Legislature(2011 - 2012)HOUSE FINANCE 519

02/06/2012 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 142 PRESUMPTION AGIA PROJECT IS UNECONOMICAL TELECONFERENCED
Heard & Held
+ HB 180 VETERAN DESIGNATION ON DRIVER'S LICENSE TELECONFERENCED
Moved CSHB 180(FIN) Out of Committee
+ HB 198 SPEC. EDUC. SERVICE AGENCY FUNDING/SUNSET TELECONFERENCED
Heard & Held
+= HB 118 RESEARCH AND DEVELOPMENT TAX CREDIT TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 6, 2012                                                                                           
                         1:35 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 1:35 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Co-Chair                                                                                        
Representative Anna Fairclough, Vice-Chair                                                                                      
Representative Mia Costello                                                                                                     
Representative Mike Doogan                                                                                                      
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Reggie Joule                                                                                                     
Representative Mark Neuman                                                                                                      
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Rena  Delbridge, Staff,  Representative Mike  Hawker; Curtis                                                                    
Thayer,   Deputy  Commissioner,   Department  of   Commerce,                                                                    
Community and  Economic Development; Alan  Johnston, Wedbush                                                                    
Securities,   Anchorage;    Dan   White,    Associate   Vice                                                                    
Chancellor,  Research,  University   of  Alaska,  Fairbanks;                                                                    
Representative    Alan  Dick, Chair,  Special  Committee  on                                                                    
Education;  Millie  Ryan,   Executive  Director,  Governor's                                                                    
Council on  Disabilities and Special  Education; P.J,   Ford                                                                    
Slack,  PH.D,  Board  President, Special  Education  Service                                                                    
Agency;   Patrick   Pillai,  Executive   Director,   Special                                                                    
Education  Service  Agency  (SESA);  Marcy  Herman,  Special                                                                    
Assistant,  Department of  Education and  Early Development;                                                                    
Representative  Dan  Saddler,  Sponsor; Joe  Michel,  Staff,                                                                    
Representative Bill Stoltze.                                                                                                    
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
Bruce   Tangeman,   Deputy   Commissioner,   Tax   Division,                                                                    
Department  of Revenue;  Laraine Adans,  Director of  Social                                                                    
Services,  Lower Yukon  School  District, Mountain  Village;                                                                    
Dr. Cassie  Wells, Director,  Student Services,  North Slope                                                                    
Borough  School  District,  Barrow;  Ron  Siebels,  Military                                                                    
Order  of   the  Purple  Heart,  Anchorage;   Chris  Nelson,                                                                    
Muldoon;  Ric   Davidge,  President,  Vietnam   Veterans  of                                                                    
America;  Susan Gorski,  Eagle  River  Chamber of  Commerce,                                                                    
Chugiak;   Verdie   Bowen,    Director   Veterans   Affairs,                                                                    
Anchorage; Stacy Oates,  Administrative Manager, Division of                                                                    
Motor Vehicles, Department of Administration.                                                                                   
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 118    RESEARCH AND DEVELOPMENT TAX CREDIT                                                                                   
                                                                                                                                
          HB 118 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HB 142    PRESUMPTION AGIA PROJECT IS UNECONOMICAL                                                                              
                                                                                                                                
          HB 142 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HB 180    VETERAN DESIGNATION ON DRIVER'S LICENSE                                                                               
                                                                                                                                
          CSHB 180(FIN)  was REPORTED out of  Committee with                                                                    
          a "do  pass" recommendation and with  a new fiscal                                                                    
          impact  note by  the House  Finance Committee  for                                                                    
          the Department of Administration.                                                                                     
                                                                                                                                
HB 198    SPEC. EDUC. SERVICE AGENCY FUNDING/SUNSET                                                                             
                                                                                                                                
          HB 198 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HOUSE BILL NO. 142                                                                                                            
                                                                                                                                
     "An  Act  relating  to the  creation  of  a  rebuttable                                                                    
     presumption that the project  licensed under the Alaska                                                                    
     Gasline  Inducement   Act  is  uneconomic   because  of                                                                    
     insufficient  firm  transportation  commitments  during                                                                    
     the first open season."                                                                                                    
                                                                                                                                
1:35:30 PM                                                                                                                    
                                                                                                                                
Co-Chair   Thomas   MOVED   to  ADOPT   proposed   committee                                                                    
substitute  for HB  142,  Work  Draft 27-LS0451\E.  Co-Chair                                                                    
Stoltze OBJECTED for purpose of discussion.                                                                                     
                                                                                                                                
RENA DELBRIDGE, STAFF, REPRESENTATIVE  MIKE HAWKER, spoke on                                                                    
behalf of the sponsor,  Speaker Mike Chenault. She discussed                                                                    
changes contained  in the  committee substitute.  Dates were                                                                    
changed to update the legislation to 2012:                                                                                      
                                                                                                                                
   · Page 11, Line 9: July 15, 2011, is changed to May                                                                          
     15,2012                                                                                                                    
   · Page 1, Line 12: Aug. 1,2011 is changed to May 30,                                                                         
     2012                                                                                                                       
   · Page 1, line 13: July 15, 2011 is changed to May                                                                           
     15,2012                                                                                                                    
   · Page 2, line 3: Aug. 15,2011, is changed to June                                                                           
     15,2011                                                                                                                    
   · Page 2, line 7: 2013 is changed to 2014                                                                                    
                                                                                                                                
Ms.  Delbridge  explained  that the  dates  corresponded  to                                                                    
deadlines contained in the legislation.                                                                                         
                                                                                                                                
Co-Chair  Stoltze  asked  if   there  were  any  substantive                                                                    
issues. Ms. Delbridge observed that  a year had passed since                                                                    
the  legislation was  introduced and  that the  sponsor felt                                                                    
that it was appropriate to  encourage a more timely process.                                                                    
Deadlines were  shortened by a  couple of months.  The first                                                                    
benchmark of July 15, 2012 was  changed to May 15, 2012. She                                                                    
pointed out that  the open season would have  been in effect                                                                    
for two years.                                                                                                                  
                                                                                                                                
Ms.  Delbridge   noted  that  throughout  the   bill,  "firm                                                                    
transportation commitments" were  changed to "commitments to                                                                    
acquire firm  transportation capacity".  Firm transportation                                                                    
commitments  were  not  the  expected  outcome  of  an  open                                                                    
season.   Instead  the   expected   outcome  was   precedent                                                                    
agreements  or  commitments  to  iron  out  conditions  that                                                                    
become firm  transportation capacity. The changes  were made                                                                    
in the title;  page 1, line 10;  page 1, line 12  - 13; page                                                                    
1, line 14; and page 2, line 10.                                                                                                
                                                                                                                                
Ms.  Delbridge observed  that  the last  change  was to  the                                                                    
standard  for  commitments  to acquire  firm  transportation                                                                    
commitments, which  had been  changed to  require sufficient                                                                    
commitments to  support development of the  project licensed                                                                    
by  the  Alaska  Gasline  Inducement  Act  (AGIA).  The  new                                                                    
standard replaced  "construction" with "development"  of the                                                                    
project. The  change was reflected  on page 1, line  10. The                                                                    
committee substitute  struck prior language  requiring those                                                                    
commitments to  be "sufficient  to support  the construction                                                                    
of the  project." The change  was also reflected on  page 2,                                                                    
line 9.  The word "credit"  was deleted; the project  had to                                                                    
have sufficient "support" and finance "development".                                                                            
                                                                                                                                
1:41:02 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
further  OBJECTION, committee  substitute for  HB 142,  Work                                                                    
Draft 27-LS0451\E was adopted.                                                                                                  
                                                                                                                                
HB  142  was  HEARD  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 118                                                                                                            
                                                                                                                                
     "An Act relating to a tax credit for corporate income                                                                      
     taxes paid for qualified research and development                                                                          
    expenditures; and providing for an effective date."                                                                         
                                                                                                                                
1:42:58 PM                                                                                                                    
                                                                                                                                
Co-Chair  Thomas   MOVED  to  ADOPT  a   proposed  committee                                                                    
substitute  for HB  118,  work  draft 27-GH1951\B.  Co-Chair                                                                    
Stoltze OBJECTED for purpose of discussion.                                                                                     
                                                                                                                                
