Legislature(2011 - 2012)HOUSE FINANCE 519

02/29/2012 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Delayed to 2:00 p.m. Today --
+ HB 252 INCOME TAX EXEMPTION TELECONFERENCED
Heard & Held
*+ HCR 24 STATE FOOD RESOURCE DEVELOPMENT GROUP TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 29, 2012                                                                                          
                         2:08 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
2:08:27 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze  called the House Finance  Committee meeting                                                                   
to order at 2:08 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 Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mark Neuman                                                                                                      
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Joe  Michel,  Staff,  Representative   Bill  Stoltze;  Joshua                                                                   
Walton,   Staff,    Representative   Mia    Costello;   Barry                                                                   
Creighton,  President, Ionia,  Inc., Kenai; Cathy  Creighton,                                                                   
Ionia,  Inc.,  Kenai;  Darren Snyder,  Board  Member,  Alaska                                                                   
Food Policy  Council; Leslie  Houston, Director,  Division of                                                                   
Administrative  Services,  Department   of  Corrections;  Joe                                                                   
Balash,   Deputy   Commissioner,    Department   of   Natural                                                                   
Resources;  Ray Riutta,  Executive  Director, Alaska  Seafood                                                                   
Marketing  Institute, Department  of Commerce, Community  and                                                                   
Economic Development.                                                                                                           
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Adam Krynicki,  Intellectual Property  Specialist,  Office of                                                                   
Intellectual  Property and  Commercialization, University  of                                                                   
Alaska  Fairbanks,   Fairbanks;  Tyler  Arnold,   Co-Founder,                                                                   
Simply    Social,    Anchorage;   Allan    Johnston,    Chief                                                                   
Encouragement   Officer,   The  Entrepreneurs   and   Mentors                                                                   
Network  Inc.,  Anchorage; Johanna  Bales,  Deputy  Director,                                                                   
Tax  Division,   Department  of  Revenue,   Anchorage;  Bryce                                                                   
Wrigley,   Alaska   Farm  Bureau,   Delta   Junction;   Danny                                                                   
Consenstein, State  Executive Director, Farm  Service Agency,                                                                   
United States Department of Agriculture, Anchorage.                                                                             
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HCR 24    STATE FOOD RESOURCE DEVELOPMENT GROUP                                                                                 
                                                                                                                                
          HCR 24 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HB 252    INCOME TAX EXEMPTION                                                                                                  
                                                                                                                                
          HB 252 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HOUSE BILL NO. 252                                                                                                            
                                                                                                                                
     "An Act exempting certain small businesses from the                                                                        
     corporate income tax; and providing for an effective                                                                       
     date."                                                                                                                     
                                                                                                                                
2:09:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MIA  COSTELLO, SPONSOR, introduced  HB 252 and                                                                   
explained  that the  intent of  the legislation  was to  take                                                                   
advantage of federal  law and incentivize investment  in fast                                                                   
growing  companies.   Currently,   federal  law  allowed   an                                                                   
investor to  be exempt from capital  gains tax on  money that                                                                   
was  invested in  this  type of  company  if  the funds  were                                                                   
invested for five  years. She related that the  intent behind                                                                   
the  federal  law  was to  encourage  investment  in  certain                                                                   
types  of fast  growing,  qualifying companies.  She  pointed                                                                   
out that  qualifying companies  could be  based anywhere  and                                                                   
were not  targeted to a  particular geographic region  of the                                                                   
world;  the  intent  of  the bill  was  to  bring  investment                                                                   
dollars to Alaska  by creating a tax incentive  for companies                                                                   
under  a  certain  size.  She  stated  that  Alaska  did  not                                                                   
currently  have many  fast  growing, smaller  companies,  but                                                                   
that bringing them to the state  would grow and diversify its                                                                   
economy.                                                                                                                        
                                                                                                                                
2:12:00 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:13:01 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
2:13:03 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  MOVED to ADOPT the  proposed committee                                                                   
substitute  for  HB  252,  Work  Draft  27-LS1085\D  (Nauman,                                                                   
2/29/12) as a working document.                                                                                                 
                                                                                                                                
2:13:14 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze OBJECTED for the purpose discussion.                                                                           
                                                                                                                                
JOE  MICHEL, STAFF,  REPRESENTATIVE  BILL STOLTZE,  discussed                                                                   
two  changes in  the  committee  substitute, version  D.  The                                                                   
first change, found  on page 2, lines 11 and  12, removed the                                                                   
words  "qualified small  businesses." The  second change  was                                                                   
found where line  12 would have been and designated  that the                                                                   
words "qualified  small  businesses" had  a meaning given  in                                                                   
Section 1202  of the Internal  Revenue Code, which  was found                                                                   
in Title 26 of  the United States Code, as  that section read                                                                   
on  January  1,  2012,  as  not   including  a  construction,                                                                   
transportation, utility, or fisheries business.                                                                                 
                                                                                                                                
Co-Chair  Stoltze queried  if  the changes  in the  committee                                                                   
substitute  had a  substantive  effect in  fiscal costs.  Mr.                                                                   
Michel   replied  in   the  affirmative   and  related   that                                                                   
eliminating  a  number  of  small  businesses  that  did  not                                                                   
qualify  for the  change would  reduce the  amount of  audits                                                                   
that the  Department of Revenue  (DOR) would need  to conduct                                                                   
regarding the proposed legislation.                                                                                             
                                                                                                                                
Co-Chair   Stoltze   requested    an   explanation   of   the                                                                   
substantive  changes  to  the   bill  structure.  Mr.  Michel                                                                   
explained that  originally, DOR  would have needed  to assign                                                                   
three auditors  in order to  administer the proposed  change,                                                                   
but that due  to the elimination of some types  of qualifying                                                                   
businesses, the  department had indicated that  it would need                                                                   
only one auditor.                                                                                                               
                                                                                                                                
Vice-Chair  Fairclough inquired  if the  revised fiscal  note                                                                   
had been given to the committee.                                                                                                
                                                                                                                                
Co-Chair Stoltze  requested that  the updated fiscal  note be                                                                   
distributed to committee members.                                                                                               
                                                                                                                                
2:15:32 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:18:48 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Mr. Michel discussed  the updated fiscal note for  HB 252 and                                                                   
related that  it reflected the  changes in the  new committee                                                                   
substitute.  The note added  a new  position and showed  that                                                                   
there would be no change in revenue to the state.                                                                               
                                                                                                                                
2:19:33 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  WITHDREW  his OBJECTION.  There  being  NO                                                                   
further OBJECTION, Work Draft 27-LS1085\D was ADOPTED.                                                                          
                                                                                                                                
Representative Edgmon  observed that the fiscal  note did not                                                                   
point to  any generated  revenue, but  offered that  this was                                                                   
because the  department was unwilling  to project  the impact                                                                   
of the bill that far forward.                                                                                                   
                                                                                                                                
Representative   Costello   requested  a   clarification   of                                                                   
Representative   Edgmon's  comments.  Representative   Edgmon                                                                   
reiterated  his comments  and  pointed out  that new  revenue                                                                   
would be generated  by bill because it would  have a positive                                                                   
effect.    Representative   Costello    responded   in    the                                                                   
affirmative and voiced agreement.                                                                                               
                                                                                                                                
ADAM KRYNICKI,  INTELLECTUAL PROPERTY  SPECIALIST,  OFFICE OF                                                                   
INTELLECTUAL  PROPERTY AND  COMMERCIALIZATION, UNIVERSITY  OF                                                                   
ALASKA FAIRBANKS,  FAIRBANKS (via  teleconference),  spoke in                                                                   
support of  the legislation. He  related that  the University                                                                   
of Alaska  Fairbanks performed  approximately $120  million a                                                                   
year in research,  which resulted in amazing  discoveries. He                                                                   
discussed   the  university's   research  efforts   regarding                                                                   
Alzheimer's  disease,  sudden   infant  death  syndrome,  and                                                                   
unmanned  aerial  vehicle  components.  He  shared  that  the                                                                   
Alaska Center for  Energy and Power had  produced discoveries                                                                   
in  energy solutions  and road  construction.  The Office  of                                                                   
Intellectual  Property and  Commercialization was  part  of a                                                                   
new  effort   to  create  economic  opportunities   from  new                                                                   
discoveries.  He related that  patenting, building,  testing,                                                                   
and  commercializing  viable  technologies  took  significant                                                                   
investment,  without  which  most   ventures  could  not  get                                                                   
started.  He concluded  that HB  252  encouraged the  private                                                                   
sector to invest  in Alaskan technologies and  that it highly                                                                   
incentivized   investment   in    Alaskan   qualified   small                                                                   
businesses that used those technologies.                                                                                        
                                                                                                                                
Co-Chair  Stoltze asked  whether the  testifier was  speaking                                                                   
on behalf  of the University.  Mr. Krynicki responded  in the                                                                   
affirmative.                                                                                                                    
                                                                                                                                
JOSHUA WALTON,  STAFF, REPRESENTATIVE  MIA COSTELLO,  relayed                                                                   
that Mr. Tyler Arnold had submitted video testimony.                                                                            
                                                                                                                                
Co-Chair Stoltze  noted that  Representative Gara  had joined                                                                   
the committee.                                                                                                                  
                                                                                                                                
2:23:52 PM                                                                                                                    
                                                                                                                                
TYLER  ARNOLD,  CO-FOUNDER,  SIMPLY  SOCIAL,  ANCHORAGE  (via                                                                   
teleconference),  testified  in  support of  the  legislation                                                                   
via video and shared  that the bill would make  it easier for                                                                   
startup businesses  to be  based in  Alaska. He related  that                                                                   
his company  was a global 1202  C corporation that  was based                                                                   
in  Alaska. He  stated that  Alaska  had one  of the  highest                                                                   
state  corporate income  tax rates  in the  country and  that                                                                   
the  legislation would  not only  remove the  burden of  high                                                                   
tax   rates,   but  would   increase   the   state's   global                                                                   
competiveness.  He   related  a  story  about   his  business                                                                   
history  in  Alaska  and his  new  startup  business,  Simply                                                                   
Social.                                                                                                                         
                                                                                                                                
