department  of                                                                   
Law.                                                                                                                            
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Bruce  Johnson,  Utah  State  Tax  Commissioner,  Utah;  Bill                                                                   
O'Leary,   Vice    President,   Finance,    Alaska   Railroad                                                                   
Corporation.                                                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 216    "An Act relating to municipal taxation of refined                                                                     
          fuel products."                                                                                                       
                                                                                                                                
          CS HB216  (FIN) was REPORTED out of  Committee with                                                                   
          a "do  pass" recommendation and three,  zero fiscal                                                                   
          notes:   two  new fiscal notes  from Department  of                                                                   
          Community   and  Economic  Development   (Community                                                                   
          Assistance  & Rural  Energy Programs)  and #2  from                                                                   
          Department of Revenue.                                                                                                
                                                                                                                                
HB 244    "An Act relating to the Code of Criminal                                                                              
          Procedure;   relating   to  defenses,   affirmative                                                                   
          defenses,  and justifications  to certain  criminal                                                                   
          acts;  relating   to  rights  of   prisoners  after                                                                   
          arrest;   relating  to  discovery,   immunity  from                                                                   
          prosecution,  notice of defenses,  admissibility of                                                                   
          certain  evidence, and  right to representation  in                                                                   
          criminal   proceedings;  relating  to   sentencing,                                                                   
          probation, and discretionary  parole; amending Rule                                                                   
          16, Alaska  Rules of Criminal Procedure,  and Rules                                                                   
          404, 412,  609, and 803, Alaska Rules  of Evidence;                                                                   
          and providing for an effective date."                                                                                 
                                                                                                                                
          HB 244 was heard and  HELD in Committee for further                                                                   
          consideration.                                                                                                        
                                                                                                                                
HB 267    "An Act relating to the Alaska Railroad;                                                                              
          authorizing  the  Alaska  Railroad  Corporation  to                                                                   
          provide    financing     for    the    acquisition,                                                                   
          construction, improvement,  maintenance, equipping,                                                                   
          or operation  of facilities for  the transportation                                                                   
          of  natural gas  resources within  and outside  the                                                                   
          state  by others; authorizing  the Alaska  Railroad                                                                   
          Corporation   to  issue  bonds  to   finance  those                                                                   
          facilities; and providing for an effective date."                                                                     
                                                                                                                                
          CS HB 267 was REPORTED out of Committee with a "do                                                                    
          pass"  recommendation and  one fiscal impact  note:                                                                   
          #1  from  Department   of  Community  and  Economic                                                                   
          Development.                                                                                                          
                                                                                                                                
HB 293    An Act levying and collecting a state sales and                                                                       
          use tax; and providing for an effective date.                                                                         
                                                                                                                                
          HB 293 was heard and  HELD in Committee for further                                                                   
          consideration.                                                                                                        
                                                                                                                                
CSSB 128(FIN) am                                                                                                                
          "An  Act relating to  licensing common  carriers to                                                                   
          dispense alcoholic beverages;  and providing for an                                                                   
          effective date."                                                                                                      
                                                                                                                                
          CSSB 128(FIN) am was REPORTED out of Committee                                                                        
          with a "do pass recommendation" and fiscal impact                                                                     
          note #2 from Department of Revenue.                                                                                   
HOUSE BILL NO. 293                                                                                                            
                                                                                                                                
     An Act levying and collecting a state sales and use                                                                        
     tax; and providing for an effective date.                                                                                  
                                                                                                                                
BRUCE JOHNSON, UTAH STATE TAX  COMMISSIONER, observed that he                                                                   
is the Co-Chair of the Implementing  Group of the Streamlined                                                                   
State Sales Tax group and provided  information on the issue.                                                                   
He  stated  that whether  a  sales  tax  was adopted  was  an                                                                   
individual  state  policy,  but  encouraged  the  streamlined                                                                   
sales  tax  system.  He  discussed  his  experience  advising                                                                   
businesses  on  local  sales  tax  provisions.  He  gave  the                                                                   
example of a sales tax provision  in New York State that made                                                                   
a single item either  taxed or exempt at the  discretion of a                                                                   
retailer. He explained that the  streamlined sales tax system                                                                   
unified  state  definitions,  making  regulations  consistent                                                                   
throughout  the country.  He expressed  his  belief that  the                                                                   
streamlined  system was  beneficial. He  speculated that  the                                                                   
number of returns  filed would be reduced, and  that software                                                                   
services  would   be  available  to  help  states.   He  also                                                                   
maintained   that  the   system  was   beneficial  to   local                                                                   
retailers,  since they  were otherwise  at a disadvantage  to                                                                   
retailers  outside  the  state   selling  electronically.  He                                                                   
maintained  that this  system created  a level playing  field                                                                   
for local  merchants. He  also stated  that the system  would                                                                   
ensure that the  tax would remain a viable  revenue source in                                                                   
the future. He  concluded that the streamlined  sales tax was                                                                   
the best system to choose.                                                                                                      
                                                                                                                                
Representative  Kerttula  asked  whether he  had  experienced                                                                   
other states, which  had never had a sales tax,  but rather a                                                                   
number  of non-uniform  taxes across the  state. Mr.  Johnson                                                                   
noted  that   Colorado,  Alabama   and  Arizona   have  local                                                                   
administration of sales tax, where  local governments collect                                                                   
their own tax and in some cases  the tax base is not the same                                                                   
as for  the state. He has  also practiced in  Colorado, which                                                                   
had different exemptions  at a state and municipal  level. He                                                                   
stressed that  while the  local governments maintained  local                                                                   
rule,  since they  believed it  was superior,  that it  was a                                                                   
difficult situation for businesses.  He felt that this led to                                                                   
the   Supreme  Court's   ruling,   which  required   physical                                                                   
presences in a  state before a sales tax could  be collected.                                                                   
He stated  that there  was no  state with situations  exactly                                                                   
like Alaska,  but noted  other states  were working  with the                                                                   
problem. He reiterated the benefits of the system.                                                                              
                                                                                                                                
Representative  Kerttula  asked  whether  the  exemptions  or                                                                   
their  definitions  must be  uniform  among  the states.  Mr.                                                                   
Johnson  clarified   that  a  state  may  choose   their  own                                                                   
exemptions, but  that the definitions of exemptions  would be                                                                   
uniform.                                                                                                                        
                                                                                                                                