JOE  MICHEL, STAFF,  REPRESENTATIVE BILL  STOLTZE, explained                                                                    
changes to  the proposed  committee substitute.  He observed                                                                    
that  there   were  two   changes  on   page  2,   line  11:                                                                    
"apportioned  to   this  state"  and  "AS   43.20.021"  were                                                                    
deleted; and "this title was inserted.                                                                                          
                                                                                                                                
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
further  OBJECTION,  proposed  committee substitute  for  HB                                                                    
118, work draft 27-GH1951\B was adopted.                                                                                        
                                                                                                                                
CURTIS THAYER, DEPUTY  COMMISSIONER, DEPARTMENT OF COMMERCE,                                                                    
COMMUNITY AND ECONOMIC DEVELOPMENT,  testified in support of                                                                    
HB 118.  He observed  that innovation  can be  an expensive,                                                                    
intricate and  time-intensive enterprise. But it  also could                                                                    
also  spark a  chain  of investments  in capital  equipment,                                                                    
workers, and spillover activities  in every economic sector.                                                                    
Nearly  40  other  states had  already  recognized  this  by                                                                    
establishing a  tax credit for  research and  development in                                                                    
addition to illustrated economic  benefits the credit brings                                                                    
to those states.  The tax credit also  brought a competitive                                                                    
benefit advantage over Alaska.                                                                                                  
                                                                                                                                
Mr. Thayer  observed that House  Bill 118 would  address the                                                                    
issue by establishing a 20  percent tax credit for qualified                                                                    
research  and  development   (R&D)  conducted  by  corporate                                                                    
taxpayer in Alaska. In effect,  the research and development                                                                    
tax  credit   would  stimulate   private-sector  investment,                                                                    
entrepreneurial  activity  and  business  expansion  in  the                                                                    
state  that would  bring opportunity  and sustainable  long-                                                                    
term benefits to the state's economy.                                                                                           
                                                                                                                                
Mr. Thayer  noted the  HB 118 tax  credit was  modeled after                                                                    
the  federal  R&D  established   in  1981  and  reauthorized                                                                    
fourteen times.  The credit  was reauthorized  through 2011.                                                                    
Legislation  was  introduced  to  make the  R&D  tax  credit                                                                    
permanent in order to help  companies create good jobs while                                                                    
growing future productivity.                                                                                                    
                                                                                                                                
Mr.  Thayer  explained  that  the  legislation  would  allow                                                                    
Alaskan corporations  to receive  a 20%  tax credit,  not to                                                                    
exceed $10 million per taxpayer,  per tax year. The research                                                                    
and   development  activities,   or  the   payroll  of   the                                                                    
employees, must  take place in Alaska.  To qualify, research                                                                    
and development activities must meet the following:                                                                             
                                                                                                                                
   · The purpose is discovering information technological                                                                       
     in nature;                                                                                                                 
   · The application of which is intended to be useful in                                                                       
     the development of a new or improved component of the                                                                      
     taxpayer;                                                                                                                  
   · Substantially all of the activities constitute a                                                                           
     process of experimentation; and                                                                                            
   · The experimentation is for a qualifying activity or                                                                        
     purpose.                                                                                                                   
                                                                                                                                
Mr. Thayer reviewed what would qualify:                                                                                         
                                                                                                                                
     •Developing new or improved products, processes, or                                                                        
     formulas;                                                                                                                  
     •Developing prototypes or models;                                                                                          
     •Building or improving manufacturing facilities;                                                                           
     •Developing or improving software technologies;                                                                            
     •Certification testing; and                                                                                                
     •Developing or applying for patents.                                                                                       
                                                                                                                                
Mr. Thayer reviewed what would not qualify:                                                                                     
                                                                                                                                
     •Exploration activity to ascertain the existence,                                                                          
     location, extent, or quality of any ore or mineral                                                                         
     deposit;                                                                                                                   
     •Duplicating an existing business component;                                                                               
     •Surveys and studies such as market research,                                                                              
     advertising, and routine data collection;                                                                                  
     •Research in the social sciences, arts, or humanities;                                                                     
     and                                                                                                                        
     •Anything for style, taste, cosmetic, or seasonal                                                                          
     reasons.                                                                                                                   
                                                                                                                                
1:48:13 PM                                                                                                                    
                                                                                                                                
Mr. Thayer gave  examples of the type of  credits that could                                                                    
occur. He  referred to seafood processing  waste disposal in                                                                    
fisheries.  The  EPA  had  restricted  processing  effluent.                                                                    
Research  was  needed  to   reduce  sediment  piles  through                                                                    
process   innovation,  increased   protein  and   by-product                                                                    
utilization.  Tax   credits  meant  research   conducted  in                                                                    
Alaska,  jobs, vendor  payments,  increased experience,  and                                                                    
capacity  building in  process  and  product innovation.  He                                                                    
observed that some  of the research was  being down out-side                                                                    
of the  state of  Alaska for fish  processing plants  in the                                                                    
state of Alaska.                                                                                                                
                                                                                                                                
Mr.  Thayer reviewed  potential  tax  credits for  minerals,                                                                    
rare  earth   deposit  processing.  There  was   a  need  to                                                                    
customize  the  process  for milling  and  recovery  to  use                                                                    
deposits to  the fullest potential. More  than 240 processes                                                                    
might be required  to reach all components in  a deposit. He                                                                    
observed the  work was being  done in Canada  and maintained                                                                    
it should be done in Alaska.                                                                                                    
                                                                                                                                
Mr.  Thayer spoke  to timber  for use  in architectural  and                                                                    
building industries.  To be specified for  many building and                                                                    
architectural  uses, species  must have  technical standards                                                                    
set for each product form.                                                                                                      
                                                                                                                                
Mr. Thayer observed that there were 38 states with a form                                                                       
of R&D tax credit or incentive available. He clarified that                                                                     
credits were not stackable against other industries such as                                                                     
oil and gas within the title of the legislation.                                                                                
                                                                                                                                
                                                                                                                                
1:50:08 PM                                                                                                                    
                                                                                                                                
ALAN JOHNSTON,  WEDBUSH SECURITIES, ANCHORAGE,  testified in                                                                    
support  of the  legislation. He  noted he  had been  in the                                                                    
investment   business  for   35  years   and  stressed   the                                                                    
importance of the legislation.  He emphasized the importance                                                                    
of raising aspirations that R&D could occur in Alaska.                                                                          
                                                                                                                                
1:51:44 PM                                                                                                                    
                                                                                                                                
DAN WHITE,  ASSOCIATE VICE CHANCELLOR,  RESEARCH, UNIVERSITY                                                                    
OF ALASKA,  FAIRBANKS, spoke in  support of  the legislation                                                                    
and  stressed   the  importance   of  moving   research  and                                                                    
development from the university into the private sector.                                                                        
moving  R&D to  the private  sector was  seen as  a critical                                                                    
element  of economic  development in  Alaska, especially  in                                                                    
engineering. Businesses would  gain competitive advantage in                                                                    
national and global markets  from applied research conducted                                                                    
and  licensed by  the University  of  Alaska, Fairbanks.  He                                                                    
concluded that HB 118 would  provide a significant incentive                                                                    
to business to take  advantage of emerging opportunities and                                                                    
contribute  to  the  university's mission.  The  legislation                                                                    
would build a bridge between  the university and the private                                                                    
sector  that would  lead to  job growth  and diversification                                                                    
for the state.                                                                                                                  
                                                                                                                                
1:53:38 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg noted  that seasonal  items would                                                                    
not apply  and pointed  out that  "seasonal" could  apply to                                                                    
agriculture,   fishing,  or   timber;  and   questioned  the                                                                    
definition.  Mr.  Thayer  offered to  provide  a  definition                                                                    
under  the  tax code.  Co-Chair  Stoltze  asked for  further                                                                    
clarification  regarding agricultural  seasonal definitions.                                                                    
Mr. Thayer  observed that agricultural items  would qualify.                                                                    
He pointed  out that the peony  market was a product  of the                                                                    
university's research.                                                                                                          
                                                                                                                                