ALLAN    JOHNSTON,   CHIEF    ENCOURAGEMENT   OFFICER,    THE                                                                   
ENTREPRENEURS  AND  MENTORS  NETWORK   INC.,  ANCHORAGE  (via                                                                   
teleconference),  vocalized support  for the legislation.  He                                                                   
pointed out that  Alaska was missing many tools  that did not                                                                   
fit the state's  business model; Alaska did not  have a small                                                                   
business  investment   company  (SBIC),  a   venture  capital                                                                   
company,  or an  organized angel  network.  He observed  that                                                                   
Alaska  was  the  only  state   in  the  country  without  an                                                                   
organized  angel network  and  offered that  the  legislation                                                                   
was  a tool  that would  help  the state  make  up for  other                                                                   
missing tools.  He related  that the  bill would make  Alaska                                                                   
the  most competitive  state  in  the nation,  tax-wise,  for                                                                   
these  types  of high-growth  businesses.  He  observed  that                                                                   
many  emergency  room  physicians were  attracted  to  Alaska                                                                   
because of  its outdoor lifestyle  and opined that  the state                                                                   
had a great opportunity to target high-end individuals.                                                                         
                                                                                                                                
Vice-Chair  Fairclough inquired  what an  angel network  was.                                                                   
Mr.  Johnston replied  that an  "angel investor"  was a  U.S.                                                                   
Securities  and Exchange  Commission  term for  a person  who                                                                   
was well-off  financially and  had either $200,000  in income                                                                   
for the  last two  years or  $1 million  in net worth.  Angel                                                                   
investors could  afford to make investments in  companies and                                                                   
could   afford  to   lose  their   money.   He  stated   that                                                                   
entrepreneurs  generally wanted angel  investors in  order to                                                                   
help reduce  business risk. He  pointed out that  the fastest                                                                   
growing  demographic in  Alaska  were individuals  that  were                                                                   
over  50 years  of  age and  that  many people  qualified  to                                                                   
become angel  investors but  did not know  how it  worked. He                                                                   
concluded that the  bill would help organize  people to learn                                                                   
how to become angel investors.                                                                                                  
                                                                                                                                
2:31:13 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Fairclough  inquired   if  angel  investors  were                                                                   
wealthy  people  who  were  willing   to  invest  in  smaller                                                                   
companies and provide  less risk to businesses,  while taking                                                                   
risk   themselves.   Mr.  Johnston   responded   that   angel                                                                   
investors  were people  who invested  on a  regular basis  in                                                                   
someone  else's   business  and   related  that   in  Alaska,                                                                   
investors had a  tendency to invest in their  own businesses.                                                                   
He shared that  the idea behind angel investing  was that the                                                                   
investor generally  did not want to control or  own the whole                                                                   
company,  but instead  preferred  diversity.  He stated  that                                                                   
there were  300 individuals who  contributed $1,000  per year                                                                   
to the  University of Alaska  Anchorage and opined  that most                                                                   
of these donors  would be qualified as an angel  investor. He                                                                   
related  a hypothetical  scenario  of how  university  donors                                                                   
could become  angel investors and encourage  business growth.                                                                   
He  shared  that  angel  investing   took  advantage  of  the                                                                   
experience of  individuals who had  retired and were  part of                                                                   
the  long-term  infrastructure  of Alaska  by  getting  those                                                                   
individuals  engaged   in  the  community.  He   stated  that                                                                   
engaging  and  organizing  the  experience  of  leaders  with                                                                   
Alaska's youth and  the leaders of tomorrow  was critical. He                                                                   
concluded  that  every other  state  had an  organized  angel                                                                   
network for  sharing experience  and references and  that the                                                                   
legislation  would help  enable the establishment  of  such a                                                                   
network in Alaska.                                                                                                              
                                                                                                                                
Representative   Wilson  inquired  if   DOR  knew   how  many                                                                   
businesses would  qualify under the legislation  and how much                                                                   
loss in revenue it would represent to the state.                                                                                
                                                                                                                                
2:35:05 PM                                                                                                                    
                                                                                                                                
JOHANNA BALES,  DEPUTY DIRECTOR, TAX DIVISION,  DEPARTMENT OF                                                                   
REVENUE,  ANCHORAGE  (via  teleconference),   explained  that                                                                   
there were three  requirements in order to qualify  under the                                                                   
legislation.  The first  requirement was  being engaged  in a                                                                   
qualified small  business, which  was a narrow  category. The                                                                   
second  requirement  was  that   a  business  must  have  $50                                                                   
million or  less in aggregate  assets. The third  requirement                                                                   
was  that  80  percent  of the  total  assets  must  be  used                                                                   
actively  in the  business. She  stated  that the  department                                                                   
could  examine   corporate  income  tax  returns   and  could                                                                   
determine the  first two requirements,  but that it  was very                                                                   
difficult  to determine  the  third requirements,  which  was                                                                   
how companies used  assets. She stated that  the numbers were                                                                   
indeterminate at  the current  time, but that  the department                                                                   
expected  it to  be,  as far  as existing  corporations  were                                                                   
concerned, fairly narrow.                                                                                                       
                                                                                                                                
Representative  Wilson  requested   a  ballpark  figure  that                                                                   
assumed   the  businesses   qualified  for   the  first   two                                                                   
requirements. Ms.  Bales responded that there  would probably                                                                   
be 300  to 400  very small  companies involved  and that  the                                                                   
department  would have  to examine how  those companies  were                                                                   
using assets.  She reiterated  that the  companies were  very                                                                   
small  and  that  the department  did  not  have  information                                                                   
regarding their revenues.                                                                                                       
                                                                                                                                
Representative  Wilson  indicated   that  she  supported  the                                                                   
bill, but  expressed caution.  She queried if  the department                                                                   
knew how  much the  300 or  400 companies  currently paid  in                                                                   
corporate taxes.  Ms. Bales replied  that the  department had                                                                   
a general  idea of  the revenues  of the  companies, but  had                                                                   
only  examined  one  year  of  information  and  the  amounts                                                                   
varied greatly.  She observed  that due  to losses  and other                                                                   
factors, some  of the  qualifying companies  did not  pay any                                                                   
taxes  and  that it  was  difficult  to determine  the  exact                                                                   
taxes paid if the companies had carried forward losses.                                                                         
                                                                                                                                
Co-Chair Stoltze CLOSED public testimony.                                                                                       
                                                                                                                                
Representative Doogan  inquired whether a  larger corporation                                                                   
could form  a subsidiary,  which met  the qualifications,  in                                                                   
order to  take advantage of  the program. Mr.  Walton pointed                                                                   
to  a provision  in  Section  1202  of the  Internal  Revenue                                                                   
Code,  which dealt  with  subsidiaries.  He stated  that  the                                                                   
legislation  treated parent  and  subsidiary corporations  as                                                                   
one  entity.   When  combined,  the  parent   and  subsidiary                                                                   
companies  had to be  below the  $50 million aggregate  gross                                                                   
assets  cap  in  order  to  qualify  under  the  legislation;                                                                   
furthermore, both  the parent and subsidiary would  also have                                                                   
to  be   involved  in  one   of  the  qualifying   trades  or                                                                   
businesses,  as well  as meet  the 80  percent working  asset                                                                   
requirement.                                                                                                                    
                                                                                                                                
2:39:44 PM                                                                                                                    
                                                                                                                                
Representative  Doogan wondered  why DOR  was unable  to make                                                                   
an estimate  on the  potential revenue loss  if the  bill was                                                                   
enacted. He  inquired if the bill  sponsor had a  better idea                                                                   
of what  the potential  losses might  be. Mr. Walton  replied                                                                   
that it  was difficult to  determine the potential  losses in                                                                   
revenue that  would result  from the  bill's passage,  as DOR                                                                   
had   previously   stated.   He    indicated   that   through                                                                   
discussions with  DOR, numbers  that were based  on different                                                                   
criteria had  been "drilled  into," but  that the 80  percent                                                                   
working asset  requirement made  calculations very  difficult                                                                   
because  DOR  did  not  track that  information  in  as  much                                                                   
detail as  the first two  requirements. He shared  that based                                                                   
on the  other criteria, there  were a number of  sectors that                                                                   
may  be   able  to   apply  for   the  exemption,   but  that                                                                   
eligibility for  the exemption would  be determined by  a DOR                                                                   
auditor;  this was  the reason  there was a  position for  an                                                                   
auditor in the fiscal note.                                                                                                     
                                                                                                                                
Representative  Doogan  was  not   comfortable  with  unknown                                                                   
costs  as  a  matter  of  policy.   He  opined  that  if  400                                                                   
companies  fit the  requirements  and received  $10  million,                                                                   
the bill  would represent  a lot of  money. He was  surprised                                                                   
that the  department could not  provide a better  estimate on                                                                   
the potential losses  in revenue. He offered that  it did not                                                                   
instill confidence  in him that  DOR was unable  to determine                                                                   
the fiscal impact.                                                                                                              
                                                                                                                                
Representative  Doogan inquired how  confident the  state was                                                                   
in  determining the  bill's  $50 million  asset  requirement,                                                                   
given  that it  was unable  to determine  how many  companies                                                                   
were affected  by the  legislation. Mr.  Walton replied  that                                                                   
the $50  million in assets  was something that  corporate tax                                                                   
payers filed  with as part of  a corporate income  tax return                                                                   
to the state of  Alaska; as a result, it was  a category that                                                                   
DOR had a pretty  good handle on. The department  was able to                                                                   
determine  how many  companies  were  below the  $50  million                                                                   
gross  asset cap and  also had  some ability  to examine  the                                                                   
industry  criteria in Section  1202 of  the Internal  Revenue                                                                   
Code  and eliminate  certain  industries;  however, what  was                                                                   
being done with  a company's assets was not  reported to DOR.                                                                   
He stated that  the intent of the legislation  was to promote                                                                   
smaller,  startup businesses  by tying  into the federal  tax                                                                   
provisions;  the federal  tax  provisions  were used  because                                                                   
they had  been shown  to be successful  at encouraging  those                                                                   
types  of businesses.  He  mentioned that  through  extensive                                                                   
searching, the  sponsor was unable  to find a  single example                                                                   
of a Section  1202 C corporation in Alaska.  He observed that                                                                   
he was  not saying  that no companies  could qualify  for the                                                                   
exemption,  but that  the definition  for  a qualified  small                                                                   
business under Section  1202 was more geared  toward allowing                                                                   
qualifying  companies to  issue  stock, which  was exempt  to                                                                   
capital gains  tax. He  shared that  the sponsor had  adopted                                                                   
the  definitions of  the  qualified small  businesses,  which                                                                   
must  meet particular  criteria.  He  stated that  a  typical                                                                   
Section  1202 C  qualifying small  business tended  to be  in                                                                   
the   technology,   research    and   development,   biotech,                                                                   
pharmaceutical,  telecommunication,  or information  services                                                                   
and software industries.                                                                                                        
                                                                                                                                