Mr.  Persily asked  whether, under  the streamlined  program,                                                                   
there  would be  prohibition  in  a municipality  against  an                                                                   
excise  tax, such  as bed tax,  car rental  tax. Mr.  Johnson                                                                   
stated that  there would not be.  He noted that in  Utah, the                                                                   
state retained the right for excise taxes.                                                                                      
                                                                                                                                
Co-Chair Williams asked what was  required to pass the system                                                                   
into law. Mr.  Johnson noted that the system  would come into                                                                   
effect when  ten states were  participating, but  would still                                                                   
be voluntary for  merchandisers that did not  have a physical                                                                   
presence  in the  state.  For it  to be  mandatory,  Congress                                                                   
would have to take action.                                                                                                      
                                                                                                                                
Co-Chair  Williams asked  how  exemptions  were decided.  Mr.                                                                   
Johnson  responded  that  Utah made  the  minimum  conforming                                                                   
decisions, keeping  in place  their previous exemptions,  but                                                                   
fine-tuning  the  system  to  be  in  conformation  with  the                                                                   
unified definitions. He pointed  out that Alaska faced a more                                                                   
daunting task.  He concluded  that the intent  was not  for a                                                                   
uniform task, but to make the tax uniformly convenient.                                                                         
                                                                                                                                
Representative  Hawker  asked   for  clarification  that  the                                                                   
statewide sales tax  system did not have dominion  over local                                                                   
decisions.  Mr. Persily  confirmed  that the  system did  not                                                                   
prohibit existing  or new excise taxes in  municipalities. He                                                                   
pointed out  that if  a municipality desired  to tax  an item                                                                   
that was exempt statewide, they  would simply adopt an excise                                                                   
tax.                                                                                                                            
                                                                                                                                
Vice-Chair Meyer asked whether  a bed or car rental tax would                                                                   
be left  up to municipalities.  Mr. Persily pointed  out that                                                                   
those cities  with current excise  taxes, but that  under the                                                                   
bill, the State would also implement  its use tax in addition                                                                   
to  those taxes.  Vice-Chair  Meyer  clarified  if the  State                                                                   
could  implement   a  statewide   excise  tax.   Mr.  Persily                                                                   
confirmed that this was true.                                                                                                   
                                                                                                                                
Co-Chair Williams called a Committee Recess at 2:01 PM.                                                                         
                                                                                                                                
TAPE HFC 03 - 93, Side A                                                                                                      
                                                                                                                                
Co-Chair Williams reconvened the meeting at 9:30 PM.                                                                            
                                                                                                                                
JOHN   MACKINNON,   DEPUTY   COMMISSIONER,    DEPARTMENT   OF                                                                   
TRANSPORTATION AND PUBLIC FACILITIES  provided information on                                                                   
the motor fuel tax provision of  HB 293. The current .08-cent                                                                   
a  gallon  would be  raised  to  .20  cents per  gallon.  The                                                                   
current  .08-cent per  gallon  tax raises  approximately  $29                                                                   
million  dollars  a  year. The  increase  would  generate  an                                                                   
additional  $41  million dollars.  He  noted  that the  total                                                                   
raised by  the highway  user fee  would be approximately  $70                                                                   
million.   The  Department  of   Transportation  and   Public                                                                   
Facilities   currently   spends   $60  million   in   highway                                                                   
maintenance and  an additional  $50 million in  federal match                                                                   
for highway  construction, which  all comes from  the General                                                                   
Fund. He noted that 38 states  would still have a higher fuel                                                                   
tax than Alaska. The national  average is about .20 cents per                                                                   
gallon.                                                                                                                         
                                                                                                                                
KEVIN RITCHIE, ALASKA MUNICIPAL  LEAGUE provided information.                                                                   
He noted  that a group  of municipal  officials had  met with                                                                   
the   Governor   and   offered    suggestions,   which   were                                                                   
subsequently   acted   upon   to   lesson   the   impact   on                                                                   
municipalities.  He stated that  the rewritten bill  was then                                                                   
reviewed,  and   a  few  concerns  were  raised.   The  first                                                                   
objection was  to the  exemption of sales  tax on  marine and                                                                   
motor fuel. He pointed out that  currently municipalities tax                                                                   
marine  and motor  fuel,  equaling  millions  of dollars  for                                                                   
municipalities.   He   stated    that   the   exemption   was                                                                   
problematic. The  second issue is  the concern raised  by the                                                                   
cap.  He explained  that  a number  of  municipalities had  a                                                                   
variety of caps, put in place  to encourage local business in                                                                   
that particular  community. He noted  that there was  talk of                                                                   
considering a lower  cap, which was then broadened.  He noted                                                                   
that  in car  sales, the  amount  of sales  tax might  effect                                                                   
where cars are purchased.                                                                                                       
                                                                                                                                
JOANNE  ROOMSBERG, JUNEAU  SALES  TAX ADMINISTRATOR,  JUNEAU,                                                                   
spoke in  response to  a question  by Representative  Hawker.                                                                   
She explained  that presently Juneau  has a fuel  flowage fee                                                                   
that is  charged at the  municipal airport. Aviation  fuel is                                                                   
exempt  from the  city's general  sales tax.  She stated  her                                                                   
understanding that  the bill would  allow Juneau  to continue                                                                   
to implement a fuel excise tax.                                                                                                 
                                                                                                                                
Mr. Ritchie pointed  out that Tom Boedeker was  the Committee                                                                   
Chair in the working group that  had raised concern about the                                                                   
effect on fuel taxes.                                                                                                           
                                                                                                                                
In response  to a question  by Representative  Berkowitz, Ms.                                                                   
Roomsberg stated that a non-resident  exemption card could be                                                                   
purchased for a  cost of $20 dollars. The card  is good for a                                                                   
year. This  allows the purchase  of items that would  be used                                                                   
and consumed  outside of the city  and borough of  Juneau. It                                                                   
would not  qualify for items that  would be used  or consumed                                                                   
in  Juneau, such  as a  car rental  or  hotel room.  Tangible                                                                   
personal property  can be brought  into the city for  work or                                                                   
service, such as service on a car.                                                                                              
                                                                                                                                
Co-Chair Harris  asked about the  position of  communities in                                                                   
support  of a  statewide sales  tax.  He asked  what kind  of                                                                   
relief   was    necessary   to    garner   acceptance    from                                                                   
municipalities. Mr.  Ritchie referred to testimony  in Senate                                                                   
Finance,    revolving    around   conflicts    foreseen    by                                                                   
municipalities. He  pointed out that at this time  not all of                                                                   
the  conflicts were  apparent. He  noted that  even in  cases                                                                   
when communities were not in favor,  they had suggestions for                                                                   
making it workable.                                                                                                             
                                                                                                                                