1:57:03 PM                                                                                                                    
                                                                                                                                
Representative  Gara  recalled  concerns  that  state  money                                                                    
would not displace  federal funds. He asked  the federal tax                                                                    
rate. Mr.  Thayer explained businesses could  not claim both                                                                    
a state and federal tax credit on the same percentage.                                                                          
                                                                                                                                
Mr.  Thayer explained  that the  20 percent  tax credit  for                                                                    
qualified  research   and  development  that   exceeded  the                                                                    
average qualified  research and development  expenditures as                                                                    
defined in  26 U.S.C 41(d)  (Internal Revenue Code)  for the                                                                    
three  years immediately  preceding  the year  in which  the                                                                    
credit was claimed. Unused credits  might be carried forward                                                                    
for up  to seven years  after the expenditure for  which the                                                                    
credit  was  claimed.  In  order   to  prevent  a  corporate                                                                    
taxpayer from  claiming more than  one benefit for  a single                                                                    
expenditure,  the  bill would  also  provide  that a  credit                                                                    
could  not  be  claimed  for  expenditures  the  corporation                                                                    
deducted in calculating its tax  liability, or for any other                                                                    
credit,  including  any  federal   credits,  that  had  been                                                                    
apportioned  to  the state  and  claimed  under the  current                                                                    
Alaska Net Income Tax Act.                                                                                                      
                                                                                                                                
Representative Gara asked  what would occur in  a case where                                                                    
there  was a  22  percent  state credit  and  an 18  percent                                                                    
federal credit  and questioned  if the  state would  pay the                                                                    
extra  2 percent  or the  entire credit.  He reiterated  his                                                                    
request for the federal tax rate.                                                                                               
                                                                                                                                
1:59:19 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg  reiterated  his  question:  What                                                                    
agricultural products qualify that would not be seasonal.                                                                       
                                                                                                                                
BRUCE   TANGEMAN,   DEPUTY   COMMISSIONER,   TAX   DIVISION,                                                                    
DEPARTMENT  OF  REVENUE   (via  teleconference),  could  not                                                                    
respond but promised to provide the information.                                                                                
                                                                                                                                
Representative Gara  asked the  federal tax  rate and  if it                                                                    
would be  replaced with state  credits. Mr.  Tangeman stated                                                                    
he would provide the information.                                                                                               
                                                                                                                                
Co-Chair Stoltze  noted the bill  would be held in  order to                                                                    
allow the Department of Revenue  time to research answers to                                                                    
the member's questions.                                                                                                         
                                                                                                                                
2:01:17 PM                                                                                                                    
                                                                                                                                
Representative  Gara concluded  that  businesses could  take                                                                    
the state  or federal tax  credit and restated  his previous                                                                    
scenario. He thought  the state would pay the  entire tax if                                                                    
its tax credit was higher than the federal rate.                                                                                
                                                                                                                                
Representative   Gara  noted   a  comprehensive   system  of                                                                    
deductions  and   credits  under  43.55  oil   and  gas  tax                                                                    
established  under   Alaska's  Clear  and   Equitable  Share                                                                    
(ACES).  He did  not see  the prohibition  for adding  these                                                                    
credits to  the proposed R&D  tax credit. He  wanted further                                                                    
assurance that  the tax  could not be  taken in  addition to                                                                    
the ACES credit.                                                                                                                
                                                                                                                                
2:03:00 PM                                                                                                                    
                                                                                                                                
Representative Neuman  asked equipment and  facilities would                                                                    
be allowed  if they supported  a new product  or technology.                                                                    
Mr. Thayer  affirmed that they  would be covered as  long as                                                                    
the business  was a taxpayer to  the state of Alaska  and it                                                                    
supported new  technology to bring  something to  market; it                                                                    
would qualify if  it had not been done  before. He clarified                                                                    
the  credit  would  apply for  developing  and  proving  the                                                                    
technologies   or   building  or   improving   manufacturing                                                                    
facilities to add or enhance a product.                                                                                         
                                                                                                                                
2:05:08 PM                                                                                                                    
                                                                                                                                
Vice-chair Fairclough  observed that  page 2  lines 5  and 6                                                                    
provided  for a  seven-year credit  carry forward  and asked                                                                    
why a past  tax liability would be allowed  for seven years.                                                                    
Mr. Thayer  explained that the  provision was  modeled after                                                                    
federal tax legislation.                                                                                                        
                                                                                                                                
Vice-chair  Fairclough  referred  to  page 2,  line  9.  She                                                                    
shared concerns that  the state deduction would  be taken in                                                                    
lieu of another deduction  [federal] and questioned if there                                                                    
should  be  a  requirement  to   go  forward  on  the  other                                                                    
deduction.                                                                                                                      
                                                                                                                                
Vice-chair  Fairclough  observed  the  national  and  global                                                                    
recession  and questioned  what other  states were  doing in                                                                    
terms of R&D tax credits.                                                                                                       
                                                                                                                                
2:07:09 PM                                                                                                                    
                                                                                                                                
Representative Gara referred to subsections (c) and (d) on                                                                      
page 2:                                                                                                                         
                                                                                                                                
     (c) If  the tax credit  under this section  exceeds the                                                                    
     taxpayer's tax  liability after  other tax  credits are                                                                    
     taken  under this  chapter for  the year  in which  the                                                                    
     expenditure is  incurred, the excess of  the tax credit                                                                    
     over the  liability may  be carried  forward for  up to                                                                    
     seven years. If an unused  credit is carried forward to                                                                    
     a tax year from an  earlier year, the credit arising in                                                                    
     the earliest year is applied first against the tax                                                                         
     liability for the year.                                                                                                    
                                                                                                                                
     (d) A person may not  claim a credit under this section                                                                    
     for  qualified  research and  development  expenditures                                                                    
     that were deducted in the  calculation of tax liability                                                                    
     under AS  43.20.011(e) or for  which any  other credit,                                                                    
     including any  federal credit, has been  apportioned to                                                                    
     this state and claimed under AS 43.20.021.                                                                                 
                                                                                                                                
Representative   Gara  thought   that  the   above  sections                                                                    
conflicted. He  thought that they implied  that credits were                                                                    
stackable  to 100  percent. Mr.  Thayer  responded that  the                                                                    
committee  substitute would  effectively prohibit  stacking.                                                                    
He  maintained that  the  legislation  prohibited a  company                                                                    
from claiming  R&D tax credits against  corporate income tax                                                                    
if  the expense  used in  calculating  the R&D  was used  to                                                                    
claim a credit against taxes  due on other types under Title                                                                    
43.  Testimony  in  previous   committees  during  the  2011                                                                    
session  expressed concern  that a  company subject  to both                                                                    
corporate income  tax and oil  and gas production  tax could                                                                    
receive a  credit against both  taxes for the  same expense.                                                                    
The  committee substitute  assured  that  the company  could                                                                    
only take a credit against one tax type for those expenses.                                                                     
                                                                                                                                
Representative  Gara  reiterated  his concerns.  Mr.  Thayer                                                                    
noted that  an oil  company or subsidiary  that does  R&D on                                                                    
heavy or  viscous retrieval would  qualify as long  as there                                                                    
was  no other  tax  credit received;  the  credit would  not                                                                    
apply once production was begun.                                                                                                
                                                                                                                                
2:09:23 PM                                                                                                                    
                                                                                                                                
Representative Gara  provided a scenario based  on a company                                                                    
invested in  heavy oil technology that  received a deduction                                                                    
of their tax  rate, which could be 40  percent. He suggested                                                                    
that  the legislation  would not  prevent  the company  from                                                                    
getting a tax credit on top of the deduction.                                                                                   
                                                                                                                                
Mr. Thayer  reiterated that the  legislation refers  back to                                                                    
the bill title, which indicated  that credits would only pay                                                                    
for  qualified  research  and development  expenditures.  He                                                                    
maintained that they could not take both.                                                                                       
                                                                                                                                
Representative  Gara argued  that the  legislation spoke  to                                                                    
tax credits not  deducts, which were separate  under the oil                                                                    
and gas [tax] code.                                                                                                             
                                                                                                                                
