Legislature(2013 - 2014)HOUSE FINANCE 519

03/14/2014 08:30 AM FINANCE


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08:32:51 AM Start
08:33:46 AM HB75
09:24:47 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 75 CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 14, 2014                                                                                            
                         8:32 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
8:32:51 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 8:32 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Lindsey Holmes                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Paul Seaton;  Candace  Winkler, CEO,  Alaska                                                                    
Community Foundation;  Nancy DeCherney,  Executive Director,                                                                    
Juneau  Arts   and  Humanities  Council;   Jordan  Marshall,                                                                    
External   Affairs   Manager,   Rasmuson   Foundation;   Dan                                                                    
DeBartolo,  Permanent  Fund  Division  Director;  Mr.  Chris                                                                    
Christensen   III,  Associate   Vice  President   for  State                                                                    
Relations, University of Alaska.                                                                                                
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Mike Walsh, Vice President, Foraker Group.                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 75     CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY                                                                             
                                                                                                                                
          HB 75 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 75                                                                                                             
                                                                                                                                
     "An  Act  repealing   certain  audit  requirements  for                                                                    
     entities  receiving contributions  from permanent  fund                                                                    
     dividends; requiring  each campus of the  University of                                                                    
     Alaska  to apply  to be  included  on the  contribution                                                                    
     list for  contributions from permanent  fund dividends;                                                                    
     and requiring  a university to  pay an  application fee                                                                    
     for each  campus separately listed on  the contribution                                                                    
     list for contributions from permanent fund dividends."                                                                     
                                                                                                                                
8:33:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PAUL  SEATON introduced  the bill.  He stated                                                                    
that the  bill changed  the provision  related to  the Pick,                                                                    
Click, Give campaign  and the Permanent Fund.  He noted that                                                                    
the  campaign  had  an  audit  provision  for  a  non-profit                                                                    
organization with  a budget greater than  $250 thousand. The                                                                    
audit required  a Certified  Public Accountant  (CPA), which                                                                    
cost approximately  $7 thousand  to $12 thousand.  Most non-                                                                    
profit organizations  did not earn  the amount spent  on the                                                                    
audit  participating in  the campaign.  He pointed  out that                                                                    
the  federal  requirements   were  different.  He  mentioned                                                                    
problems encountered by  non-profit organizations throughout                                                                    
the state. He offered to answer members' questions.                                                                             
                                                                                                                                
Co-Chair Stoltze OPENED public testimony.                                                                                       
                                                                                                                                
8:37:17 AM                                                                                                                    
                                                                                                                                
MIKE   WALSH,    VICE   PRESIDENT,   FORAKER    GROUP   (via                                                                    
teleconference),  appreciated the  efforts to  allow greater                                                                    
accessibility  to   the  Pick,  Click,  Give   campaign.  He                                                                    
advocated  for the  aspirations  of HB  75  via the  Foraker                                                                    
Group.  He wished  to  eliminate the  barrier  of the  audit                                                                    
requirement  for smaller  organizations. He  appreciated the                                                                    
value of the  audit requirement, but hoped  to eliminate the                                                                    
obstacles   related  to   state   requirements.  His   group                                                                    
advocated  for  tying  the   state  requirement  to  federal                                                                    
requirements;  a  federal  audit  would  suffice  the  state                                                                    
requirement  in situations  where  an organization  required                                                                    
it.                                                                                                                             
                                                                                                                                
8:40:00 AM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze clarified Mr. Walsh's name and position.                                                                       
                                                                                                                                
Mr. Walsh  responded that he  was the vice president  of the                                                                    
Foraker Group.                                                                                                                  
                                                                                                                                
8:40:51 AM                                                                                                                    
                                                                                                                                
CANDACE  WINKLER, CEO,  ALASKA COMMUNITY  FOUNDATION, stated                                                                    
her  foundation had  nine affiliates  throughout the  state.                                                                    
She  mentioned that  the foundation  housed and  managed the                                                                    
outreach and coordination for the  Pick, Click, Give project                                                                    
fund.   She  stated   that  the   foundation  served   as  a                                                                    
beneficiary  agency.   She  also   served  on   the  Foraker                                                                    
operations board with  other non-profit organization leaders                                                                    
around  the state.  She spoke  to  the record  participation                                                                    
rates above 6 percent; the  program was full of potential to                                                                    
support all  non-profit organizations around the  state. She                                                                    
concurred with  Mr. Walsh  regarding the  audit requirements                                                                    
and his suggestion  related to the federal  audit. She added                                                                    
the  potential for  enhancements to  the program  offered by                                                                    
the university system.                                                                                                          
                                                                                                                                
8:43:58 AM                                                                                                                    
                                                                                                                                
Ms. Winkler discussed the  Foraker operations board's survey                                                                    
coordinating  with  participating non-profit  organizations.                                                                    
She noted  the critical  value of coordination  and outreach                                                                    
determined by the survey. She  stated that the best strategy                                                                    
for sustainability  required a 7 percent  fee accompanied by                                                                    
donations  that  would  help to  support  the  program.  The                                                                    
strategy was deemed reasonable for sustaining the effort.                                                                       
                                                                                                                                
Co-Chair Stoltze  noted that the  Rasmuson foundation  had a                                                                    
three year commitment to administrate the campaign.                                                                             
                                                                                                                                