Co-Chair  Harris asked  whether the  Alaska Municipal  League                                                                   
foresaw  a "roadblock"  to working  with the  sales tax.  Mr.                                                                   
Ritchie  maintained  that they  did  not  have a  history  of                                                                   
blocking legislation. Co-Chair  Harris observed that it would                                                                   
be helpful  for the Municipal  League to help  gather support                                                                   
for the tax.                                                                                                                    
                                                                                                                                
Mr. Ritchie pointed  out that the organization  was committed                                                                   
to helping meet the budget gap.  He stated that the Board had                                                                   
directed him to  work with the Legislature to  resolve issues                                                                   
surrounding the tax.                                                                                                            
                                                                                                                                
Representative  Berkowitz  asked  if the  Administration  had                                                                   
reviewed  other states  with overlapping  taxes. Mr.  Ritchie                                                                   
observed that Alaska was unique  in its taxation, as the only                                                                   
state with  a municipal  power to tax  sales without  a state                                                                   
sales tax.                                                                                                                      
                                                                                                                                
Representative  Kerttula asked  about  the level  of drop  in                                                                   
revenue  sharing.  Mr. Ritchie  responded  that  in the  past                                                                   
three years it  had remained level, and now it  had gone down                                                                   
by  25%.  Municipalities  received  $40 million  in  1986  as                                                                   
compared to the current $20 million.  Representative Kerttula                                                                   
asked how many  municipalities had raised their  sales tax in                                                                   
the last couple  of years. Mr. Ritchie thought  that three or                                                                   
four  municipalities had  raised  their  sales tax  including                                                                   
Dillingham, and Seward.                                                                                                         
                                                                                                                                
Representative  Kerttula asked how  many communities  were at                                                                   
the cap  for property tax,  with a fairly  high sales  tax as                                                                   
well. Mr. Ritchie  observed that there is a  statutory cap of                                                                   
30 mils. Different communities  have revenue caps. Petersburg                                                                   
has a 10-mil  property cap, which  they are at. Juneau  has a                                                                   
cap of 12 mils,  and is currently at 11 mils.  In response to                                                                   
a  question by  Representative  Kerttula,  Mr. Ritchie  noted                                                                   
that the state assessor could  provide a list of property tax                                                                   
caps.                                                                                                                           
                                                                                                                                
Representative Kerttula asked  about the range of exemptions.                                                                   
The  city  and  borough  of Juneau  has  37  exemptions.  Mr.                                                                   
Ritchie referred  to a list  of exemptions provided  in 1999,                                                                   
which  lays  out  most  of  the   exemptions.  Representative                                                                   
Kerttula asked  if there had been  a study on the  impacts on                                                                   
Juneau  of a  tax such  as that  contained  in the  Committee                                                                   
Substitute.  Ms.   Roomsberg  stated  that  Juneau   has  the                                                                   
difference in  the exemptions and  the tax base,  which would                                                                   
make it difficult to evaluate  the tax impact. She noted that                                                                   
several  aspects of  the  tax must  be  more clearly  defined                                                                   
before   a  more   comprehensive  study   could  occur:   the                                                                   
exemptions, incidents and tax base.                                                                                             
                                                                                                                                
Vice-Chair Meyer  asked how to  rate the three  major sources                                                                   
of  revenue, which  are before  the  Legislature: sales  tax,                                                                   
[capping  the] permanent  fund dividend,  and income  tax. He                                                                   
observed that a  sales tax and a state income  tax would take                                                                   
disposable income  out of the  economy, but pointed  out that                                                                   
capping permanent fund dividend  would also keep money out of                                                                   
the economy. He questioned Anchorage's  position. Mr. Ritchie                                                                   
referred  to a  poll by  the Southeast  Alaska Municipal  and                                                                   
Business Conference  and noted that,  as of 2:30  on 5/14/03,                                                                   
eight municipalities  were in  favor and  48 were opposed  to                                                                   
the proposed sales tax. Members  were asked to list the least                                                                   
objectionable revenue stream:  30 permanent fund earnings, 25                                                                   
income tax, and 2 sales.                                                                                                        
                                                                                                                                
Representative  Hawker  asked  if municipal  revenue  sharing                                                                   
would be increased or decreased  as a result of the bill. Mr.                                                                   
Ritchie noted that  the bill allows the state  to appropriate                                                                   
6 cents  of the  gas tax  increase to  road revenue  sharing,                                                                   
which  would  raise  revenue  sharing  by  approximately  $18                                                                   
million. He  observed that this  year's reduction  to revenue                                                                   
sharing was $7 - $8 million. Representative  Hawker concluded                                                                   
that  the legislation  would increase  revenue  sharing by  a                                                                   
multiple  of the  current reduction.  He asked  the level  of                                                                   
property tax caps  in communities relying solely  on property                                                                   
tax.  Mr.  Ritchie thought  that  those  communities  relying                                                                   
solely on property tax had rates  of 18 to 20 percent. Juneau                                                                   
is at 11.5 - 12 mils.                                                                                                           
                                                                                                                                
ROD  PECK,  PRESIDENT  ALASKA   TRAVEL  INDUSTRY  ASSOCIATION                                                                   
testified  in  support  of  the  bill.  He  stated  that  his                                                                   
organization  represented  small  businesses  in  Alaska.  He                                                                   
stated  that tourists  spent 1.8 billion  on visitor  related                                                                   
activities.   His   industry   recognizes  the   fiscal   gap                                                                   
challenges  that the  legislature  faces, but  faces its  own                                                                   
challenges.  He  observed  that  there  was  a  reduction  of                                                                   
visitors to  the state. He anticipated  a further drop  of 10                                                                   
20 percent drop in visitors. He  suggested that a revitalized                                                                   
marketing  program would  turn  around the  trend. He  stated                                                                   
support  of the bill,  if amended  to include  a tourism  tax                                                                   
revenues to bolster the existing  state marketing program. He                                                                   
presented the committee with amendment  language, which would                                                                   
identify   tourism  tax   revenue   by  tracking   industries                                                                   
contributing to a marketing program.                                                                                            
                                                                                                                                
Vice-Chair Meyer  asked how much  revenue was estimated  as a                                                                   
result  of  the  amendment.  Mr.  Peck  observed  that  their                                                                   
research  indicates  that,  of  the $1.8  billion,  they  can                                                                   
identify  $920  million  in  activities  over  an  annualized                                                                   
period.  Vice-Chair Meyer  observed that  the car rental  tax                                                                   
bill  contained  a  clause  to  reappropriate  funds  to  the                                                                   
tourism  industry.  Mr. Peck  stated  that his  industry  was                                                                   
opposed to  targeted taxes,  and believed  that this  was the                                                                   
fairest tax since it was industry wide.                                                                                         
                                                                                                                                