Mr. Tangeman  clarified that it could  not be used as  a tax                                                                    
credit  if  it were  used  as  a  deduction and  pointed  to                                                                    
Section (d), page 2, line 8:                                                                                                    
                                                                                                                                
     A person may not claim  a credit under this section for                                                                    
     qualified  research and  development expenditures  that                                                                    
     were  deducted  in  the calculation  of  tax  liability                                                                  
     under AS 43.20.011(e).                                                                                                     
                                                                                                                                
2:11:24 PM                                                                                                                    
                                                                                                                                
Representative Gara  agreed with  the intent but  noted that                                                                    
AS  43.20.011(e)   referred  to   the  nine   percent  state                                                                    
corporate tax,  not the oil  and gas tax. Mr.  Tangeman felt                                                                    
that Section  (d) was clear  and maintained that  the intent                                                                    
was not to allow  stacking. Representative Gara suggested an                                                                    
amendment  was  needed  for clarification  that  the  credit                                                                    
could not be  stacked on credits and  deductions taken under                                                                    
AS 43.55, oil and gas tax.                                                                                                      
                                                                                                                                
2:13:22 PM                                                                                                                    
                                                                                                                                
Representative  Neuman asked  what discussions  had occurred                                                                    
regarding  transferable  and  non-transferable  credits.  He                                                                    
observed that  transfers had been enacted  to assist smaller                                                                    
companies  with  working  capital. He  recognized  that  the                                                                    
state  was  still  "on  the   hook"  for  100  percent,  but                                                                    
suggested they be transferrable.                                                                                                
                                                                                                                                
Mr. Thayer  noted that only  the film incentive  program had                                                                    
transferrable  tax credits.  He observed  issues surrounding                                                                    
how  credits  would  be   transferred  and  evaluated.  Film                                                                    
industry  tax credits  sell  between  80 to  90  cents on  a                                                                    
dollar. Smaller companies would not  have a tax liability to                                                                    
the  state. The  credit would  be aimed  at large  companies                                                                    
that had the ability to do a lot of R&D in the state.                                                                           
                                                                                                                                
Mr.  Tangeman  agreed   that  the  intent  was   not  to  be                                                                    
transferable  and  the  seven  year  provision  would  allow                                                                    
smaller  corporations  to  have  time  to  realize  the  tax                                                                    
liability.                                                                                                                      
                                                                                                                                
Co-Chair Stoltze closed public testimony.                                                                                       
                                                                                                                                
HB  118  was  HEARD  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:17:41 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:25:42 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
2:26:09 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 198                                                                                                            
                                                                                                                                
     "An Act relating to the special education service                                                                          
     agency."                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ALAN  DICK,   CHAIR,  SPECIAL  COMMITTEE  ON                                                                    
EDUCATION, testified in support of  HB 198. He observed that                                                                    
House  Bill  198  would  remove  a  sunset  requirement  and                                                                    
increase  state funding  for the  Special Education  Service                                                                    
Agency  (SESA),  which  was  a  not-for-profit  organization                                                                    
established  in  statute  in  1986.  The  Special  Education                                                                    
Service  Agency was  governed by  the Governor's  Council on                                                                    
Disabilities and  Special Education and its  own independent                                                                    
board of directors.                                                                                                             
                                                                                                                                
Representative  Dick noted  that  sometimes districts  could                                                                    
not   fully   serve    students   that   had   low-incidence                                                                    
disabilities  with existing  personnel and  resources. House                                                                    
Bill 198  would incorporate the recommendations  of the most                                                                    
recent  legislative audit,  completed in  2007. The  Special                                                                    
Education Service Agency assisted  local school districts to                                                                    
provide needed  special education  services. House  Bill 198                                                                    
would  repeal  the  sunset  requirement  and  increase  SESA                                                                    
funding.                                                                                                                        
                                                                                                                                
Representative  Dick   noted  that  the   Special  Education                                                                    
Service  Agency received  state support  based on  a funding                                                                    
formula  adopted  in 1998.    Each  year the  Department  of                                                                    
Education and  Early Development allocated to  SESA not less                                                                    
than  $15.75,  times  the   number  of  students  statewide.                                                                    
Although local  school districts  had received  increases in                                                                    
state funding since  1998, SESA had not.  Under  HB 198, the                                                                    
multiplier  would increase  as the  base student  allocation                                                                    
increases.    Currently  the   computation  (.4  percent  of                                                                    
$5,680) equaled  $22.72 which  would approximate  the impact                                                                    
of  inflation  from  1998  to 2011.  He  observed  that  the                                                                    
Committee did not change the provision.                                                                                         
                                                                                                                                
The Special  Education Service Agency  was set to  expire on                                                                    
June  30, 2013.   During  previous performance  audits, both                                                                    
the  Department of  Education  and  the Legislative  Auditor                                                                    
recommended removing  SESA from  the sunset process.   House                                                                    
Bill 198 would repeal the  sunset requirement and thus allow                                                                    
SESA to  plan long-term  and have  adequate funding  to meet                                                                    
special needs of special children.                                                                                              
                                                                                                                                
2:29:51 PM                                                                                                                    
                                                                                                                                
MILLIE  RYAN,  EXECUTIVE  DIRECTOR,  GOVERNOR'S  COUNCIL  ON                                                                    
DISABILITIES AND SPECIAL EDUCATION,  testified in support of                                                                    
HB  198. She  observed  that the  council's  mission was  to                                                                    
improve  the  lives  of people  with  disabilities  and  the                                                                    
quality   of    education   provided   to    students   with                                                                    
disabilities. The council consisted  of 27 members appointed                                                                    
by  the   governor.  Sixty  percent  of   the  members  were                                                                    
individuals with  disabilities or parents or  family members                                                                    
of  people  with  disabilities.   There  were  state  agency                                                                    
representatives from  the Department of Education  and Early                                                                    
Development,   Division    of   Vocational   Rehabilitation,                                                                    
Department  of   Health  and  Social  Services;   and  other                                                                    
representatives designated in federal law.                                                                                      
                                                                                                                                
Ms. Ryan  noted that  the council had  five responsibilities                                                                    
in statute.  Five Council members  serve on the  SESA board.                                                                    
There  were  representatives  from:  school  administrators,                                                                    
special   education   administrators,   and   the   National                                                                    
Educational  Association.  The  special  education  director                                                                    
from the  Department of Education and  Early Development and                                                                    
Ms. Ryan were ex-official members.                                                                                              
                                                                                                                                
2:32:33 PM                                                                                                                    
                                                                                                                                
Ms. Ryan  noted that  the job  of board  was to  assure SESA                                                                    
provided   assistance   to   school  districts   and   early                                                                    
intervention  programs serving  students with  low incidence                                                                    
disabilities,  particularly those  who  lived  in rural  and                                                                    
remote areas of the state.  The board also assured that SESA                                                                    
supported education that was  student, family and community-                                                                    
centered and met the individual  needs of students; assisted                                                                    
SESA   in  addressing   other  state   education  needs   of                                                                    
individuals  with low  incidence  disabilities, as  external                                                                    
funding  was  obtained;  and  monitored  SESA  policies  and                                                                    
procedures.                                                                                                                     
                                                                                                                                
Ms. Ryan  observed that SESA  was established in 1986,  as a                                                                    
not-for-profit  corporation  that  operated under  a  sunset                                                                    
provision.  She  noted  that  SESA  received  Low  Incidence                                                                    
Disabilities (LID) funding from  the Department of Education                                                                    
and Early Development based on  prior year's statewide total                                                                    
enrollment and federal and state grants and contracts.                                                                          
                                                                                                                                
2:33:45 PM                                                                                                                    
                                                                                                                                
Representative Wilson referred to  LID funding. She asked if                                                                    
funding was  based on all  students that were  designated as                                                                    
special education students. Ms.  Ryan explained that funding                                                                    
was based on the entire student  count not just the count of                                                                    
special education students.                                                                                                     
                                                                                                                                
Ms. Ryan  pointed out that required  services were itinerant                                                                    
outreach  services to  students who  were deaf;  deaf-blind;                                                                    
cognitively impaired; hearing  impaired; blind and visually,                                                                    
orthopedically disabled,  multiple disabilities,  or autism.                                                                    
She  noted that  these disabilities  tended to  be uncommon.                                                                    
Special education instruction support  and training of local                                                                    
school district personnel were provided  to both special and                                                                    
regular  education  staff.  Other  services  appropriate  to                                                                    
special education needs were also provided.                                                                                     
                                                                                                                                