2:45:56 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  directed the committee's  attention to                                                                   
page 88 of  the Department of Revenue's Revenue  Sources Book                                                                   
and noted  that it  listed the income  to state from  general                                                                   
corporate  tax,  as  well as  petroleum  corporate  tax.  She                                                                   
offered that  the Revenue Sources  Book showed that  in 2011,                                                                   
the state received  $157 million in general  corporate income                                                                   
tax  and  $542  million  from   petroleum  related  corporate                                                                   
income tax. She  noted that the Revenue Sources  Book figures                                                                   
gave the committee an outside number.                                                                                           
                                                                                                                                
Co-Chair  Stoltze  offered  that  Vice-Chair  Fairclough  was                                                                   
referencing $157  million of income  to the state if  all the                                                                   
companies listed  fell under the $50 million  gross aggregate                                                                   
assets cap.                                                                                                                     
                                                                                                                                
Vice-Chair  Fairclough  pointed  out  that  petroleum  income                                                                   
would not  apply to  the bill  because those companies  would                                                                   
be over the $50 million asset limit.                                                                                            
                                                                                                                                
Mr.  Walton  provided  some  of   the  exclusions  that  were                                                                   
already  in the  federal  tax  code in  order  to inform  the                                                                   
committee  what  industries  would   not  qualify  under  the                                                                   
legislation.  He  related  that  under Section  1202  of  the                                                                   
Internal Revenue  Code, which  was found in  Title 26  of the                                                                   
United  States  Code,  the performance  of  services  in  the                                                                   
following    industries   were    excluded:   health,    law,                                                                   
engineering,  architecture,  accounting,  actuarial  science,                                                                   
performing  arts, consulting,  financial services,  brokerage                                                                   
services,  or  any  trade or  business  where  the  principle                                                                   
asset of  such trade or business  is the reputation  or skill                                                                   
of one  or more of  its employees. He  offered that  the last                                                                   
exception  was added to  prevent sole  proprietors and  other                                                                   
service  providers   from  avoiding  taxes  and   added  that                                                                   
farming,   banking,   insurance,  financing,   leasing,   and                                                                   
similar industries  were also explicitly excluded  in federal                                                                   
tax  code.  Also  excluded  in   the  federal  tax  code  was                                                                   
resource  extraction, such  as the raising  or harvesting  of                                                                   
trees,  as  well as  the  oil,  mining, and  gas  industries;                                                                   
restaurants,  hotels,  motels   or  similar  businesses  were                                                                   
likewise excluded.  He pointed out  that real estate  was not                                                                   
specifically  excluded  from the  tax  code, but  that  there                                                                   
were  requirements  for  qualification   as  to  the  maximum                                                                   
amount  of  real  estate holdings;  a  real  estate  business                                                                   
leasing, renting,  or selling property did not  count towards                                                                   
the active  business requirements  for  those assets  and the                                                                   
companies were  functionally excluded.  Regulated  investment                                                                   
firms, real  estate investment  trusts, real estate  mortgage                                                                   
investment        companies,         cooperatives,        and                                                                   
domestic/international   sales  corporations  also   did  not                                                                   
qualify  under the  tax code.  He  added that  if a  business                                                                   
held more  than ten  percent of  its net  assets in  stock in                                                                   
another corporation,  it did  not meet  the 80 percent  asset                                                                   
in  the active  conduct  of  business requirement.  With  the                                                                   
adoption  of the  new committee  substitute, the  legislation                                                                   
also  expressively  excluded   the  construction,  utilities,                                                                   
transportation, and  fisheries industries. He  mentioned that                                                                   
there   were  a   broad  range   of   industries  that   were                                                                   
specifically  included  and  could   not  qualify  under  any                                                                   
circumstance. He  related that through discussions  with DOR,                                                                   
his  understanding  was  that   under  the  legislation,  the                                                                   
sectors  that  may  still  qualify   included  manufacturing,                                                                   
retail, wholesale, and other sectors.                                                                                           
                                                                                                                                
2:49:50 PM                                                                                                                    
                                                                                                                                
Representative Doogan  understood that DOR needed  to conduct                                                                   
audits on  expenditures in  order to  make sure the  expenses                                                                   
conformed to the  tax code and the legislation,  but wondered                                                                   
whether  the department  would  be  required to  publish  the                                                                   
information in  order to enable  the committee to  keep track                                                                   
of the issue.                                                                                                                   
                                                                                                                                
Mr.  Walton  responded   that  as  the  bill   was  currently                                                                   
written, it did  not have an explicit  reporting requirement,                                                                   
but  pointed  out  that  when a  corporation  filed  for  its                                                                   
corporate  income  tax,  it  was   required  to  include  its                                                                   
federal  income tax  return. Qualifying  corporations  needed                                                                   
to  indicate  eligibility  for exemptions  on  their  federal                                                                   
returns;  at this time,  the information  would be  available                                                                   
to the  state. He  mentioned that  there were  confidentially                                                                   
requirements  and that tax  payer, as  well as corporate  tax                                                                   
payer information  could not be shared in a  way that exposed                                                                   
the  internal  financial dealings  of  individual  companies;                                                                   
however,  in some  cases, such  as with  C corporations,  the                                                                   
companies  were  publicly  listed  and  may  be  required  to                                                                   
report through the U.S. Securities and Exchange Commission.                                                                     
                                                                                                                                
Representative  Doogan  expressed  that  he would  feel  more                                                                   
confident if the  bill included an audit provision.  He noted                                                                   
that  the legislation  entered  "fresh  territory," but  that                                                                   
the state  had only  a rough  idea of  what the result  would                                                                   
be.                                                                                                                             
                                                                                                                                
Vice-Chair Fairclough  pointed out  that the existing  Alaska                                                                   
Statutes explicitly  stated that  all corporations  that were                                                                   
members  of the  same parent/subsidiary  control group  shall                                                                   
be treated as  one corporation. She directed  the committee's                                                                   
attention  to line  22, Section  5 of  legislation and  noted                                                                   
that it stated  that Section 3 took effect July  1, 2023; she                                                                   
inquired if this  was because the federal code  was ending at                                                                   
that date.  Mr. Walton responded  that line 22, Section  5 of                                                                   
the  bill provided  a  sunset date.  Section  3 returned  the                                                                   
statutes  that  were altered  by  the  bill to  the  original                                                                   
language. He  stated that Section  4 specified  that Sections                                                                   
1 and 2  take effect July  1, 2012. Section 5  specified that                                                                   
the language  in the  statutes would revert  back on  July 1,                                                                   
2023 to what it had originally been.                                                                                            
                                                                                                                                
Vice-Chair Fairclough  believed it  was a complicated  sunset                                                                   
provision and clarified  that the bill would  sunset about 10                                                                   
years  after the  law took  effect. Mr.  Walton responded  in                                                                   
the  affirmative  and stated  that  the  sunset date  was  11                                                                   
years from the  effective date, but that the  exemption could                                                                   
not  be claimed  until  the beginning  of  January, 2013.  He                                                                   
stated that the  sponsor wanted the bill to have  at least 10                                                                   
full  years   before  its   sunset  in   order  to   see  the                                                                   
legislation's   effect.   He    concurred   with   Vice-Chair                                                                   
Fairclough   regarding   the   complexity   of   the   sunset                                                                   
provision.                                                                                                                      
                                                                                                                                
2:54:22 PM                                                                                                                    
                                                                                                                                
Vice-Chair   Fairclough   agreed   with   the   comments   of                                                                   
Representative  Doogan  regarding the  benefit  of the  state                                                                   
receiving  a report  on the  legislation  in a  few years  in                                                                   
order to see who  was accessing it. She pointed  out that the                                                                   
state was  forgoing revenue  and was  not decreasing  it. She                                                                   
opined that  it would  take some time  for regulations  to be                                                                   
written in  order to  enable the  department to ascertain  if                                                                   
80 percent  of the  assets were being  used for a  particular                                                                   
corporation.  She believed  that there  may be some  pushback                                                                   
from companies that  were trying prove the 80  percent use of                                                                   
their   assets.  She   offered  that   the  legislation   was                                                                   
worthwhile and  that it might  help younger minds,  which may                                                                   
be   more    IT   savvy,    to   "put   packages    together"                                                                   
internationally. She  mentioned the video presentation  by an                                                                   
Alaskan  who was  doing  business  in Romania  and  concluded                                                                   
that the  legislation seemed like  an opportunity to  try and                                                                   
move  forward;  however,  she  requested  that  a  report  on                                                                   
program be  presented in the  future. She offered  that three                                                                   
years may  be the wrong  point at which  to conduct  a report                                                                   
because it  would take  a year to  write the regulations  and                                                                   
inquired  what  timeline the  department  expected  regarding                                                                   
the  regulations.  Ms. Bales  responded  that  it would  take                                                                   
approximately  six  to eight  months  for the  department  to                                                                   
draft  the  regulations;  however,  because  the  legislation                                                                   
piggy-backed  the federal  code,  the department  would  also                                                                   
count on the  federal regulations to assist  in administering                                                                   
the bill.                                                                                                                       
                                                                                                                                