Representative  Kerttula  asked   about  the  nature  of  the                                                                   
contract with Alaska Travel Industry  Association (ATIA). Mr.                                                                   
Peck observed that ATIA is in  the third year of a three-year                                                                   
plan that  would continue  into perpetuity.  They have  a $10                                                                   
million budget, of which $4 million  was in contribution from                                                                   
the state and $6 million is from  matching private funds. The                                                                   
budget in  year one and two was  $8.5 and $7 million,  with a                                                                   
greater percentage coming from the state.                                                                                       
                                                                                                                                
Representative  Hawker observed  that the proposed  amendment                                                                   
would deprive the  State of the tax from an  entire sector of                                                                   
the economy.  Mr. Peck stated  that this was not  true, since                                                                   
the  industry  generates $1.8  billion.  He stated  that  the                                                                   
amendment targets segments of  activities in the area of $900                                                                   
million.                                                                                                                        
                                                                                                                                
Representative  Hawker summarized that  the proposal  by ATIA                                                                   
would deprive the  state of revenue from a sub  sector of the                                                                   
economy, which  would benefit solely from  revenues collected                                                                   
from within it. Mr. Peck pointed  out that not all gift shops                                                                   
would  contribute due  to a  definition  of seasonality,  but                                                                   
acknowledged the  conclusion. Representative Hawker  asked if                                                                   
the amendment was acceptable to  the industry, and questioned                                                                   
why  they  had  not formed  a  trade  association  and  self-                                                                   
assessed for the same efforts.                                                                                                  
                                                                                                                                
Representative Berkowitz  speculated that problems  attendant                                                                   
to  tourism marketing  also impeded  work in  this area.  Mr.                                                                   
Peck  confirmed  that  it was  difficult  to  reach  industry                                                                   
consensus.                                                                                                                      
                                                                                                                                
In response  to a  question by  Representative Kerttula,  Mr.                                                                   
Peck confirmed that  there were a variety of  excise taxes in                                                                   
the industry.                                                                                                                   
                                                                                                                                
Co-Chair Williams  stated that  a committee substitute  would                                                                   
be available at the next Committee meeting.                                                                                     
                                                                                                                                
HB  293  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
HOUSE BILL NO. 267                                                                                                            
                                                                                                                                
     "An  Act relating  to the  Alaska Railroad;  authorizing                                                                   
     the  Alaska Railroad  Corporation  to provide  financing                                                                   
     for   the   acquisition,    construction,   improvement,                                                                   
     maintenance, equipping,  or operation of  facilities for                                                                   
     the transportation  of natural gas resources  within and                                                                   
     outside  the state  by  others; authorizing  the  Alaska                                                                   
     Railroad  Corporation to  issue bonds  to finance  those                                                                   
     facilities; and providing for an effective date."                                                                          
                                                                                                                                
REPRESENTATIVE  VIC  KOHRING, SPONSOR,  provided  information                                                                   
about the bill. He observed that  the legislation would allow                                                                   
revenues  to  be raised  in  order  to  build a  natural  gas                                                                   
pipeline. He  explained that the  bill authorizes  the Alaska                                                                   
Railroad  Board to  generate tax-exempt  bonds  to raise  low                                                                   
interest  rate  funds. Bonds  would  be issued  and  proceeds                                                                   
would  be lent  to potential  constructors of  the gas  line.                                                                   
There  would  be   no  net  effect  to  the   State.  Bonding                                                                   
authorization would  be available  to assist the  building of                                                                   
the pipeline. The debt is non-recourse,  which means that the                                                                   
debt would be the responsibility  of the project sponsor. The                                                                   
builders  would be  responsible  for their  debt. The  debtor                                                                   
could not lien  any assets of the Railroad,  state of Alaska,                                                                   
or  the  Permanent  Fund.  Financing   would  be  issued  for                                                                   
acquisition,    construction,    improvement,    maintenance,                                                                   
equipping,  and  operation  of   facilities  associated  with                                                                   
transportation  of natural gas.  Up to  $17 billion  would be                                                                   
authorized,  which would  provide  the majority  of  proceeds                                                                   
needed for building a $20 - $25  billion pipeline. The Alaska                                                                   
Railroad would issue the bonds,  but neither the Railroad nor                                                                   
the state  of Alaska would be  liable for the debt.  The bill                                                                   
requires that  prior to  issuing bonds,  proof of ability  to                                                                   
repay  must  be demonstrated.  Representative  Kohring  noted                                                                   
that  there  was  a history  in  other  states  of  railroads                                                                   
helping  to finance pipeline  projects.  He also pointed  out                                                                   
the   mission  of   the  Railroad   to  facilitate   economic                                                                   
development.                                                                                                                    
                                                                                                                                
Representative Kohring referred  to a letter by George K Baum                                                                   
& Company, which indicated the  feasibility of issuing bonds.                                                                   
He stressed that  the current low interest rates  would allow                                                                   
the capital  to be raised. He  noted that the bonds  were tax                                                                   
exempt. The Railroad's ability  to issue tax-exempt bonds was                                                                   
initiated  when  purchased  by  the  federal  government.  He                                                                   
concluded that  the bill presented an important  facet toward                                                                   
completion of the pipeline.                                                                                                     
                                                                                                                                
Co-Chair  Harris  asked for  an  update of  discussions  with                                                                   
North Slope producers.                                                                                                          
                                                                                                                                
PAUL  FUHS, YUKON  PACIFIC,  stated that  the  Administration                                                                   
might  have more  information  on specific  negotiations.  In                                                                   
response to  a question by  Co-Chair Harris, Mr.  Fuhs stated                                                                   
that  the intent  is to  get tax-exempt  bonding through  the                                                                   
Railroad. He  observed that  the Alaska Railroad  Corporation                                                                   
does not have the authority in  its organic act. The state of                                                                   
Alaska must give it the authority.                                                                                              
                                                                                                                                
TAPE HFC 03 - 93, Side B                                                                                                      
                                                                                                                                
In response to a question by Representative  Hawker, Mr. Fuhs                                                                   
noted  that  a  similar  bill was  in  the  last  legislative                                                                   
session: HB 423, which was rolled into HB 519.                                                                                  
                                                                                                                                