2:35:13 PM                                                                                                                    
                                                                                                                                
Ms. Ryan  spoke to  the funding formula  set in  1998, which                                                                    
was  $15.75 times  the number  of students  in the  state in                                                                    
average daily membership in the preceding fiscal year.                                                                          
                                                                                                                                
Ms.  Ryan observed  that the  recommended change  in funding                                                                    
formula for SESA was 0.40%  of the current year base student                                                                    
allocation  (BSA) X  total  average  daily membership  (ADM)                                                                    
from previous  year. She explained  that the  increase would                                                                    
catch SESA up  in terms of inflation. The  formula would tie                                                                    
SESA funding to the BSA.  The sunset provision would also be                                                                    
removed.                                                                                                                        
                                                                                                                                
Ms. Ryan  explained that  the funding  formula for  SESA was                                                                    
based on  a fixed  student allocation that  was set  in 1998                                                                    
and  did not  keep up  with inflation.  She emphasized  that                                                                    
SESA  specialists traveled  frequently to  rural Alaska  and                                                                    
travel expenses were rising. In  FY 2013, SESA would receive                                                                    
less money  than it  did 10  years ago;  SESA's BSA  did not                                                                    
change  when school  district's BSA  changed. If  SESA's BSA                                                                    
had  changed at  the same  time,  its rate  would be  $22.71                                                                    
instead of $15.75.                                                                                                              
                                                                                                                                
2:36:51 PM                                                                                                                    
                                                                                                                                
Ms. Ryan observed  that the 2007 audit  recommended that the                                                                    
statutory  funding  formula  be  reevaluated  based  on  the                                                                    
effects  of  inflation  and increased  employee  costs.  The                                                                    
interim commissioner  of Department  of Education  and Early                                                                    
Development  concurred with  the audit's  recommendations at                                                                    
the time of the audit.                                                                                                          
                                                                                                                                
Co-Chair   Stoltze   asked   the   position   of   the   new                                                                    
commissioner. Ms. Ryan stated  that the new commissioner was                                                                    
non-committal.                                                                                                                  
                                                                                                                                
2:38:04 PM                                                                                                                    
                                                                                                                                
Ms. Ryan observed  that in response to the  last audit, SESA                                                                    
successfully  secured additional  grants and  contracts that                                                                    
fit with  its mission.  "Soft" money dedicated  for specific                                                                    
purposes in 2011  comprised 45% of SESA's  budget; there was                                                                    
a $236,000 contribution  to overhead. As a  result, SESA was                                                                    
able to  fund 3 positions  for the LID program.  She pointed                                                                    
out that specialists that consult  with districts would have                                                                    
to  be reduced  if the  "soft" money  did not  continue. She                                                                    
concluded  that  SESA  had   increased  grant  funding  over                                                                    
previous years.                                                                                                                 
                                                                                                                                
2:38:46 PM                                                                                                                    
                                                                                                                                
Ms.  Ryan reiterated  that SESA  had already  had difficulty                                                                    
meeting  its statutorily  mandated  duties. If  there was  a                                                                    
reduction  in  grants  and  contracts  the  situation  would                                                                    
worsen and negatively impact students and school districts.                                                                     
                                                                                                                                
Ms.  Ryan  emphasized  that  SESA  brought  the  ability  to                                                                    
provide  evidence-based  strategies   to  school  districts,                                                                    
which would be decreased without  funding. A lack of funding                                                                    
would result in fewer and shorter on-site visits.                                                                               
                                                                                                                                
Ms. Ryan  stressed the  importance of  SESA for  new special                                                                    
education teachers  and to  classroom teachers  working with                                                                    
students who have unique, low-incidence disabilities.                                                                           
                                                                                                                                
2:40:14 PM                                                                                                                    
                                                                                                                                
Representative Wilson  spoke to mentoring and  observed that                                                                    
the Department  of Education  and Early  Development already                                                                    
mentors first  and second year teachers  and suggested there                                                                    
was a duplication of service.                                                                                                   
                                                                                                                                
P.J, FORD  SLACK, PH.D,  BOARD PRESIDENT,  SPECIAL EDUCATION                                                                    
SERVICE AGENCY, observed that she  was also the principal at                                                                    
Sitka  High  School and  the  former  superintendent of  the                                                                    
Delta  Greely  School  District.   She  responded  that  the                                                                    
mentorship   program  did   not  mentor   special  education                                                                    
teachers or specialists while she  was at Delta Greely. Only                                                                    
core academic areas were mentored.                                                                                              
                                                                                                                                
Representative   Wilson   argued  that   special   education                                                                    
teachers were  included in the  Department of  Education and                                                                    
Early Development's  mentoring programs  and asked  for more                                                                    
data.                                                                                                                           
                                                                                                                                
PATRICK  PILLAI,   EXECUTIVE  DIRECTOR,   SPECIAL  EDUCATION                                                                    
SERVICE AGENCY (SESA), added that  a lot of the new teaching                                                                    
mentoring  was  done to  bring  teachers  into the  teaching                                                                    
environment    for   strategies,    while   SESA    provided                                                                    
professional development in special  education that might be                                                                    
specific  to a  particular  syndrome. He  observed that  new                                                                    
teachers  might  have  only taken  one  generic  class.  The                                                                    
professional development provided by  SESA was for classroom                                                                    
strategies  and on-going  professional  development for  the                                                                    
general school body.                                                                                                            
                                                                                                                                
2:42:27 PM                                                                                                                    
                                                                                                                                
Representative   Wilson  suggested   there   needed  to   be                                                                    
discussion with  the university and Department  of Education                                                                    
and  Early  Development  if  there  were  special  education                                                                    
teachers without a special education degree.                                                                                    
                                                                                                                                
Ms. Ryan  explained that a  special education  teacher could                                                                    
have  a general  background, but  SESA provided  specialized                                                                    
services.                                                                                                                       
                                                                                                                                
Representative  Gara  summarized  that urban  districts  had                                                                    
their own  special education expertise  and SESA  focused on                                                                    
smaller districts.  Ms. Ryan  agreed that  the focus  was on                                                                    
rural districts  and pointed out  that Anchorage  and larger                                                                    
districts  had  the expertise  to  work  with special  needs                                                                    
students.  She   added  that   SESA  provided   support  and                                                                    
information to all school districts.                                                                                            
                                                                                                                                
Representative  Gara stressed  the  common  goal to  provide                                                                    
needed services in the most  sufficient manner. He asked how                                                                    
many students SESA  served. Mr. Pillai noted  there were 354                                                                    
LID  students.  He added  that  SESA  also worked  with  the                                                                    
general education  staff and peers that  interact with those                                                                    
students through training.                                                                                                      
                                                                                                                                
Representative Gara  asked the per student  dollar cost. Mr.                                                                    
Pillai agreed  to provide the information.  He stressed that                                                                    
services were provided to more than just the students.                                                                          
                                                                                                                                
2:45:52 PM                                                                                                                    
                                                                                                                                
Representative   Costello  observed   that  the   foundation                                                                    
formula  based  on   student  attendance  was  approximately                                                                    
$5,682  per   student.  The  LID   program  was   a  general                                                                    
percentage of total student population.                                                                                         
                                                                                                                                
Mr. Pillai clarified  that the child count was  the count of                                                                    
special  education  students.  The  calculation  was  $15.75                                                                    
times the ADM,  which was not tied to  BSA. School districts                                                                    
were functioning  at 5 percent  of the consumer  price index                                                                    
(CPI), while SESA was 30 percent below the CPI.                                                                                 
                                                                                                                                
Representative Costello  concluded that  the rate  was based                                                                    
on total student population based on a historical number.                                                                       
                                                                                                                                