Vice-Chair Fairclough  asked for a  repeat of the  time frame                                                                   
regarding the  regulations. Ms.  Bales replied that  it would                                                                   
be approximately six to eight months.                                                                                           
                                                                                                                                
Representative  Edgmon   pointed  out  that   the  department                                                                   
estimated  that the bill  would bring  300 to 400  businesses                                                                   
to  Alaska  and  inquired  if the  new  businesses  would  be                                                                   
primarily  smaller  information technology  companies,  which                                                                   
came  to the  state because  of  the tax  credit. He  further                                                                   
inquired if  the companies would  be big enough to  pay taxes                                                                   
at  some  point   and  have  audits  conducted.   Mr.  Walton                                                                   
responded  that  his  understanding  of what  Ms.  Bales  had                                                                   
previously  expressed  was that  the  300 to  400  businesses                                                                   
were  companies  that  were  already in  Alaska  and  may  be                                                                   
eligible   to   receive  the   exemption   immediately.   The                                                                   
intention  behind  the bill  was  to encourage  companies  in                                                                   
sectors  where there  were  a low  number  of businesses.  He                                                                   
reiterated that  the sponsor had  looked for existing  1202 C                                                                   
corporations  in Alaska, but  had been  unable to locate  any                                                                   
and mentioned  that Mr. Arnold,  who had had given  the video                                                                   
testimony, intended  to structure  his business in  Alaska as                                                                   
a  1202   C  corporation.  He   concluded  that   the  bill's                                                                   
intention  was  to exempt  revenue  that  the state  was  not                                                                   
currently  receiving  in  order to  attract  businesses  that                                                                   
would grow to become corporate tax payers.                                                                                      
                                                                                                                                
Representative  Edgmon queried  if the  bill was intended  to                                                                   
not  only  attract  businesses  to the  state,  but  also  to                                                                   
attract angel investors  and an angel network  to Alaska. Mr.                                                                   
Walton  responded in  the affirmative  and  that the  current                                                                   
federal  tax  provisions encouraged  investment.  He  pointed                                                                   
out that there  were venture capitalists and  angel investors                                                                   
in  Alaska, but  that  it was  difficult  to find  investment                                                                   
vehicles in the  state. He opined that Alaska,  in some ways,                                                                   
was good  place to start  a small business,  but that  it was                                                                   
not a friendly  place to start a small business  that was a C                                                                   
corporation.  He  stated  that  C  corporations  could  issue                                                                   
multiple shares of  stock and could have an  unlimited number                                                                   
of investors;  these types of  companies could attract  a lot                                                                   
of  capital  for  financing  and had  a  good  ability,  once                                                                   
started, to grow  large. He offered that small  businesses in                                                                   
Alaska  were   usually  started   as  S  corporations,   sole                                                                   
proprietorships,   or  limited  liability   companies  (LLC);                                                                   
these   structures   were  referred   to   as   "pass-through                                                                   
entities"  and under them,  the corporate  tax liability  was                                                                   
passed to  the owners  as personal  income tax liability.  He                                                                   
offered  that  in a  state  without  a personal  income  tax,                                                                   
pass-through  entities  could   be  very  attractive.  If  an                                                                   
investor wanted to  start a business that could  be traded on                                                                   
the  stock  exchange,  it  needed   to  be  started  as  a  C                                                                   
corporation. Once  a C corporation  reached $90,000  per year                                                                   
in income,  it was  already in the  9.4 percent tax  bracket,                                                                   
which  was  the fifth  highest  bracket  in the  country.  He                                                                   
discussed  anecdotal evidence  of  Alaskan entrepreneurs  who                                                                   
were investing  in starting companies  in Montana  because of                                                                   
that  state's  lower  tax  rate.   He  offered  that  Alaskan                                                                   
investors  would  probably  prefer  to  start  businesses  in                                                                   
Alaska, but pointed  out that the state's tax  rates had such                                                                   
a  negative   impact  on  the   business  plans   of  startup                                                                   
companies.  He  stated  that  statistically,  for  every  ten                                                                   
small businesses  that were started, there would  be one left                                                                   
standing after  five years. He  concluded that  the sponsor's                                                                   
intent  with HB  252  was to  make  it easier  for  qualified                                                                   
businesses  to start  and  grow,  as well  as  to provide  an                                                                   
investment vehicle for Alaska's venture capital sector.                                                                         
                                                                                                                                
3:03:11 PM                                                                                                                    
                                                                                                                                
Representative  Edgmon  surmised  that  the  purpose  of  the                                                                   
legislation   was  multifold   and  that   it  grew   Alaskan                                                                   
fledgling   industries,  while   also  bringing  in   venture                                                                   
capital. He inquired  if an Alaskan corporation  must consist                                                                   
of  a  small  group  of  individuals,   rather  than  a  sole                                                                   
proprietor  in order to  qualify under  the legislation.  Mr.                                                                   
Walton replied  that it  was possible  for a sole  proprietor                                                                   
to  begin  a  business  and structure  it  as  an  LLC,  sole                                                                   
proprietorship,  S corporation, or  a C corporation;  not all                                                                   
of these  structures would  fit very  well in  the case  of a                                                                   
sole  proprietorship.  He  observed  that it  was  much  more                                                                   
complicated to  start a C  corporation and that  starting one                                                                   
would  only   be  done  if  the   desire  was  to   get  more                                                                   
sophisticated stock  offerings and have  a lot of  owners. He                                                                   
stated   that  an   S   corporation   was  limited   to   100                                                                   
shareholders and  that they had  to be individuals  and could                                                                   
not be  companies. He  shared that  most venture  capitalists                                                                   
did not  invest their personal  money, but instead  created a                                                                   
firm to serve as  a holding company for their  assets and let                                                                   
the firm  do the  investments;  in the case  of those  firms,                                                                   
the corporation  must be a C  corporation or it could  not be                                                                   
invested in.                                                                                                                    
                                                                                                                                
Representative  Edgmon  supported  the  bill,  but  indicated                                                                   
that he  still had questions  regarding Section 3.  He stated                                                                   
that   Section  3   discussed   the  tax   not  applying   to                                                                   
individuals or fiduciaries.                                                                                                     
                                                                                                                                
Vice-Chair   Fairclough   interjected    that   the   section                                                                   
Representative  Edgmon  was  referring   to  was  the  sunset                                                                   
provision, which she had previously inquired about.                                                                             
                                                                                                                                
Representative   Edgmon  further   inquired   if  Section   3                                                                   
excluded  a  corporation  that was  individually  owned.  Mr.                                                                   
Walton  responded to  the question  and  stated, "that's  the                                                                   
way that  the law exists now,  which would be changed  by the                                                                   
bill and  revert back to  that language." [The  wording "that                                                                   
language" was made in reference to Section 3 of the bill.]                                                                      
                                                                                                                                
Co-Chair Stoltze  observed that there was some  complexity in                                                                   
the  bill  and  that  it  was   his  intention  to  give  the                                                                   
committee a chance to think about it overnight.                                                                                 
                                                                                                                                
Representative  Gara supported  the concept  of the bill.  He                                                                   
related  that he  liked startup  businesses,  but that  there                                                                   
were few  incentives in  Alaska to  encourage those  types of                                                                   
businesses. He  pointed out that  he was a co-sponsor  of the                                                                   
legislation, but  related that  he had several  questions. He                                                                   
noted that  in Alaska, only  C corporations currently  paid a                                                                   
corporate tax  and that  if an investor  was trying  to avoid                                                                   
taxes and  could set up as an  LLC or an S  corporation, they                                                                   
did so. He related  that he was an owner of  a restaurant and                                                                   
was  a LLC  member. He  explained  that being  an LLC  member                                                                   
meant that there  was a main person who ran  the business and                                                                   
made the decisions  over the other investors;  investors like                                                                   
himself could invest  money in the business, but  did not run                                                                   
it. He  inquired why the LLC  structure would not  be perfect                                                                   
for  angel  investors.  He  explained   that  under  the  LLC                                                                   
structure,  there  were  one  or  several  people  that  were                                                                   
actually  running the  company,  there were  many  investors,                                                                   
and  there was  no corporate  tax.  He inquired  why the  LLC                                                                   
structure did  not allow and  attract startup  businesses, as                                                                   
there was not a  tax on LLCs in Alaska. Mr.  Walton responded                                                                   
that  the answer  depended on  what  was planned  to be  done                                                                   
with  the business  afterwards.  For instance,  a  restaurant                                                                   
structured  under a C  corporation could  expand to  multiple                                                                   
branches  and  not start  "bumping  up  against some  of  the                                                                   
limits  of  the  LLC  business   structure."  However,  if  a                                                                   
restaurant  wanted to issue  and trade  stock, the  structure                                                                   
of the business  would need to be  changed from a LLC  to a C                                                                   
corporation because  the LLC structure limited  the amount of                                                                   
capital that  could be  brought into a  company. In  the case                                                                   
of  an S  Corporation, corporate  income tax  was shifted  to                                                                   
personal income tax.  He observed that the problem  with an S                                                                   
corporation  was that  it was  limited  to 100  shareholders,                                                                   
who must to be individuals.                                                                                                     
                                                                                                                                
3:09:13 PM                                                                                                                    
                                                                                                                                
Representative  Gara provided  an  example related  to a  law                                                                   
firm. He shared  that a law firm did not have  much assets in                                                                   
the form  of equipment, but  made a lot  of money.  He opined                                                                   
that a law firm  might have less than $50 million  in assets,                                                                   
but that  it had  high money making  potential. He  expressed                                                                   
concern that  it would  be difficult  to tax companies  under                                                                   
the asset  criteria and  wondered whether  there should  be a                                                                   
limitation, which  specified that  once a company  had earned                                                                   
certain amount of profits, it was required to pay some tax.                                                                     
Mr.  Walton  responded  that  he  was  unable  to  provide  a                                                                   
definitive answer.  He related  that generally speaking,  the                                                                   
types  of  business  that  started  as  C  corporations  were                                                                   
looking  to produce  something.  He  explained  that the  law                                                                   
firm example worked  well because the firm  provided services                                                                   
and that  the costs  associated  with a law  firm might  only                                                                   
consist of  a place  to house the  offices that provided  the                                                                   
service.   He  related   that  C   corporations  were   often                                                                   
producing  something  and  that   investment  in  assets  was                                                                   
required  to  create  the  product.  He  concluded  that  the                                                                   
problem,  which  was  brought   to  light  by  the  law  firm                                                                   
example,  was not  really characteristic  of C  corporations;                                                                   
however,  he  would gather  more  information  regarding  the                                                                   
possible   extent   to   which  it   could   characterize   C                                                                   
corporations.                                                                                                                   
                                                                                                                                