Representative  Whitaker referred  to the difference  between                                                                   
tax  exempt  and  taxable  bonds.  Mr.  Fuhs  encouraged  the                                                                   
Committee  to  read  the  letter  from  George  K.  Baum  and                                                                   
Company, which has sold $2 billion in bonds in the state.                                                                       
                                                                                                                                
Representative  Whitaker  asked who  was  the  holder of  the                                                                   
bonds in  Valdez. Mr. Fuhs  observed that they  are municipal                                                                   
bonds.                                                                                                                          
                                                                                                                                
Mr.  Fuhs pointed  out that  George  K Baum  and Company  was                                                                   
asked  to  verify   Yukon  Pacific's  numbers   look  at  the                                                                   
difference  in tax-exempt  bonds  and estimate  if the  bonds                                                                   
could be  sold. The letter  concludes that the  project could                                                                   
be financed  in the  bond market if  the railroad  vehicle is                                                                   
available.  He  pointed  out that  this  pertains  to  either                                                                   
project:  Trans Canada  or all  Alaskan. He  referred to  the                                                                   
spreadsheet attached to the letter,  indicating that the rate                                                                   
difference  between  non-taxable  and taxable  was  two  full                                                                   
points  (copy on  file.) He  added that  they indicated  that                                                                   
there were sufficient  revenues under the Alaska  Natural Gas                                                                   
Development Act.  He observed  that estimated revenues  for a                                                                   
private project would be $350  - $400 million to the state of                                                                   
Alaska  and $50  - $100  for municipalities.  A public  model                                                                   
shows up to a billion dollar return to the state of Alaska.                                                                     
                                                                                                                                
Mr. Fuhs observed  that the George K Baum and  Company has as                                                                   
much  experience  in  selling  bonds  as  anyone  in  Alaska.                                                                   
Representative  Kohring referred to  his experience  with the                                                                   
company while  on the  Alaska Railroad Board.  Representative                                                                   
Whitaker expressed hid support of the bill.                                                                                     
                                                                                                                                
Mr. Fuhs  discussed changes proposed  in an amendment  by Co-                                                                   
Chair  Harris   (Amendment  1),   which  would  confirm   the                                                                   
authority of the  Railroad to what is actually  stated in the                                                                   
authorization.                                                                                                                  
                                                                                                                                
Representative Hawker observed  that there was no information                                                                   
in the  packet from  the Department  of Revenue, and  pointed                                                                   
out that the Department had bond  experience. Mr. Fuhs stated                                                                   
that  the  Department  of  Revenue  had  responded  in  other                                                                   
committee meetings.                                                                                                             
                                                                                                                                
Representative Whitaker pointed  out that he had testimony by                                                                   
former Department of Revenue Commission Wilson Condon.                                                                          
                                                                                                                                
BILL  O'LEARY,  VICE  PRESIDENT,   FINANCE,  ALASKA  RAILROAD                                                                   
CORPORATION testified  via teleconference  in support  of the                                                                   
bill.  Representative  Hawker  observed that  the  investment                                                                   
community's view  of Alaskan bonds  might not be the  same as                                                                   
it was  a year  ago. He  asked if Committee  should  obtain a                                                                   
more current view of the bond rating before proceeding.                                                                         
                                                                                                                                
Mr. O'Leary  stated that he  had viewed the information  from                                                                   
the state financial  advisor, and pointed out  that the model                                                                   
being used  would not affect  the State's bond  ratings; only                                                                   
the project would be affected.                                                                                                  
                                                                                                                                
Representative  Whitaker stressed that  there is  no inherent                                                                   
liability  for the  state of  Alaska or  the Alaska  Railroad                                                                   
Corporation. The  liability lies with the feasibility  of the                                                                   
project.                                                                                                                        
                                                                                                                                
Representative Hawker  expressed concern about  the extent of                                                                   
the  bonds ($17  billion),  and asked  if  the Department  of                                                                   
Revenue had reviewed the project.                                                                                               
                                                                                                                                
LARRY  PERSILY, DEPUTY  COMMISSIONER,  DEPARTMENT OF  REVENUE                                                                   
noted that the idea had been discussed  the previous year, in                                                                   
regards to  how the  state could help  bring about  a natural                                                                   
gas  project  to  commercialize  stranded gas  in  the  North                                                                   
Slope. He  noted that  it was  discovered that under  federal                                                                   
legislation the  Alaska Railroad Corporation has  the ability                                                                   
to issue  tax-exempt bonds.  There is  no explicit  provision                                                                   
requiring the bonds to be used  to support railroad function.                                                                   
Discussions with  bond counselors indicated that  if there is                                                                   
enabling legislation  the Alaska  Railroad Corporation  would                                                                   
be in  a position  to issue financing  bonds. The  payment of                                                                   
the bonds  would not  be the responsibility  of the  state of                                                                   
Alaska   or  the   Corporation.  Investors   would  have   to                                                                   
demonstrate sufficient revenue  from the project to repay the                                                                   
bonds. A  determination was made  that [the investors]  could                                                                   
realize a savings of $1 billion  by issuing tax-exempt bonds.                                                                   
He  noted the  argument  that  the federal  regulations  were                                                                   
unclear,  and   might  dissuade  investors.  This   would  be                                                                   
resolved by  an IRS opinion  or further legal  research prior                                                                   
to the bond purchases.                                                                                                          
                                                                                                                                
Representative  Hawker  concurred  that  the  funding  seemed                                                                   
viable,  but observed  that  the  bill had  not  been a  high                                                                   
priority previously.  Mr. Persily clarified that  a change in                                                                   
[state] statute is needed to give  the Railroad the authority                                                                   
to  issue the  bonds. He  concluded  that tax-exempt  bonding                                                                   
could be a viable funding source.                                                                                               
                                                                                                                                
Mr.   Fuhs  stressed   that   this  bonding   authority   was                                                                   
specifically  intended for the  gas pipeline, and  speculated                                                                   
that this was the reason for the delay.                                                                                         
                                                                                                                                
Representative Hawker noted the  correlation with Proposition                                                                   
3  in  the  last  election.  Mr.  Fuhs  speculated  that  the                                                                   
legislation   does   not   discriminate   against   potential                                                                   
sponsors.                                                                                                                       
                                                                                                                                
Representative  Berkowitz  pointed  out that  this  authority                                                                   
could be  used for other  purposes such  as a portion  of the                                                                   
capital budget.                                                                                                                 
                                                                                                                                