Mr. Ryan clarified that the  number of children was similar,                                                                    
but  funding  was tied  to  all  the children  receiving  an                                                                    
education in  the state and  was a flat rate.  She explained                                                                    
that  SESA  funding would  decrease  with  the child  count;                                                                    
unlike school districts  whose funding was tied  to the BSA.                                                                    
The  legislation   would  tie  SESA  funding   to  the  BSA.                                                                    
Districts refer children to SESA.                                                                                               
                                                                                                                                
2:49:33 PM                                                                                                                    
                                                                                                                                
Representative  Costello noted  the  program was  set up  to                                                                    
primarily  help rural  students.  She  referred to  children                                                                    
with  autism enrolled  in  Anchorage.  Mr. Pillai  clarified                                                                    
that  while  larger  districts  tended  to  have  their  own                                                                    
specialists; SESA provides training for larger districts.                                                                       
                                                                                                                                
Representative Costello questioned how  funding for SESA fit                                                                    
with  other  state needs  and  why  the  request was  for  a                                                                    
percentage instead of a dollar amount increase.                                                                                 
                                                                                                                                
Mr.  Pillai  stressed  the   difficulty  of  recruiting  and                                                                    
maintaining staff  at the  current funding  level. Multiple-                                                                    
disability  specialists  were  reduced from  five  to  three                                                                    
through  attrition. New  recruits did  not receive  the same                                                                    
level  of   wage  or  benefits  as   those  being  replaced.                                                                    
Competition    with   other    school   entities    affected                                                                    
recruitment;  there was  a  40  percent discrepancy  between                                                                    
SESA and the Anchorage School District.                                                                                         
                                                                                                                                
Mr. Pillai  spoke to  the demand for  services. The  ADM was                                                                    
dropping, but  the LID numbers  and the number  of referrals                                                                    
from rural  Alaska had increased.  Some districts had  up to                                                                    
eight  or nine  students  with autism.  Extra funding  would                                                                    
allow  more  specialists  to be  hired  and  improve  salary                                                                    
scales for retention.                                                                                                           
                                                                                                                                
2:53:31 PM                                                                                                                    
                                                                                                                                
Representative Costello asked the  turnover rate. Mr. Pillai                                                                    
observed that there  was a low turnover rate  for many years                                                                    
due to retirement incentives, but  six employees had left in                                                                    
the previous  year. He  noted difficulties  with recruitment                                                                    
due to salary and the high degree of specialty needed.                                                                          
                                                                                                                                
2:54:53 PM                                                                                                                    
                                                                                                                                
Ms.  Ryan spoke  to the  sunset provision.  The 2007,  audit                                                                    
found  that:  SESA  performed   a  valuable,  effective  and                                                                    
efficient service  to school districts  that they  could not                                                                    
provide themselves  because of  the nature of  low incidence                                                                    
disabilities;  students  were able  to  be  served in  their                                                                    
local  communities;  and  SESA did  not  duplicate  services                                                                    
provided by the Department  of Education & Early Development                                                                    
or local school districts.  The audit recommended removal of                                                                    
the sunset.  She observed that  another audit  was underway,                                                                    
which added  to the  difficulty of recruiting  and retaining                                                                    
qualified staff.                                                                                                                
                                                                                                                                
2:55:53 PM                                                                                                                    
                                                                                                                                
Vice-chair  Fairclough  asked  if   the  student  count  was                                                                    
breakdown by region. She asked  if there was a concentration                                                                    
in specific  school districts. Mr.  Pillai observed  that 54                                                                    
school districts  were served. Almost every  school district                                                                    
was   served,  but   there  were   cloisters  in   different                                                                    
districts. Some  districts had eight to  ten students, while                                                                    
others  had one  or two.  There  was a  referral process  in                                                                    
place.  Vice-chair  Fairclough  reiterated that  she  wanted                                                                    
student service numbers.                                                                                                        
                                                                                                                                
Vice-chair Fairclough  asked for  a copy  of the  2007 audit                                                                    
and  expressed   concerned  about   the  fiscal   note.  She                                                                    
suggested that the  fiscal note did not  adequately show the                                                                    
cost of  continuing the program.  She requested  a breakdown                                                                    
of administrative  costs and the  cost of  Public Employees'                                                                    
Retirement  System (PERS)  and  Teachers' Retirement  System                                                                    
(TRS) prior to servicing students.                                                                                              
                                                                                                                                
2:58:55 PM                                                                                                                    
                                                                                                                                
Co-Chair  Thomas  observed that  he  had  not heard  of  the                                                                    
program and  spoke against the sunset.  He expressed concern                                                                    
that   money  had   been  given   several  years   prior  to                                                                    
disadvantaged  children  and  wondered whether  the  program                                                                    
would serve the same children twice.                                                                                            
                                                                                                                                
Vice-chair  Fairclough discussed  the  district cost  factor                                                                    
increment  increases, which  were currently  in their  final                                                                    
year.  She  thought  that   additional  resources  had  been                                                                    
appropriated  toward  disabilities   and  wondered  how  the                                                                    
programs  worked  together.  She asked  for  an  explanation                                                                    
about  how the  program provided  unique opportunities  that                                                                    
were not  covered by the  Department of Education  and Early                                                                    
Development.                                                                                                                    
                                                                                                                                
3:02:19 PM                                                                                                                    
                                                                                                                                
Mr.  Pillai, in  response  to a  question by  Representative                                                                    
Neuman,  explained that  intensive funding  was provided  to                                                                    
schools for special education; SESA  was more in the role of                                                                    
providing  onsite  professional   development  for  teachers                                                                    
based  on the  referral process.  School districts  referred                                                                    
students to SESA for services.                                                                                                  
                                                                                                                                
Representative  Neuman   expressed  concern  on   behalf  of                                                                    
smaller  school  districts  and requested  a  follow  up  on                                                                    
costs.                                                                                                                          
                                                                                                                                
MARCY  HERMAN, SPECIAL  ASSISTANT,  DEPARTMENT OF  EDUCATION                                                                    
AND EARLY DEVELOPMENT,  testified in support of  SESA with a                                                                    
sunset  and  offered   that  Michael  Hanley,  Commissioner,                                                                    
Department  of  Education  and Early  Development  would  be                                                                    
happy to attend the next hearing.                                                                                               
                                                                                                                                
Ms.   Herman   replied   to   an   earlier   question   from                                                                    
Representative  Wilson  and  explained that  there  were  36                                                                    
special  education  teachers   being  mentored  through  the                                                                    
mentoring program.                                                                                                              
                                                                                                                                
LARAINE  ADANS, DIRECTOR  OF  SOCIAL  SERVICES, LOWER  YUKON                                                                    
SCHOOL  DISTRICT,  MOUNTAIN  VILLAGE  (via  teleconference),                                                                    
spoke  in support  of continued  funding  through SESA.  She                                                                    
observed  that  the 11  villages  in  the district  were  in                                                                    
strong support of the legislation.                                                                                              
                                                                                                                                
DR. CASSIE  WELLS, DIRECTOR,  STUDENT SERVICES,  NORTH SLOPE                                                                    
BOROUGH SCHOOL DISTRICT,  BARROW (via teleconference), spoke                                                                    
in strong support of SESA  and the elimination of the sunset                                                                    
clause.   She   emphasized   that  SESA   provided   on-site                                                                    
specialized  programing and  training  for  those that  work                                                                    
with the  students with  the most  significant disabilities,                                                                    
particularly in rural and remote areas.                                                                                         
                                                                                                                                
Co-Chair Stoltze  noted that  HB 198  would remain  open for                                                                    
additional public testimony.                                                                                                    
                                                                                                                                
HB  198  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
AT EASE                                                                                                                         
3:08:29 PM                                                                                                                    
                                                                                                                                
3:08:52 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
3:13:48 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 180                                                                                                            
                                                                                                                                
     "An  Act authorizing  the Department  of Administration                                                                    
     to note a person's status  as a veteran on the person's                                                                    
     driver's license and to  provide certain information to                                                                    
    the Department of Military and Veterans' Affairs."                                                                          
                                                                                                                                
Co-Chair   Thomas   MOVED   to  ADOPT   proposed   committee                                                                    
substitute for  HB 180, Work Draft  27-LS0589\T, (Luckhaupt,                                                                    
2/6/12).   Co-Chair   Stoltze   OBJECTED  for   purpose   of                                                                    
discussion.                                                                                                                     
                                                                                                                                