Representative   Gara  wondered   if  there   had  been   any                                                                   
discussion  regarding whether  a tax should  be imposed  on a                                                                   
qualifying  company  after  a  certain number  of  years.  He                                                                   
pointed  out that the  wholesale and  retail industries  were                                                                   
covered  by the  legislation and  inquired whether  wholesale                                                                   
liquor stores  could take advantage  of the legislation.  Mr.                                                                   
Walton  replied  that  he  did  not  believe  that  wholesale                                                                   
liquor stores were  exempted under the legislation,  but that                                                                   
he would follow  up with a definitive answer.  He shared that                                                                   
the  retail  and  wholesale  businesses   were  not  excluded                                                                   
because the  sponsor wanted to  attract businesses  that were                                                                   
selling  a   product  and  did   not  want  to   adopt  broad                                                                   
restrictions,  which might exclude  the retail and  wholesale                                                                   
sectors.                                                                                                                        
                                                                                                                                
3:13:00 PM                                                                                                                    
                                                                                                                                
Representative  Gara  stated  that  the bill  should  have  a                                                                   
cleaner  sunset  clause. Co-Chair  Stoltze  interjected  that                                                                   
the  sunset   clause  was  one   of  the  reasons   that  the                                                                   
legislation would  be held for a  day or more and  noted that                                                                   
it was the  committee's desire to create a  substantive piece                                                                   
of legislation.                                                                                                                 
                                                                                                                                
Vice-Chair Fairclough  queried whether the $50  million asset                                                                   
cap was  created at the state  level or whether  it currently                                                                   
existed under  Section 1202 of  the federal code.  Mr. Walton                                                                   
replied  that the  number  came  directly from  the  Internal                                                                   
Revenue Code.                                                                                                                   
                                                                                                                                
Vice-Chair  Fairclough inquired  if  an "Alaska  corporation"                                                                   
under the legislation  meant that the business  was in Alaska                                                                   
or that it was  simply incorporated in the  state. Mr. Walton                                                                   
responded that initially,  the requirement had  been that the                                                                   
company  had to  be  headquartered in  Alaska,  but that  the                                                                   
Department  of Law  (DOL), via  DOR,  had expressed  concerns                                                                   
that  the requirement  may  violate the  Interstate  Commerce                                                                   
Clause and  equal protection.  In response  to concerns  from                                                                   
DOL,  the  requirement   of  headquartering  in   Alaska  was                                                                   
removed  from   the  legislation.   He  explained   that  the                                                                   
exemption  removed  corporate   income  liability,  but  that                                                                   
there  was no  liability for  business  activities that  were                                                                   
conducted  out  of  Alaska.  He  stated  that  if  a  company                                                                   
incorporated  in Alaska  but did not  conduct business  here,                                                                   
it  did not  incur  corporate  income  tax liability  in  the                                                                   
state.   He  offered   that  there   were   cases  in   which                                                                   
corporations  would  incorporate  and do  business  somewhere                                                                   
else  because  of  beneficial  legal  provisions  in  another                                                                   
jurisdiction. He  concluded that  the exemption did  not help                                                                   
companies  that  were  incorporating   in  Alaska  and  doing                                                                   
business  in  another   state  because  they  would   not  be                                                                   
generating any liability.                                                                                                       
                                                                                                                                
Vice-Chair Fairclough  surmised that  the bill created  a tax                                                                   
shelter  for investment  up to  $50  million, which  required                                                                   
the investors to  "keep the assets rolling."  She pointed out                                                                   
that  the  legislation  encouraged  investors  to  invest  in                                                                   
something in  Alaska and that  it enabled angel  investors to                                                                   
put their  assets  to work and  forego the  tax expense.  She                                                                   
observed that  based on the  federal code, the  threshold cap                                                                   
for qualification  was set at  $50 million in  assets instead                                                                   
of  using  another  method. Mr.  Walton  responded  that  the                                                                   
extent of the  tax shelter for investors was  provided in the                                                                   
federal   code,  which   provided   all   the  benefits   for                                                                   
investments. He offered  that the bill created  a tax benefit                                                                   
for  startups in  Alaska  and opined  that  generally, a  tax                                                                   
shelter referred  to a measure with the purpose  of defraying                                                                   
an  income  tax  or  tax  liability   that  already  existed;                                                                   
however, the  bill did not have  that effect. He  stated that                                                                   
the  legislation  simply  exempted the  corporations  in  the                                                                   
non-prohibited  areas, as  well  as the  types of  businesses                                                                   
that  the  sponsor  was  trying  to  promote  in  Alaska.  He                                                                   
furthered that  if investors  were using Alaska's  businesses                                                                   
as  a tax  shelter, they  did so  under the  auspices of  the                                                                   
federal code.                                                                                                                   
                                                                                                                                
Co-Chair  Stoltze  referred  to the  concerns  and  questions                                                                   
that were  raised regarding HB  252 and encouraged  committee                                                                   
members to work  with the sponsor on possible  changes to the                                                                   
legislation.  Representative   Costello  responded  that  she                                                                   
welcomed  comments  and  would   work  with  members  of  the                                                                   
committee on the bill.                                                                                                          
                                                                                                                                
3:17:36 PM                                                                                                                    
                                                                                                                                
HB  252  was   HEARD  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
Co-Chair  Stoltze   handed  the  gavel  over   to  Vice-Chair                                                                   
Fairclough.                                                                                                                     
                                                                                                                                
3:17:47 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:19:44 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE CONCURRENT RESOLUTION NO. 24                                                                                            
                                                                                                                                
     Relating to the establishment and operation of a state                                                                     
     food resource development working group.                                                                                   
                                                                                                                                
3:19:44 PM                                                                                                                    
                                                                                                                                
Representative Wilson  MOVED to ADOPT the  proposed committee                                                                   
substitute  for HCR  24, Work  Draft 27-LS1383/A  (Bannister,                                                                   
2/16/12) as a working document.                                                                                                 
                                                                                                                                
Representative   Doogan   OBJECTED   for   the   purpose   of                                                                   
discussion.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  BILL  STOLTZE,  SPONSOR, explained  that  the                                                                   
resolution  was a  broad ranged  approach  that attempted  to                                                                   
improve the  local purchases of  Alaskan wild  caught seafood                                                                   
and  agricultural  products.  He offered  that  although  the                                                                   
legislation  was only a  resolution, it  already had  support                                                                   
within  the   administration.   The  legislation  worked   to                                                                   
encourage  existing  agencies  to work  together  to  enhance                                                                   
food  security  in  order  to  improve  the  amount  of  wild                                                                   
Alaskan seafood  and agricultural  products that  people were                                                                   
buying, without  the creation  of a lot  of new programs.  He                                                                   
opined  that one  of the  failures of  agriculture in  Alaska                                                                   
had been too  much innovation and expansion  and offered that                                                                   
this was true  of fish plants, dairies, and  silos. He stated                                                                   
that Alaska  had a  lot of good,  hard-working fisherman  and                                                                   
farmers who knew  how to harvest from the seas  and land. The                                                                   
resolution was an  attempt to encourage the state  to do more                                                                   
with its  resources. He  discussed including nutritious  food                                                                   
in  classrooms  and  offered   that  the  state  had  already                                                                   
"ceded"  nutrition when  Taco Bell  and Pizza  Hut were  both                                                                   
accepted  vendors  in  schools.   He  shared  his  view  that                                                                   
Alaskan  seafood should  be  served in  schools  as often  as                                                                   
possible.  He   stated  that   Commissioner  Bell   from  the                                                                   
Department  of Commerce  Community  and Economic  Development                                                                   
had  indicated that  the application  of  the resolution  was                                                                   
doable. He suggested  that due to the nature  of bureaucracy,                                                                   
state  agencies  often did  not  communicate well  with  each                                                                   
other and that  the legislation was an effort  to develop and                                                                   
purchase more  Alaskan products in  order to get  better food                                                                   
into  the  state's  pantries,   school  programs,  and  food-                                                                   
security  warehouses.  He  believed  that  the  opportunities                                                                   
were "boundless"  and pointed  out that  the legislation  was                                                                   
not currently requesting any funding.                                                                                           
                                                                                                                                
3:24:46 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  related that he had benefited  from serving                                                                   
on the Alaskan  Seafood Marketing Institute for  eight years,                                                                   
as well  as from representing  an agricultural  district that                                                                   
contained  large and  small farmers.  He  discussed the  high                                                                   
quality  of  agricultural  products  from  his  district  and                                                                   
shared a personal  story about a trip to Barrow.  He observed                                                                   
that  there was  a  possible market  in  Barrow for  Alaskan-                                                                   
grown  carrots during  the winter.  He discussed  integrating                                                                   
Alaskan   food   with   the    Department   of   Corrections'                                                                   
dormitories  and shared  the value  of the  state buying  its                                                                   
own  products.   He  stated  the  importance  of   having  an                                                                   
integrated plan  that would get the state's  commissioners to                                                                   
work  together   to  promote   Alaska's  local  seafood   and                                                                   
produce. He observed  that the larger amount  of economic and                                                                   
year-round value  would be in  Alaskan seafood, but  that the                                                                   
resolution  would be  a big win  for the  state's growers  as                                                                   
well.  He  offered that  the  Alaskan  agricultural  industry                                                                   
could  grow  more, but  that  it  needed to  develop  markets                                                                   
before  it expanded.  He  concluded  that Alaska  had  smart,                                                                   
capable, innovative,  and productive  fisherman and  farmers,                                                                   
and that  the state could  do a lot more  than it had  in the                                                                   
past.  He pointed  out  that he  would  like  to see  Alaskan                                                                   
seafood   and   agricultural    products   in   the   state's                                                                   
correctional  facilities,  universities,   and  school  lunch                                                                   
programs and  stated that he was  willing to set  aside money                                                                   
in  the capital  budget for  the creation  of a  "commodities                                                                   
food  bank." He  reiterated displeasure  that  Taco Bell  and                                                                   
Pizza Hut were served in Alaskan schools.                                                                                       
                                                                                                                                