Co-Chair  Harris noted  that  the bill  is  project and  site                                                                   
neutral.  He referred  to  Amendment  1, which  conforms  the                                                                   
powers  granted  to ARRC  in  Sec. 2  of  the bill  with  the                                                                   
specific  provisions  in the  legislative  authorization  and                                                                   
approval section.  It clarifies that  the act is  intended to                                                                   
facilitate  a natural gas  pipeline form  the North  Slope of                                                                   
Alaska.                                                                                                                         
                                                                                                                                
Mr. Persily agreed  that the amendment made  it explicit that                                                                   
[the bonds  are intended] for  a natural gas pipeline  in the                                                                   
North Slope,  replacing a more  broad authority,  which could                                                                   
have  been  used  for other  projects.  He  noted  that  this                                                                   
applied  to commercializing  and  transporting  gas from  the                                                                   
North Slope.                                                                                                                    
                                                                                                                                
In response  to a  question by  Co-Chair Harris, Mr.  Persily                                                                   
acknowledged that  if amendment would assist  North Slope gas                                                                   
development. He  observed that using the authority  for other                                                                   
purposes might risk  its ability to be used  for [the natural                                                                   
gas  pipeline] if  problems were  encountered  before it  was                                                                   
needed  for the  project.  He pointed  out  that a  potential                                                                   
sponsor could  be anyone who  can show sufficient  revenue to                                                                   
cover the bonds.                                                                                                                
                                                                                                                                
Representative Whitaker expressed his support of the bill.                                                                      
                                                                                                                                
Vice-Chair Meyer also expressed  his support of the bill, and                                                                   
asked if  the State was  ultimately responsible.  Mr. Persily                                                                   
noted that the bonds were revenue  bonds, based on the belief                                                                   
in sufficient  repayment revenue.  The state of  Alaska would                                                                   
not be responsible.                                                                                                             
                                                                                                                                
Mr.  Fuhs  referred to  the  letter  by  George K.  Baum  and                                                                   
observed that the bonds would  be non-recourse conduit bonds.                                                                   
The  minimum debt  service  ratios  are calculated  at  fifty                                                                   
percent higher revenues than needed  to make the payments, in                                                                   
order for  the market  to have  confidence in purchasing  the                                                                   
bonds.                                                                                                                          
                                                                                                                                
Representative  Hawker  referred  to  a  letter  from  Conoco                                                                   
Phillips,  stating:   "while  it  is  too  early   to  select                                                                   
financing vehicles,  HB 267 will  add a potentially  valuable                                                                   
option". He  asked why the bill  was proposed in  the current                                                                   
year. He suggested that there  were still hurdles to overcome                                                                   
to truly  view the viability of  the funding. He asked  why a                                                                   
specific  amount  ($17  billion)  was selected  and  why  the                                                                   
legislation should be passed now.                                                                                               
                                                                                                                                
Mr. Persily noted  the specific financing vehicle  depends on                                                                   
who builds the project. The specific  amount was necessary to                                                                   
attract pipeline sponsors, and  if the statute was not on the                                                                   
books, it might delay negotiations.  He maintained that there                                                                   
was no harm  in having the statute. Mr. Fuhs  maintained that                                                                   
federal factors  in the negotiations would become  clear this                                                                   
year.                                                                                                                           
                                                                                                                                
Representative  Hawker  asked  the  Department  of  Revenue's                                                                   
position. Mr. Persily stated that  he believed the Department                                                                   
of Revenue was supportive of the  bill, since they had worked                                                                   
on various aspects of the legislation over the years.                                                                           
                                                                                                                                
Representative  Kerttula referred  to the  importance of  the                                                                   
legislation to  potential buyers. Mr. Persily  confirmed that                                                                   
it  was also  important to  show  good faith  to the  federal                                                                   
government  and demonstrate  that  [the state  of Alaska]  is                                                                   
moving forward.                                                                                                                 
                                                                                                                                
In response  to a  question by  Representative Whitaker,  Mr.                                                                   
Persily responded that the most  current estimates of funding                                                                   
needs were reflected in the $17 billion figure.                                                                                 
                                                                                                                                
Co-Chair   Harris  MOVED   Amendment  #1.   There  being   NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Representative Berkowitz MOVED  to ADOPT Amendment #2 a title                                                                   
amendment: delete  "relating to  the Alaska Railroad".  There                                                                   
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
Representative Foster  MOVED to report CSHB 267  (FIN) out of                                                                   
Committee    with   individual    recommendation   and    the                                                                   
accompanying fiscal  note. There being NO OBJECTIONS,  it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS HB  267 was  REPORTED out  of Committee  with a "do  pass"                                                                   
recommendation  and   one  fiscal  impact  note:     #1  from                                                                   
Department of Community and Economic 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\V                                                                   
(5/8/03). There being NO OBJECTION, it was so ordered.                                                                          
                                                                                                                                
RANDY RUARO,  STAFF, CO-CHAIR  WILLIAMS provided  information                                                                   
on the  bill. He explained  that the committee  substitute is                                                                   
an attempt to  address concerns expressed  by Representatives                                                                   
Croft  and  Whitaker  regarding prohibition  of  taxation  of                                                                   
fuels transiting  through  a borough  or municipality  on its                                                                   
way to  another destination.  The Sponsor  had expressed  his                                                                   
support  of the  bill. The  bill also  prohibits taxation  of                                                                   
wholesale  sales  of  fuels  refined  in a  borough  and  the                                                                   
transit  of  fuel  through a  borough  unless  that  activity                                                                   
currently exists,  in which case  it would be  grand fathered                                                                   
in.  Mr. Rauro  observed  that  the Alaska  Municipal  League                                                                   
indicated that it  would neither oppose nor  advocate for the                                                                   
legislation.                                                                                                                    
                                                                                                                                
Representative  Chenault  MOVED to  ADOPT  Amendment #2.  Co-                                                                   
Chair Williams  OBJECTED. Representative  Chenault  noted the                                                                   
technical nature  of the amendment: insert "or  transfers" on                                                                   
page 2, line 7.                                                                                                                 
                                                                                                                                
SUSAN   BURKE,   ATTORNEY,   WILLIAMS    PETROLEUM   provided                                                                   
information  on  the  Committee Substitute.  She  noted  that                                                                   
Amendment  #2  would  correct an  oversight  making  sections                                                                   
congruent in language.                                                                                                          
                                                                                                                                
Co-Chair  Williams WITHDREW  his  OBJECTION.  There being  no                                                                   
other objections, Amendment #2 was ADOPTED.                                                                                     
                                                                                                                                