REPRESENTATIVE DAN SADDLER, SPONSOR, spoke in support of                                                                        
House Bill 180. He read the sponsor statement:                                                                                  
                                                                                                                                
     House Bill  180 seeks  to help Alaska  veterans receive                                                                    
     more  of the  benefits they  have earned  through their                                                                    
     sacrifice  and service  in uniform,  and to  which they                                                                    
     were entitled  by law  and custom.  It would  allow the                                                                    
     Division of Motor Vehicles (DMV)  to add information to                                                                    
     state   drivers'  licenses   or  identification   cards                                                                    
     signifying the holder's status as  a veteran, and would                                                                    
     allow DMV  to share  that information with  the state's                                                                    
     veterans benefit office.                                                                                                   
                                                                                                                                
     Alaska  is among  the most  veteran-friendly states  in                                                                    
     the   Union.   Many    businesses   and   organizations                                                                    
     demonstrate  their  appreciation  by  offering  various                                                                    
     discounts, preferences and other  benefits to bona fide                                                                    
     veterans.  However, veterans  must  usually prove  they                                                                    
     qualify  by   presenting  certified  copies   of  their                                                                    
     discharge  documents -  the DD-214,  DD-215, or  NGB-22                                                                    
     forms,  exposing  these  critical  documents  to  wear,                                                                    
     damage or loss.                                                                                                            
                                                                                                                                
     By  giving  veterans  a  way   to  carry  reliable  and                                                                    
     convenient  proof  of   their  status  on  state-issued                                                                    
     cards, this bill would help  them more easily enjoy the                                                                    
     full range  of personal,  business and  social benefits                                                                    
     offered to them by a grateful state.                                                                                       
                                                                                                                                
     HB 180 could  also help relieve the  situation in which                                                                    
     tens  of thousands  of Alaska  veterans may  be missing                                                                    
     out  on significant  government benefits,  because they                                                                    
     have  no contact  with the  state's Office  of Veterans                                                                    
     Affairs. The  bill would allow  the DMV to  provide the                                                                    
     names and  addresses of those who  were issued veteran-                                                                    
     designated driver's  licenses or ID cards  to the state                                                                    
     veterans' office.  That office could then  reach out to                                                                    
     make  more  veterans  aware of  programs  available  to                                                                    
     them, and  to help  them receive  any benefits  owed to                                                                    
     them.                                                                                                                      
                                                                                                                                
Representative Saddler outlined changes from CSHB 180 (STA)                                                                     
to version X:                                                                                                                   
                                                                                                                                
   · Page  1, line 9:                                                                                                           
     Adds  "at  the  request  of  the  person"  before  "The                                                                    
     department shall…"  This would  allow for  the veterans                                                                    
     opt-in  provision for  information  to go  to the  U.S.                                                                    
     Office of Veterans Affairs for identification cards.                                                                       
                                                                                                                                
   · Page 2, line 1 :                                                                                                           
     Adds  "with the  approval  of the  person" before  "The                                                                    
     department shall…"  This would  allow for  the veterans                                                                    
     opt  in provision  for information  to go  to the  U.S.                                                                    
     Office of Veterans Affairs for the driver's license.                                                                       
                                                                                                                                
   · Page 2 line 8 :                                                                                                            
     Adds  "at  the  request  of  the  person"  before  "the                                                                    
     department shall…"                                                                                                         
                                                                                                                                
   · Page 2, Lines 16-19:                                                                                                       
                                                                                                                                
     Adds language  allowing for a  $5 fee for  the driver's                                                                    
     license  replacement  with   the  veteran  designation,                                                                    
     which  is a  change from  a $15  replacement fee.  This                                                                    
     would   cover   the    department's   expense   without                                                                    
     additional revenue.                                                                                                        
                                                                                                                                
   · Page 2, Lines 13-14:                                                                                                       
                                                                                                                                
     Adds "with the approval  of the applicant" and provides                                                                    
     that  the department  "shall make  available" [provide]                                                                    
     the name  and address…" This makes  sending information                                                                    
     from the Division of Motor  Vehicles to the U.S. Office                                                                    
     of Veterans Affairs for the opt-in provision.                                                                              
                                                                                                                                
   · Page 2, Line 20: changes effective date from 2012 to                                                                       
     "2013".                                                                                                                    
                                                                                                                                
3:17:51 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO                                                                         
further OBJECTION, committee substitute for HB 180, Work                                                                        
Draft 27-LS0589\T, (Luckhaupt, 2/6/12) was adopted.                                                                             
                                                                                                                                
3:18:50 PM                                                                                                                    
                                                                                                                                
RON SIEBELS,  MILITARY ORDER OF THE  PURPLE HEART, ANCHORAGE                                                                    
(via   teleconference),   testified   in  support   of   the                                                                    
legislation.  He stressed  the benefits  of the  legislation                                                                    
and the importance the state recognition of veterans.                                                                           
                                                                                                                                
CHRIS  NELSON, MULDOON  (via  teleconference), testified  in                                                                    
support  of HB  180.  He noted  the  high unemployment  rate                                                                    
among recently returned veterans,  which was higher than the                                                                    
national    unemployment    rate.    Several    governmental                                                                    
jurisdictions were  instituting veterans'  hiring preference                                                                    
along with  unions and private employers  that were actively                                                                    
recruiting  veterans. He  stressed  the  importance of  easy                                                                    
identification and  noted that the service  discharge papers                                                                    
were cumbersome  and included  more information  than needed                                                                    
by an employer.                                                                                                                 
                                                                                                                                
3:21:04 PM                                                                                                                    
                                                                                                                                
Co-Chair Thomas  questioned where  the designation  would be                                                                    
on  the license  and  suggested an  American  flag could  be                                                                    
added to the background.                                                                                                        
                                                                                                                                
RIC  DAVIDGE, PRESIDENT,  VIETNAM VETERANS  OF AMERICA  (via                                                                    
teleconference),  testified   in  support  of  HB   180.  He                                                                    
stressed that  the identification of veterans  on state ID's                                                                    
was a  national priority.  He stressed  the need  to contact                                                                    
veterans  in regards  to medical  conditions. He  pointed to                                                                    
congressional directives to seek  out veterans for services.                                                                    
The legislation would  also allow a uniform  ID for veterans                                                                    
to   obtain  services   for  disabilities,   discounts,  and                                                                    
employment applications.                                                                                                        
                                                                                                                                
3:24:52 PM                                                                                                                    
                                                                                                                                
SUSAN GORSKI, EAGLE RIVER CHAMBER  OF COMMERCE, CHUGIAK (via                                                                    
teleconference),  testified  in  support   of  HB  180.  She                                                                    
observed  that  the  legislation would  facilitate  veterans                                                                    
with other  public services  and prevent  the need  to carry                                                                    
discharge papers.                                                                                                               
                                                                                                                                
Co-Chair Stoltze noted  the high density of  veterans in his                                                                    
district, which was double the national average.                                                                                
                                                                                                                                
3:27:11 PM                                                                                                                    
                                                                                                                                
VERDIE  BOWEN,  DIRECTOR  VETERANS AFFAIRS,  ANCHORAGE  (via                                                                    
teleconference),  testified   in  support  of  HB   180.  He                                                                    
observed that not all veterans  received a medical care card                                                                    
from  U.S. Office  of Veterans  Affairs (VA);  only veterans                                                                    
that receive  care at  the VA received  a card.  Only 30,000                                                                    
veterans were registered at the  VA. He felt the legislation                                                                    
would facilitate identification of veterans.                                                                                    
                                                                                                                                
3:28:40 PM                                                                                                                    
                                                                                                                                
Representative  Neuman  asked  if veterans  should  have  to                                                                    
check to opt in or out with the VA.                                                                                             
                                                                                                                                
Mr. Bowen  would prefer to  be able to contact  all veterans                                                                    
but stressed that receipt of  the benefit on the license was                                                                    
the first priority.                                                                                                             
                                                                                                                                
Representative Neuman noted an  amendment might be necessary                                                                    
to ensure the protection of a veteran's privacy.                                                                                
                                                                                                                                