3:29:03 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg   supported  the   resolution.  He                                                                   
discussed  that in  many ways,  the state was  at a  critical                                                                   
point.  He  mentioned   the  loss  of  federal   funding  for                                                                   
Alaska's  agricultural  research  and  the  "crisis"  at  the                                                                   
experimental farm  at the University of Alaska  Fairbanks. He                                                                   
inquired  how  Alaska  found  itself in  the  position  of  a                                                                   
crisis and  commented that  the state used  to have  a robust                                                                   
agriculture industry.  He recalled that mission  schools used                                                                   
to have  "huge gardens" and  discussed greenhouses  that used                                                                   
to  be at  various hot  springs.  Co-Chair Stoltze  responded                                                                   
that  he was  unsure how  the  state had  de-evolved to  such                                                                   
poor food  choices. He  mused how society  had gotten  to the                                                                   
point  where a  raw carrot  was often  a "foreign  substance"                                                                   
for a  child. He  offered that  successful farmers  in Alaska                                                                   
were successful  not because of  government, but in  spite of                                                                   
it  and opined  that  the  Department of  Natural  Resources'                                                                   
(DNR)   Division  of   Agriculture   could  use   a  lot   of                                                                   
improvement.  He furthered that  the Division of  Agriculture                                                                   
had  carried some  "political  baggage"  over the  years  and                                                                   
that  it  had  internal  issues.   He  stated  that  DNR  was                                                                   
responsible  for  helping  the state  produce  its  minerals,                                                                   
oil, gas,  as well  as other  land resources  and that  given                                                                   
those  responsibilities,  it   had  been  difficult  for  the                                                                   
department to  stay focused on agriculture;  the difficulties                                                                   
within  the   department  regarding  the  promotion   of  the                                                                   
state's agriculture  was one of  the reasons the  sponsor had                                                                   
brought  up  the  resolution.   He  reiterated  that  he  was                                                                   
pleased that  the administration had embraced  the resolution                                                                   
and mentioned  that while it  might not be very  substantive,                                                                   
it was  a good place  to start.  The resolution attempted  to                                                                   
get  agencies involved  and  working together.  He  concluded                                                                   
that the  legislation was  not a  perfect document,  but that                                                                   
it  was   a  best  effort   to  examine  who   was  involved;                                                                   
furthermore, it  had been successful  as a talking  point and                                                                   
a working document.                                                                                                             
                                                                                                                                
Representative  Edgmon indicated  that he  would be happy  to                                                                   
work  with Co-Chair  Stoltze  on  the resolution.  He  stated                                                                   
that he  would like  regional non-profit  associations  to be                                                                   
listed  somewhere  in  the  legislation.   He  mentioned  the                                                                   
Bristol  Bay Native Association's  work  with the local  food                                                                   
bank and  nearby schools  and talked  of trading local  foods                                                                   
within  the  areas  of  Alaska. He  related  that  his  local                                                                   
school  district  had  initiated   a  program  whereby  local                                                                   
fisherman  donated fresh  salmon to  local processers,  which                                                                   
was then served  every Friday in school. He  offered that the                                                                   
resolution  would  help  promote  other  programs  that  were                                                                   
similar  to the  fish program  in  his constituency's  school                                                                   
district.   Co-Chair  Stoltze   agreed  that   Representative                                                                   
Edgmon's region  gave a lot of  good ideas in regard  to what                                                                   
works  locally. He  discussed visiting  with fish  processors                                                                   
from  Togiak   and  spoke  of   the  value  of   using  local                                                                   
facilities and people  in Togiak, rather than  building a new                                                                   
fish plant in Anchorage.  He offered that it was  a good idea                                                                   
to  give  regional  producers  the  economic  opportunity  of                                                                   
producing a product.                                                                                                            
                                                                                                                                
3:35:39 PM                                                                                                                    
                                                                                                                                
Representative  Doogan WITHDREW  his  OBJECTION. There  being                                                                   
NO further OBJECTION, Work Draft 27-LS1383/A was ADOPTED.                                                                       
                                                                                                                                
Vice-Chair  Fairclough   commented  that  the   locally-grown                                                                   
carrots  from Co-Chair  Stoltze's district  were some  of the                                                                   
sweetest and most  nutritious carrots that could  be found in                                                                   
America.  She  noted that  the  local  growers were  doing  a                                                                   
fabulous  job  producing  carrots.  She  referenced  Alaska's                                                                   
high rates  of obesity, particularly  in schools,  and opined                                                                   
that the  resolution was a  creative idea that  would benefit                                                                   
students, farmers, and fishermen.                                                                                               
                                                                                                                                
3:36:54 PM                                                                                                                    
                                                                                                                                
BARRY  CREIGHTON, PRESIDENT,  IONIA,  INC.,  KENAI, spoke  in                                                                   
support of the  resolution. He explained that  Ionia Inc. was                                                                   
a non-profit  organization that  consisted of  a group  of 25                                                                   
families who all  had history of behavioral  health problems;                                                                   
the  families  had  banded  together  for  peer  support  and                                                                   
quickly  realized  that  food  was the  foundation  of  their                                                                   
world. He  related that Iona Inc.  used simple food,  such as                                                                   
grains,  vegetables, or  seaweed. He shared  that Ionia  Inc.                                                                   
had  applied  for a  grant  through  the Alaska  Science  and                                                                   
Technology and  the Alaska  Conservation Foundations  to find                                                                   
grain that  would grow  in Alaska.  Through the grant,  Ionia                                                                   
had  purchased a  tractor  and had  cleared  land. Ionia  had                                                                   
found  40 different  heirloom  seeds from  around the  world,                                                                   
one  of which  was  a barley  seed  from the  Himalayas.  The                                                                   
Himalayan  barley had a  very short  growing season,  grew in                                                                   
poor soil, and  flourished in turned-over muskeg  without any                                                                   
assistance.  The term "heirloom"  meant that  a seed  had not                                                                   
been hybridized.  He explained  that Iona  Inc. had  produced                                                                   
over 1,000  lbs. of seed from  one seed packet,  consumed 800                                                                   
lbs.  of whole  grain  per month,  had  cleared  30 acres  of                                                                   
land, and  were in  the process of  building a 12,000  square                                                                   
foot barn.  He furthered  that Ionia Inc.  had 2,000  feet of                                                                   
raised   garden  beds,   as   well  as   three   50-foot-long                                                                   
greenhouses.  He  related  that  the group  had  about  15-20                                                                   
children in  the Connections  Homeschool Program.  He pointed                                                                   
out  that he  had been  on the  board of  the federal  health                                                                   
clinic in Soldotna  for the last 10 years and  that over that                                                                   
period,  the rates  of  diabetes and  obesity  in Alaska  had                                                                   
risen drastically.  He offered that  food could be used  as a                                                                   
frame  of  reference  to  countermeasure  some  of  society's                                                                   
problems,  particularly  in the  area  of mental  health.  He                                                                   
shared  that  many of  Ionia  Inc.  families had  used  heavy                                                                   
psychotropic  drugs  prior to  joining  the group,  but  that                                                                   
after  adopting a  "food frame  of  reference", the  families                                                                   
had been  drug free for 25  years. He stated that  using food                                                                   
did  not cure  anything, but  that it  brought the  "symptoms                                                                   
down  the  pendulum to  idiosyncratic  behavior,  instead  of                                                                   
socio." He  stated that  from a  fiscal perspective,  not one                                                                   
member of  Ionia Inc.  spent time  at the Alaska  Psychiatric                                                                   
Institute, which had  a cost to the state of  $1,200 per day.                                                                   
He  offered  that Ionia  Inc.'s  peer  support and  food  had                                                                   
provided its members  with a foundational frame  of reference                                                                   
to approach their problems and achieve a restorative life.                                                                      
                                                                                                                                
3:40:38 PM                                                                                                                    
                                                                                                                                
CATHY  CREIGHTON, IONIA,  INC., KENAI,  testified in  support                                                                   
of  the resolution  and related  that Ionia  had a  dedicated                                                                   
website.  She  stated  that  Ionia   Inc.  had  been  growing                                                                   
healthy food  for 25  years in Alaska.  She related  that the                                                                   
group had been  mostly isolated, but that over  the past year                                                                   
people  from  the  state  had   been  coming  to  Ionia  Inc.                                                                   
desiring  information and  cooking classes.  She shared  that                                                                   
all  the  local  health  organizations   were  interested  in                                                                   
healthy food,  as well  as gardening  clubs and related  that                                                                   
Iona was  no longer  alone in its  desire for healthy  foods.                                                                   
She  opined   that  Alaskan-grown  vegetables   were  strong,                                                                   
sweet, and  nutritious  and had very  special qualities.  She                                                                   
discussed  Alaska's  grass-roots  appetite and  related  that                                                                   
having   the  partnership   of   the  government   would   be                                                                   
encouraging   and   beneficial   to  "this   movement."   She                                                                   
furthered  that  the  legislation   would  be  beneficial  to                                                                   
health  organizations,  the  state's economics,  as  well  as                                                                   
children in schools.  She added that Diane Peck,  who was the                                                                   
chair of  the Alaska Food Policy  Council and an  employee of                                                                   
Department  of  Health  and Social  Services,  had  requested                                                                   
that the  Department of  Environmental Conservation  be added                                                                   
to the resolution's list of state organizations.                                                                                
                                                                                                                                
Co-Chair Stoltze  replied that  he would take  a look  at the                                                                   
resolution.                                                                                                                     
                                                                                                                                