Representative Hawker pointed  out that the legislation would                                                                   
restrict  a municipality's  ability to  collect local  excise                                                                   
tax. Ms.  Burke noted  that they  were attempting to  prevent                                                                   
the type  of municipal taxation  that initiative  sponsors in                                                                   
Fairbanks  tried to  get enacted:  the  physical transfer  of                                                                   
refined fuel from one container to another.                                                                                     
                                                                                                                                
Representative Hawker  questioned if Alaska  Municipal League                                                                   
would support the legislation.                                                                                                  
                                                                                                                                
Representative Foster noted that  in 1993 he sponsored a bill                                                                   
to respond  to a community that  was charging a  transfer tax                                                                   
for goods traveling through a variety of municipalities.                                                                        
                                                                                                                                
Representative Foster  MOVED to report CSHB 216  (FIN) out of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal  notes. There being NO OBJECTIONS  it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSHB  216 (FIN)  was REPORTED  out  of Committee  with a  "do                                                                   
pass" recommendation  and three, zero fiscal notes:   two new                                                                   
fiscal  notes  from  Department  of  Community  and  Economic                                                                   
Development  (Community Assistance  & Rural Energy  Programs)                                                                   
and #2 from Department of Revenue.                                                                                              
CS FOR SENATE BILL NO. 128(FIN) am                                                                                            
                                                                                                                                
     "An Act relating to licensing common carriers to                                                                           
     dispense alcoholic beverages; and providing for an                                                                         
     effective date."                                                                                                           
                                                                                                                                
RICHARD   SCHMITZ,    STAFF,   SENATOR   COWDERY,    provided                                                                   
information on the bill. He noted  that the legislation deals                                                                   
with the fact  that common carriers can dispense  alcohol and                                                                   
are  licensed by  the Alcoholic  Beverage  Control Board.  He                                                                   
observed that concern was expressed  that airlines would have                                                                   
to  license  all   of  their  planes  because   it  would  be                                                                   
impossible  to guarantee which  plane would  make a  run. The                                                                   
legislation  was amended to  enact a  biannual fee  of $2,000                                                                   
dollars  per location  that Alaska Airlines  serves.  Pan Air                                                                   
Aviation would be allowed to pay  a $1,000 dollar fee for the                                                                   
first aircraft and $100 fee for  each additional plane. A bar                                                                   
car on a train would be individually  licensed. The Alcoholic                                                                   
Beverage Control Board  supports the bill as it  cuts back on                                                                   
paperwork and makes it easier to license aircraft.                                                                              
                                                                                                                                
Representative  Berkowitz  asked  if  on  board  alcohol  was                                                                   
taxed. After  discussion, it was  speculated that it  was not                                                                   
taxed.                                                                                                                          
                                                                                                                                
Representative  Foster  asked if  the  fee pertains  to  each                                                                   
carrier.   Mr. Schultz explained  that carriers can  chose by                                                                   
location served or by the first 10 aircraft.                                                                                    
                                                                                                                                
Representative  Foster asked  why the  choice was  necessary.                                                                   
Mr. Schultz  observed that the  option would affect  carriers                                                                   
with less than ten 10 aircraft.                                                                                                 
                                                                                                                                
TAPE HFC 03 - 94, Side A                                                                                                      
                                                                                                                              
Representative  Kerttula  referred to  the  fiscal note.  She                                                                   
pointed  out  that  the  choice  would  cost  the  State  $39                                                                   
thousand. Mr. Schultz  stated that the goal,  in talking with                                                                   
the  Alcoholic  Beverage  Control  Board, was  to  lower  the                                                                   
paperwork cost and prevent a situation  where a carrier would                                                                   
have to register each of its aircraft as it expanded.                                                                           
                                                                                                                                
Representative Kerttula  asked how much the  planes made from                                                                   
liquor sales each  year. Representative Berkowitz  asked if a                                                                   
rate  level  had been  examined  to  make the  bill  fiscally                                                                   
neutral. Mr.  Schultz noted  that it  had been discussed.  He                                                                   
did  not  think  that there  was  opposition  to  making  the                                                                   
program revenue neutral.                                                                                                        
                                                                                                                                
LARRY  PERSILY, DEPUTY  COMMISSIONER,  DEPARTMENT OF  REVENUE                                                                   
provided information. He observed  that alcohol tax in Alaska                                                                   
is an  excise tax,  not a sales  tax. It  is assessed  at the                                                                   
wholesale level.  He assumed that airlines would  buy from an                                                                   
out-of-state  distributor.  The  question  is  whether  there                                                                   
would be  tax liability  for importing  the alcohol  into the                                                                   
state of  Alaska. He  did not  think an  excise tax  had been                                                                   
collected.                                                                                                                      
                                                                                                                                
In response  to a question  by Representative  Berkowitz, Mr.                                                                   
Persily responded  that the sale  would occur in the  air and                                                                   
may be subject to federal law.                                                                                                  
                                                                                                                                
Representative  Foster  observed that  airlines  do not  make                                                                   
their profit from alcohol sales.                                                                                                
                                                                                                                                
Mr. Schmitz noted that ERA sells alcohol on their flights.                                                                      
                                                                                                                                
Representative  Berkowitz proposed an  amendment to  make the                                                                   
legislation  revenue   neutral  by  increasing   fees  by  10                                                                   
percent; insert 1,100 on page 2 line 4.                                                                                         
                                                                                                                                
Mr. Schmitz  responded that  ERA Aviation  would be  the only                                                                   
airline affected serving intrastate routes.                                                                                     
                                                                                                                                
Vice-Chair  Meyer OBJECTED  for discussion.  He asked  if the                                                                   
amount would  be in  line with charges  by other  states. Mr.                                                                   
Schmitz  indicated  that the  fee  would  cover the  cost  to                                                                   
implement.                                                                                                                      
                                                                                                                                
Mr. Persily recalled  that many other states  have lower fees                                                                   
but that  they have  a higher volume  of planes licensed.  He                                                                   
did not  think the  fee was  grossly out  of line with  other                                                                   
states.                                                                                                                         
                                                                                                                                
Vice-Chair Meyer questioned if  the amendment would be within                                                                   
the range. Mr. Persily noted that  Alaska would not be at the                                                                   
highest  end. He added  that Alaska  Airlines has  considered                                                                   
the issue and has been looking for a solution.                                                                                  
                                                                                                                                
Representative Berkowitz MOVED  to AMEND Amendment 1: Page 2,                                                                   
line  8, delete  "2,000"  and  insert "$3,000".  Mr.  Schmitz                                                                   
questioned if page 2, line 4 should  be amended to be in line                                                                   
with  the   amended  amendment.   He  did  not   support  the                                                                   
amendment.                                                                                                                      
                                                                                                                                