3:30:23 PM                                                                                                                    
                                                                                                                                
Representative Saddler  agreed with  Representative Neuman's                                                                    
concern and observed an amendment  might be needed to delete                                                                    
"with the approval of the  person" and to insert "unless the                                                                    
person  objects."  Co-Chair  Stoltze noted  that  amendments                                                                    
would be taken  up at the next hearing  and acknowledged the                                                                    
need to protect veterans' privacy.                                                                                              
                                                                                                                                
Representative Guttenberg asked if  the list of veterans was                                                                    
available to  service agencies for notification  of benefits                                                                    
only.  Mr. Bowen  affirmed that  the provision  was included                                                                    
through the  PFD application.  Currently, 3,400  had checked                                                                    
the  veteran's  box;  the majority  of  addresses  were  for                                                                    
military installations.                                                                                                         
                                                                                                                                
3:32:07 PM                                                                                                                    
                                                                                                                                
Representative Saddler  felt privacy  was protected  and had                                                                    
no objection to the current version.                                                                                            
                                                                                                                                
Representative Gara  asked if the Alaska  National Guard was                                                                    
included. Mr. Bowen affirmed.                                                                                                   
                                                                                                                                
3:33:17 PM                                                                                                                    
                                                                                                                                
STACY  OATES,  ADMINISTRATIVE  MANAGER,  DIVISION  OF  MOTOR                                                                    
VEHICLES,     DEPARTMENT      OF     ADMINISTRATION     (via                                                                    
teleconference),  provided information  on the  legislation.                                                                    
She observed  that the administration was  neutral regarding                                                                    
the  legislation but  cautioned that  the legislation  would                                                                    
open  the door  to the  addition of  other designators.  She                                                                    
maintained that  the purpose of  the license was  to provide                                                                    
proof of the ability to drive  and the proof of identity for                                                                    
law enforcement purposes. There  would be additional revenue                                                                    
from the initial  enactment. She observed that  wait time at                                                                    
Division of  Motor Vehicle (DMV) offices  might be impacted.                                                                    
She  estimated  that  fifty percent  of  qualified  veterans                                                                    
would opt  for the designator  within the first  year, which                                                                    
was reflected in the fiscal note.                                                                                               
                                                                                                                                
3:35:25 PM                                                                                                                    
                                                                                                                                
Representative  Edgmon  referred  to  the  fiscal  note  and                                                                    
observed that it  was unclear whether DMV  would collect the                                                                    
standard fees for driver's licenses.                                                                                            
                                                                                                                                
Co-Chair Stoltze asked  if the department had  a position on                                                                    
the organ donor designation. Ms. Oates could not answer.                                                                        
                                                                                                                                
3:37:14 PM                                                                                                                    
                                                                                                                                
Representative Wilson  spoke to  the estimated wait  time at                                                                    
DMV's.  Ms. Oates  could not  determine the  real effect  on                                                                    
wait times, but  noted that individuals would  have to apply                                                                    
in  person. Representative  Wilson  reiterated concern  with                                                                    
wait times at DMV offices.  Ms. Oates acknowledged that wait                                                                    
time varied.                                                                                                                    
                                                                                                                                
3:39:03 PM                                                                                                                    
                                                                                                                                
Vice-chair Fairclough expressed  support for the legislation                                                                    
with a  provision to opt-out.  She asked that  the committee                                                                    
be provided information relating to  the Real ID Act and the                                                                    
effect on Alaskans.                                                                                                             
                                                                                                                                
Representative Saddler noted that  the fiscal note was based                                                                    
on the $15  replacement charge and would need  to be updated                                                                    
to reflect the  change to $5. He observed that  the right to                                                                    
privacy was protected in version T on page 2, line 1.                                                                           
                                                                                                                                
3:41:18 PM                                                                                                                    
                                                                                                                                
Co-Chair Thomas observed that the  fiscal note contained 160                                                                    
design hours  to accommodate the designation.  He reiterated                                                                    
the possibility  of placing a  flag in the background  [as a                                                                    
designation]. Ms. Oates could not respond.                                                                                      
                                                                                                                                
Co-Chair  Thomas   reiterated  that  a  flag   would  be  an                                                                    
appropriate identifier.                                                                                                         
                                                                                                                                
Co-Chair   Stoltze   expressed   disappointment   with   the                                                                    
administration's neutral position.                                                                                              
                                                                                                                                
3:43:35 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  asked if the  160 contract hours  could be                                                                    
quantified. Ms. Oates noted it  would be $143 dollars at 160                                                                    
hours ($22,880).                                                                                                                
                                                                                                                                
Vice-chair Fairclough  concurred that a  US flag would  be a                                                                    
fitting backdrop.                                                                                                               
                                                                                                                                
Vice-chair  Fairclough MOVED  to  ADOPT  reduce the  contact                                                                    
costs for design  in the fiscal note by  $33 thousand. There                                                                    
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
3:46:49 PM                                                                                                                    
                                                                                                                                
Representative   Costello  MOVED   to  ADOPT   a  conceptual                                                                    
amendment: before "designation"  insert "United States flag"                                                                    
on  page 1,  line  9 and  page  2, line  8.  There being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
3:48:41 PM                                                                                                                    
                                                                                                                                
Co-Chair  Thomas  MOVED  to  report  CSHB  180(FIN)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying revised fiscal note.  There being NO OBJECTION,                                                                    
it was so ordered.                                                                                                              
                                                                                                                                
CSHB  180(FIN) was  REPORTED  out of  Committee  with a  "do                                                                    
pass" recommendation  and with a  new fiscal impact  note by                                                                    
the   House  Finance   Committee  for   the  Department   of                                                                    
Administration.                                                                                                                 
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:49:54 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:50 PM                                                                                            

Document Name Date/Time Subjects
Explanation of Changes _ HB 180.pdf HFIN 2/6/2012 1:30:00 PM
HB 180
HB 180 Military Discount List.pdf HFIN 2/6/2012 1:30:00 PM
SSTA 3/22/2012 9:00:00 AM
HB 180
HB 180 Sponsor Statement.pdf HFIN 2/6/2012 1:30:00 PM
HB 180
HB 198 SESA Presentation - House Finance 2012.ppt HFIN 2/6/2012 1:30:00 PM
HB 198
SESA's Funding comparison Charts.pdf HFIN 2/6/2012 1:30:00 PM
HB 198
HB 198 SESA Responsibilities.pdf HFIN 2/6/2012 1:30:00 PM
HB 198
HB 198 SESA Sunset EliminationFunding Request.docx HFIN 2/6/2012 1:30:00 PM
HB 198
HB 198 Sponsor Statement.pdf HFIN 2/6/2012 1:30:00 PM
HB 198
SESA Audit 1994.pdf HFIN 2/6/2012 1:30:00 PM
HB 198
CSHB142 FIN WORKDRAFT.pdf HFIN 2/6/2012 1:30:00 PM
HB 142
CSHB 142 FIN workdraft Summary of Changes.pdf HFIN 2/6/2012 1:30:00 PM
HB 142
CSHB 142 (FIN)Workdraft Sponsor Statement.pdf HFIN 2/6/2012 1:30:00 PM
HB 142
CS HB118 FIN Workdraft.pdf HFIN 2/6/2012 1:30:00 PM
HB 118
HB118CS(L&C)-NEW FN-DOLWD-UI-2-3-12.pdf HFIN 2/6/2012 1:30:00 PM
HB 118
2012 HB118-CCED-DED-PowerPoint.pdf HFIN 2/6/2012 1:30:00 PM
HB 118
CSHB 180 FIN WORKDRAFT-27-LS0589-T.pdf HFIN 2/6/2012 1:30:00 PM
HB 180
CSHB 180 Proposed Changespdf.pdf HFIN 2/6/2012 1:30:00 PM
HB 180
HB 198 SESA Agency Facts 022312.pdf HFIN 2/6/2012 1:30:00 PM
HB 198
HB 198 SESA Answers to HFIN Questions from 020612.pdf HFIN 2/6/2012 1:30:00 PM
HB 198
CS HB198 SESA Av Daily Membership FY 88 to FY 11.pdf HFIN 2/6/2012 1:30:00 PM
HB 198