Mr.  Creighton stated  that  the  prior year,  the  Rasmussen                                                                   
Foundation  had started  the  Health Food  Initiative,  which                                                                   
would  serve as a  means to  deal with  health issues  across                                                                   
the state,  and related  that the  foundation was willing  to                                                                   
"pour money" into the initiative.                                                                                               
                                                                                                                                
3:44:23 PM                                                                                                                    
                                                                                                                                
DARREN  SNYDER, BOARD  MEMBER,  ALASKA  FOOD POLICY  COUNCIL,                                                                   
voiced strong  support  for the resolution.  He related  that                                                                   
the  resolution recognized  the  importance  of developing  a                                                                   
strong  and  secure  food system  that  could  provide  jobs,                                                                   
support healthy  communities, and  increase food  security to                                                                   
feed  the  hungry  and  insulate  the  state  from  potential                                                                   
disruptions  in food  supply.  Currently,  over 130  Alaskans                                                                   
had joined  the Alaska  Food Policy  Council due to  concerns                                                                   
they had  over the food  challenges facing Alaska.  He shared                                                                   
that  the  council  consisted  of  farmers,  fisherman,  food                                                                   
banks,  subsistence  users,  school  districts,  food  safety                                                                   
regulators,  processors,  educators,  families,  as  well  as                                                                   
others and that  the members had realized that  more progress                                                                   
could be made  towards healthy Alaska communities  by working                                                                   
together.  The Alaska  Food Policy  Council  had developed  a                                                                   
strategic   plan   to   guide    positive   actions   towards                                                                   
strengthening Alaska's  food systems.  He shared that  HCR 24                                                                   
and  the  proposed  State  Food   Resource  Work  Group  were                                                                   
perfectly  aligned  with  the  vision,  mission,  goals,  and                                                                   
strategies  of the  Alaska Food  Policy  Council. He  related                                                                   
that the  council was pleased  with the inclusion of  each of                                                                   
the departments  that were in the legislation,  but requested                                                                   
that the  Department of  Environmental Conservation  be added                                                                   
because it  played a  key role  within Alaska's food  system.                                                                   
He  addressed   an  earlier   question  from   Representative                                                                   
Guttenberg regarding  how the state  had found itself  in the                                                                   
position  it was  in. He  discussed America's  lower cost  of                                                                   
food since  the 1950s  and explained  that  the Lower 48  had                                                                   
"priced  out" Alaska's  ability to compete.  He related  that                                                                   
part  of the  Alaska  Food  Policy Council's  strategic  plan                                                                   
involved  strengthening  enforcement  language in  the  local                                                                   
agriculture  and  fisheries product  preference  statute,  AS                                                                   
36.15.050;  strengthening  this   statute  would  incentivize                                                                   
people  to purchase  Alaskan  products.  He related  a  story                                                                   
about the famous  and successful Anway strawberry,  which had                                                                   
been  developed   in  Haines.  He  related  that   the  Anway                                                                   
strawberry  had  diminished  partly because  people  did  not                                                                   
recognize  the importance  of a tasty,  delicious, and  fresh                                                                   
product   and   because   purchasers  had   opted   for   the                                                                   
convenience    of   frozen    strawberries.   He    addressed                                                                   
Representative Edgmon's  question regarding the  inclusion of                                                                   
some  Native  corporations  and  health  consortiums  in  the                                                                   
resolution  and   related  that   he  fully  supported   that                                                                   
concept.  He concluded  that the Alaska  Food Policy  Council                                                                   
had  worked  hard to  make  sure  it had  representation  for                                                                   
everyone on its governing board.                                                                                                
                                                                                                                                
3:49:29 PM                                                                                                                    
                                                                                                                                
LESLIE   HOUSTON,   DIRECTOR,  DIVISION   OF   ADMINISTRATIVE                                                                   
SERVICES,   DEPARTMENT   OF    CORRECTIONS,   expressed   the                                                                   
Department of  Correction's (DOC) support of  the resolution.                                                                   
She discussed  that the  department had  tracked its  Alaskan                                                                   
grown purchases  at the end of  FY 08 and that the  number of                                                                   
purchases was  "not that great,"  being anywhere  from 30,000                                                                   
to  60,000.  She  related  that   in  FY  10,  Representative                                                                   
Stoltze had brought  DNR, DOC, and some of  the Mat-Su Valley                                                                   
farmers  into  discussions regarding  Alaska  purchases;  the                                                                   
meeting had  been an  education process for  DOC, as  well as                                                                   
the farmers  regarding the best  way to sell products  to the                                                                   
state under  DOC's procurement  code. After  the meeting  was                                                                   
held,  the next  year's purchasing  in FY  11 increased  from                                                                   
30,000  to  60,000   per  year;  currently,  the   number  of                                                                   
purchases  was  at  105,000  per   year  and  the  department                                                                   
expected  FY  12's  purchases  to  exceed  that  number.  She                                                                   
mentioned  that  the  effort  to buy  local  foods  had  been                                                                   
successful, the nutritional  value of the food  was high, and                                                                   
that inmates within  DOC had commented on the  quality of the                                                                   
food. She  pointed out that DOC  had worked closely  with DNR                                                                   
on  local  purchasing and  that  currently,  DOC was  in  the                                                                   
process of  working with the  Matanuska Creamery  to purchase                                                                   
cheese. She  stated that  she was  also initiating  a process                                                                   
to start the  purchasing of local seafood and  concluded that                                                                   
DOC was fully supportive of the resolution.                                                                                     
                                                                                                                                
Co-Chair Stoltze  observed that  the state's departments  had                                                                   
been  very cooperative  in  getting  the resolution  to  this                                                                   
point.                                                                                                                          
                                                                                                                                
3:51:47 PM                                                                                                                    
                                                                                                                                
JOE  BALASH,  DEPUTY  COMMISSIONER,   DEPARTMENT  OF  NATURAL                                                                   
RESOURCES,  voiced the  department's strong  support for  the                                                                   
resolution.  He  discussed  the  economical  value  and  food                                                                   
supply  that  came  with a  strong  agricultural  sector  and                                                                   
related   that  the   department   would   assist  with   the                                                                   
resolution's effort in anyway it could.                                                                                         
                                                                                                                                
RAY  RIUTTA,  EXECUTIVE DIRECTOR,  ALASKA  SEAFOOD  MARKETING                                                                   
INSTITUTE,  DEPARTMENT OF  COMMERCE,  COMMUNITY AND  ECONOMIC                                                                   
DEVELOPMENT,  vocalized  the   institute's  support  for  the                                                                   
resolution.  He shared that  seafood was  a "brain  food." He                                                                   
related that there  was an increasing trend to  buy local and                                                                   
that  the timing  for  the resolution  was  right. He  stated                                                                   
that Alaska  had great products  and that the  Alaska Seafood                                                                   
Marketing  Institute (ASMI)  was committed  to work  together                                                                   
with   all  the   parties  that   were   involved  with   the                                                                   
resolution. He pointed  out that ASMI was serving  90 lbs. of                                                                   
Mat-Su  Valley carrots  at  the  Boston Seafood  Show,  where                                                                   
ASMI  would serve  seafood to  800  to 900  of Alaska's  best                                                                   
customers.                                                                                                                      
                                                                                                                                
Representative  Wilson asked whether  ASMI had sales  through                                                                   
the   schools   or  whether   local   districts   made   that                                                                   
complicated.  Mr.  Riutta  responded   that  the  sales  were                                                                   
primarily  handled  on  a  local level,  but  that  ASMI  was                                                                   
currently  working   on  a  national  level   school  feeding                                                                   
program, which would serve Pollock.                                                                                             
                                                                                                                                
Representative  Wilson wondered  whether  the national  level                                                                   
program included  Alaskan schools. Mr. Riutta  responded that                                                                   
it should include all schools.                                                                                                  
                                                                                                                                
3:54:43 PM                                                                                                                    
                                                                                                                                
Representative  Gara  pointed  to  the  less  than  desirable                                                                   
school  lunches and  asked Mr.  Riutta to take  the issue  to                                                                   
the ASMI  board. He related  that he  would like to  see ASMI                                                                   
file  school nutrition  legislation  in  order  to have  some                                                                   
real  guidelines  for food  in  Alaskan schools.  Mr.  Riutta                                                                   
replied that he would take the issue to the board.                                                                              
                                                                                                                                
3:55:39 PM                                                                                                                    
                                                                                                                                
BRYCE  WRIGLEY,  ALASKA  FARM  BUREAU,  DELTA  JUNCTION  (via                                                                   
teleconference),  expressed  the   bureau's  support  of  the                                                                   
resolution and  related that it  offered a collaborative  and                                                                   
comprehensive effort  to address food security  in Alaska. He                                                                   
reported that  Alaska imported about  95 percent of  the food                                                                   
it consumed  and that the state  had a three-day  to one-week                                                                   
supply of  food if  a transportation  breakdown occurred.  He                                                                   
explained  that agriculture  and  fishing were  the only  two                                                                   
industries  in Alaska  that produced  food.  He related  that                                                                   
the  resolution  encouraged a  collaborative  effort  between                                                                   
the   Alaska   Food   Policy   Council,   the   Division   of                                                                   
Agriculture,   the  Department   of   Fish   and  Game,   the                                                                   
Department of  Commerce, Community and Economic  Development,                                                                   
the   Department  of   Health   and  Social   Services,   the                                                                   
Department  of   Military  and  Veterans  Affairs,   and  the                                                                   
Department   of   Education  and   Early   Development.   The                                                                   
legislation  also  encouraged  participation  from  4-H,  the                                                                   
Future Farmers  of America, the  Alaska Farm Bureau,  as well                                                                   
as  encouraging  research by  the  University of  Alaska.  He                                                                   
furthered that the  resolution was an effort  to secure food,                                                                   
improve   health,  and   strengthen   Alaska's  economy.   He                                                                   
directed  the  committee's  attention  to  page  1,  lines  8                                                                   
through  10, which  showed that  Alaska  spends $1.5  billion                                                                   
annually  on  food;  if  the   amount  that  Alaska  produced                                                                   
increased  by 30  percent,  it  would represent  almost  $500                                                                   
million  in  additional sales  and  at  least $2  billion  of                                                                   
increased economic  activity to the state. He  shared that in                                                                   
2011, the  state's oil  revenue had  been about $5.3  billion                                                                   
and  that $2  billion would  represent almost  40 percent  of                                                                   
Alaska  unrestricted  oil revenue  from  the prior  year.  He                                                                   
opined  that  the  state  had  focused for  a  long  time  on                                                                   
keeping  oil  flowing  in  the   pipeline  and  that  it  had                                                                   
forgotten about the importance of producing its own food.                                                                       
                                                                                                                                