Representative Chenault  suggested that $3,000  would be $500                                                                   
more than the bi-annual bar fee.                                                                                                
                                                                                                                                
Representative  Stoltze   questioned  if  the   increase  was                                                                   
justified.                                                                                                                      
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Kerttula; Meyer; Whitaker; Berkowitz, Hawker                                                                          
OPPOSED: Stoltze; Chenault; Foster; Williams; Harris                                                                            
                                                                                                                                
The MOTION FAILED (5-5).                                                                                                        
                                                                                                                                
Representative Foster MOVED to  report CSSB 128(FIN)am out of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal  note. There  being NO OBJECTION,  it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSSB  128(FIN)am was  REPORTED out  of Committee  with a  "do                                                                   
pass  recommendation"   and  fiscal   impact  note   #2  from                                                                   
Department of Revenue.                                                                                                          
HOUSE BILL NO. 244                                                                                                            
                                                                                                                                
     "An Act relating to the Code of Criminal Procedure;                                                                        
     relating to defenses, affirmative defenses, and                                                                            
     justifications  to certain  criminal  acts; relating  to                                                                   
     rights   of   prisoners   after  arrest;   relating   to                                                                   
     discovery,   immunity   from  prosecution,   notice   of                                                                   
     defenses, admissibility  of certain evidence,  and right                                                                   
     to representation  in criminal proceedings;  relating to                                                                   
     sentencing,   probation,   and   discretionary   parole;                                                                   
     amending  Rule 16, Alaska  Rules of Criminal  Procedure,                                                                   
     and  Rules  404, 412,  609,  and  803, Alaska  Rules  of                                                                   
     Evidence; and providing for an effective date."                                                                            
                                                                                                                                
Vice-Chair   Meyer  MOVED   Amendment  #1:   work  draft   23                                                                   
GH1024|D.1,   dated    5/14/03.   Representative    Berkowitz                                                                   
OBJECTED.                                                                                                                       
                                                                                                                                
ANNE CARPENETI,  ASSISTANT ATTORNEY  GENERAL, LEGAL  SERVICES                                                                   
SECTION,  CRIMINAL  DIVISION,  DEPARTMENT  OF  LAW  discussed                                                                   
changes proposed  by the amendment. She noted  that Amendment                                                                   
1 would change  defense for "heat of passion"  charges from a                                                                   
defense  that  the state  is  obliged  to disprove  beyond  a                                                                   
reasonable doubt  to an affirmable defense,  which the person                                                                   
claiming the defense  is obliged to prove by  a preponderance                                                                   
of evidence. "Heat of passion"  only applies to murder in the                                                                   
first degree and murder in the  second degree, and only works                                                                   
to  reduce  the  charge  to  manslaughter.   Under  "heat  of                                                                   
passion" a person  claims that they acted in  such excitement                                                                   
aroused  by the  intended  victim that  they  were unable  to                                                                   
prevent  the crime.  The claim  is that  a homicide  occurred                                                                   
during a  situation beyond  one's control.  It is similar  to                                                                   
temporary  insanity.  The  person  committing  the  crime  is                                                                   
unable to  control him or herself,  and thus feels  that they                                                                   
should be charged  with manslaughter rather than  murder. She                                                                   
noted that  in Alaska,  insanity is  an affirmative  defense,                                                                   
which the defendant  has to prove through a  preponderance of                                                                   
the evidence. She spoke in support of the shift.                                                                                
                                                                                                                                
Representative Berkowitz pointed  out that the presumption of                                                                   
innocence and burden of proof  are the two essential precepts                                                                   
in any  trial. He  maintained that  the amendment would  turn                                                                   
these  precepts  on  their  head.   He  maintained  that  the                                                                   
amendment overturns this premise and spoke against it.                                                                          
                                                                                                                                
Vice-Chair Meyer asked if the  "heat of passion" placed these                                                                   
cases in  the same vein  as an insanity case.  Representative                                                                   
Berkowitz  explained  that  there  are  two  parts  of  doing                                                                   
something  illegal; there  needs to  be a guilty  mind  and a                                                                   
guilty act. When there is an insanity  defense the guilty act                                                                   
is conceded. An  insanity situation is distinct  from a "heat                                                                   
of  passion" defense.  He  noted that  the  State would  have                                                                   
prior knowledge of a "heat of  passion" defense and should be                                                                   
able to  prove its case.  Vice-Chair Meyer maintained  that a                                                                   
defendant  should  be  required   to  prove  that  they  were                                                                   
irrational in the heat of passion.                                                                                              
                                                                                                                                
In response  to a  question by  Representative Kerttula,  Ms.                                                                   
Carpenti confirmed  that "heat of passion" is  not equivalent                                                                   
to insanity. Representative  Kerttula asked if  the burden of                                                                   
proof remained the  same. Ms. Carpenti noted  that the change                                                                   
would  be to  an affirmative  defense. She  noted that  other                                                                   
things,  such  as duress,  support  an  affirmative  defense,                                                                   
since  the  defendant is  in  a  better position  to  provide                                                                   
information about the situation.                                                                                                
                                                                                                                                
Representative Kerttula  pointed out that if  the defense had                                                                   
not been raised, then it would  not have been the same burden                                                                   
on the defendant.  Ms. Carpenti noted the State  is currently                                                                   
obliged  to  disprove  it  beyond  a  reasonable  doubt.  The                                                                   
amendment  would  require  the   defendant  to  prove  it  by                                                                   
preponderance of evidence and  the charge would be reduced to                                                                   
manslaughter.                                                                                                                   
                                                                                                                                
In response  to a  question by  Representative Whitaker,  Ms.                                                                   
Carpenti noted that a defense  places the burden on the State                                                                   
to prove  the guilt  of a defendant,  whereas an  affirmative                                                                   
defense  places  the  burden   of  proof  on  the  defendant.                                                                   
Representative Whitaker  observed that it amounted  to a case                                                                   
of life and  death and stated that he was  uncomfortable with                                                                   
an  amendment   of  this  magnitude  being  heard   in  these                                                                   
conditions.                                                                                                                     
                                                                                                                                
Representative  Foster observed that  he had experienced  the                                                                   
weight of the  government under indictment. He  asserted that                                                                   
most citizens couldn't afford to defend themselves.                                                                             
                                                                                                                                
HB  244  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 11:32 PM                                                                                           
                                                                                                                                
                                                                                                                                

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