DANNY  CONSENSTEIN, STATE  EXECUTIVE  DIRECTOR, FARM  SERVICE                                                                   
AGENCY, UNITED  STATES DEPARTMENT OF AGGRICULTURE,  ANCHORAGE                                                                   
(via  teleconference), voiced  the  United States  Department                                                                   
of  Agriculture's  (USDA)  support  for  the  resolution  and                                                                   
mentioned that  he was also a  member of the  governing board                                                                   
of the Alaska  Food Policy Council, which also  supported the                                                                   
resolution.  He  offered  that  the USDA  was  excited  about                                                                   
being  a  partner  in the  resolution  and  that  local  food                                                                   
production  was  a priority  for  the department  because  it                                                                   
benefited  local  communities  by  helping  to  create  jobs,                                                                   
improving nutrition,  and increasing food security.  He added                                                                   
that  Alaska  was  vulnerable  to  disruptions  in  its  food                                                                   
supply and  related that  he was looking  forward to  being a                                                                   
partner  with  the state  and  its  agencies to  improve  and                                                                   
strengthen Alaska's food systems.                                                                                               
                                                                                                                                
4:00:20 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze thanked  the committee  and the public  for                                                                   
suggestions  regarding  the  resolution.  He  noted  that  he                                                                   
tried  to be  as  inclusive as  possible  when selecting  the                                                                   
legislation's   participants    and   that   he   appreciated                                                                   
Representative  Edgmon's suggestion.  He  explained that  any                                                                   
omissions were not  intentional and stated that  he wanted to                                                                   
include the  Department of Environmental Conservation  in the                                                                   
resolution  for the  areas that  it had  a constructive  role                                                                   
in,  while  still  acknowledging   that  the  department  had                                                                   
implemented  policies  that  were   not  always  popular.  He                                                                   
mentioned  that  he  would  work to  add  provisions  to  the                                                                   
resolution and  would bring it  back before the  committee at                                                                   
a future  date. He related  that he was  pleased to  see more                                                                   
people   discussing   Alaskan   fisheries   and   agriculture                                                                   
together  and offered that  there was  a constructive  spirit                                                                   
of  cooperation towards  the goals  of  better food  security                                                                   
and increasing  local, nutritious  purchases. He  agreed that                                                                   
Alaskan salmon was  a brain food and that Pollock  would be a                                                                   
preferable  alternative   to  serve   in  tacos   for  school                                                                   
lunches.                                                                                                                        
                                                                                                                                
Vice-Chair Fairclough CLOSED public testimony.                                                                                  
                                                                                                                                
4:03:23 PM                                                                                                                    
                                                                                                                                
Representative  Joule shared  that he was  excited about  the                                                                   
resolution.  He recalled  a personal  story  about living  in                                                                   
the Alaskan  communities  and related that  the community  he                                                                   
was living in would  take one day a month in  its schools "to                                                                   
be Inupiat people;"  during this time, one of  the things the                                                                   
community  brought  into  the  schools  was  local  food.  He                                                                   
shared that families  had worked together during  the harvest                                                                   
times and that  it was fun to watch families,  the community,                                                                   
and  the schools  to  be  able to  enjoy  the good  food.  He                                                                   
related  that  there  were  nutritional  issues  in  Alaska's                                                                   
schools,  jails,  residential  facilities,  state  hospitals,                                                                   
and  other facilities  and  that the  discussion  surrounding                                                                   
the resolution was  great. He stated that years  prior, there                                                                   
had been  a funding  request for a  pilot program  that would                                                                   
have replicated blueberries  in Alaska, but that  that it had                                                                   
been  vetoed.  He   related  that  he  often   wondered  what                                                                   
possibilities  Alaska had lost  as a result  of the  veto. He                                                                   
observed  that  he  managed  the  Department  of  Health  and                                                                   
Social  Services'  budget  and  that  obesity  cost  Alaskans                                                                   
somewhere  between $459  million  to $477  million per  year;                                                                   
the state's investment to fight that issue was $400,000.                                                                        
                                                                                                                                
Representative  Guttenberg  mentioned that  there  was a  new                                                                   
strain of  blueberries that  grew in  clumps like grapes.  He                                                                   
offered   that   normally,  the   problem   with   harvesting                                                                   
commercial  blueberries was  that  they fruited  in a  sparse                                                                   
pattern;  however,  an  experimental farm  in  Fairbanks  was                                                                   
working  with  local  farmers  on  the  new  blueberries.  He                                                                   
related that there  was a lot of research being  conducted on                                                                   
and  off  university  campuses   regarding  the  benefits  of                                                                   
Alaskan   blueberries   and  mentioned   that   the   state's                                                                   
blueberries    contained    incredibly   high    levels    of                                                                   
antioxidants.  He shared that  agricultural programs  outside                                                                   
of   Alaska   were  requesting   samples   of   the   state's                                                                   
blueberries  in  order to  try  to  grow them  elsewhere.  He                                                                   
stated  that hopefully,  the secret  to Alaska's  blueberries                                                                   
was  the  state's  extended  periods   of  light  during  the                                                                   
growing season.                                                                                                                 
                                                                                                                                
4:07:46 PM                                                                                                                    
                                                                                                                                
Representative   Wilson  remarked   on   the  importance   of                                                                   
nutrition  in the  state's  schools.  She observed  that  the                                                                   
state  spent  a  considerable  amount  of  money  on  serving                                                                   
breakfasts  and lunches in  schools, but  that the  meals had                                                                   
very little  nutritional  value. She offered  that the  value                                                                   
in healthy food  was found not only in eating  well, but also                                                                   
in learning and  teaching others to grow their  own food. She                                                                   
mentioned  that the school  in Tok  already had a  greenhouse                                                                   
on location and  that the middle school in  North Pole, which                                                                   
was in her district,  was making efforts in  that regard. She                                                                   
concluded   that   time   spent  with   family   and   having                                                                   
nutritional  food  could not  be  replaced by  a  can from  a                                                                   
store.                                                                                                                          
                                                                                                                                
Representative Gara  believed that one  of his failings  as a                                                                   
legislator  had been that  he had  never introduced  a school                                                                   
nutrition  bill. He  opined  that if  the  state was  serious                                                                   
about  fighting  obesity  and  creating a  market  for  local                                                                   
foods, part  of the solution had  to be standards  for school                                                                   
lunches.  He  pointed  out  that   school  lunches  contained                                                                   
simple  carbohydrates, high  amounts of  saturated fats,  and                                                                   
sometimes  trans  fats,  all  of  which  caused  obesity.  He                                                                   
expressed  regret that he  never carried  a bill with  better                                                                   
standards  for school lunches  and hoped  that someone  would                                                                   
introduce such a bill in the future.                                                                                            
                                                                                                                                
Vice-Chair Fairclough  discussed a zero fiscal  note from the                                                                   
Legislature.   She   requested   that  amendments   for   the                                                                   
resolution be submitted to Co-Chair Stoltze's office.                                                                           
                                                                                                                                
Co-Chair   Stoltze  requested   that   suggestions  for   the                                                                   
resolution  come in  the form  of concepts  or ideas,  rather                                                                   
than amendments.  He opined that  it would be  more efficient                                                                   
to  incorporate  changes  into  a  committee  substitute.  He                                                                   
reiterated  that   he  was  open  for  ideas   and  that  the                                                                   
resolution  was  an inclusive  document;  however,  it  would                                                                   
probably not  be quite as  open to all  comers as  the Alaska                                                                   
Food Policy Council  due to certain restrictions  and efforts                                                                   
to  keep the  document  focused. He  stated  that his  office                                                                   
could  figure  out   how  integrate  the  changes   with  the                                                                   
existing language of the resolution.                                                                                            
                                                                                                                                
Vice-Chair  Fairclough  noted  that the  Alaska  Food  Policy                                                                   
Council's strategic plan was included in member's packets.                                                                      
                                                                                                                                
4:11:24 PM                                                                                                                    
                                                                                                                                
HCR  24  was   HEARD  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
Vice-Chair  Fairclough  discussed   the  following  meeting's                                                                   
agenda.                                                                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                   
4:12:06 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 4:12 p.m.                                                                                          

Document Name Date/Time Subjects
CS (L&C) House Bill 252 Sectional Summary.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-26 USC 1202.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-Alaska Chamber support letter color.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-Brent Fisher email.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-Alaska Chamber support letter color.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
Explanation of Changes - HB252 vs. CSHB252(L&C).pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-Andrew Mitton email.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-Allan Johnston Support Letter.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-State Positions-AK Chamber.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 Supporting Documents-Kauffman Foundation Report.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HCR24-NEW FN- LEG- 2-28-12.pdf HFIN 2/29/2012 1:30:00 PM
HCR 24
HCR 24 Sponsor Statementpdf.pdf HFIN 2/29/2012 1:30:00 PM
HCR 24
HB252 Fairbanks Ec. Dev Corp Letter.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HB252 CS WORKDRAFT 27-LS1085-D 2.29.12.pdf HFIN 2/29/2012 1:30:00 PM
HB 252
HCR 24 Snyder Testimony.pdf HFIN 2/29/2012 1:30:00 PM
HCR 24
HCR24 Alaska Food Policy Council Strategic Plan.pdf HFIN 2/29/2012 1:30:00 PM
HCR 24
HB252-NEW-DOR-TAX-02-29-12.pdf HFIN 2/29/2012 1:30:00 PM
HB 252