Ms.  Winkler  agreed  and  pointed  out  that  the  Rasmuson                                                                    
foundation  invested heavily  in  the first  three years  to                                                                    
ensure that the state  did not incur administrative expenses                                                                    
for the program. The recent  $250 filing fee was provided to                                                                    
the state to manage the program.                                                                                                
                                                                                                                                
Co-Chair  Stoltze asked  about  sustainability. He  wondered                                                                    
about  the   threshold  for   supporting  the   campaign  in                                                                    
perpetuity.                                                                                                                     
                                                                                                                                
Ms. Winkler replied  that activity outside of  the state was                                                                    
supported by  private philanthropy, which  helped individual                                                                    
non-profit  organizations to  build  their individual  donor                                                                    
pool.  She   stressed  that  the  corporate   funders  would                                                                    
eventually  move on,  which was  why  the non-profit  sector                                                                    
must create a proactive mechanism to address the issue.                                                                         
                                                                                                                                
8:47:30 AM                                                                                                                    
                                                                                                                                
Representative  Gara  was  comfortable with  private  sector                                                                    
management of  the program.  He asked  about the  portion of                                                                    
donations  required  for  non-profit organizations  to  help                                                                    
fund the campaign.                                                                                                              
                                                                                                                                
Ms.  Winkler  explained  that  a   7  percent  donation  was                                                                    
discussed.  She pointed  out that  a website  donation would                                                                    
require a  3 percent  charge for  the transaction  cost. The                                                                    
current  practice was  no  transaction  cost for  non-profit                                                                    
organizations. She noted  that most organizations recognized                                                                    
that  a  cost  was  associated  with  fundraising  or  other                                                                    
activities.                                                                                                                     
                                                                                                                                
8:48:59 AM                                                                                                                    
                                                                                                                                
Representative  Gara  recognized  that   the  bill  did  not                                                                    
implement the  additional 7  percent for  transaction costs.                                                                    
He asked about the authority to impose the cost.                                                                                
                                                                                                                                
Ms.  Winkler   replied  that  the  bill   would  require  an                                                                    
amendment imposing the transaction  cost. She spoke in favor                                                                    
of potential enhancements to the proposed legislation.                                                                          
                                                                                                                                
Representative Gara  asked if the  money would be  routed to                                                                    
the Permanent Fund.                                                                                                             
                                                                                                                                
Ms. Winkler suggested that  when individuals donated through                                                                    
the  campaign, the  Department of  Revenue would  receive an                                                                    
aggregate amount  along with the  donation details  and pass                                                                    
the funds on to the United  Way, who would provide the funds                                                                    
to the  various non-profit  organizations. United  Way would                                                                    
assess  the  7   percent  for  the  project   fund  for  the                                                                    
continuation  of the  campaigns  efforts. The  goal was  for                                                                    
program sustainability,  which might  take another  three to                                                                    
five years.                                                                                                                     
                                                                                                                                
8:50:35 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  imagined  that  the funds  would  not  be                                                                    
comingled with the state treasury.                                                                                              
                                                                                                                                
Representative  Edgmon  asked  about statistics  related  to                                                                    
rural Alaska contributions.                                                                                                     
                                                                                                                                
Ms. Winkler was unsure about the rural Alaskan statistics.                                                                      
                                                                                                                                
Representative  Edgmon  understood  that some  of  the  non-                                                                    
profit organizations originated from rural Alaska.                                                                              
                                                                                                                                
Ms.  Winkler added  that  the  non-profits profited  because                                                                    
affiliates in the rural areas profited.                                                                                         
                                                                                                                                
8:52:06 AM                                                                                                                    
                                                                                                                                
NANCY  DECHERNEY,   EXECUTIVE  DIRECTOR,  JUNEAU   ARTS  AND                                                                    
HUMANITIES  COUNCIL stated  that  her  organization had  not                                                                    
benefited from  the campaign, as  their budget  was slightly                                                                    
over  the amount  required for  an audit.  She testified  in                                                                    
favor of the legislation.                                                                                                       
                                                                                                                                
Ms.  DeCherney  understood  that   the  bill  was  heard  in                                                                    
committee in previous sessions.                                                                                                 
                                                                                                                                
Representative  Munoz  pointed  out that  if  the  financial                                                                    
audit  requirement   were  eliminated,   the  accountability                                                                    
requirements would remain.                                                                                                      
                                                                                                                                
Ms.  DeCherney   understood  that  all  of   the  non-profit                                                                    
organizations required a 990 tax  document with the Internal                                                                    
Revenue Service for eligibility  in the campaign. She stated                                                                    
that the profit and loss  were reviewed. She stated that the                                                                    
cost  for   the  audit   would  be   $8  thousand   for  her                                                                    
organization,  which  would  be  a  greater  cost  than  the                                                                    
benefit  received from  participating in  the campaign.  She                                                                    
mentioned that her organization would  be happy to provide 7                                                                    
percent of a donation for administrative needs.                                                                                 
                                                                                                                                
8:55:00 AM                                                                                                                    
                                                                                                                                
Representative Thompson  asked if  a 990 tax  document filed                                                                    
by a non-profit organization must  be signed and approved by                                                                    
a CPA.                                                                                                                          
                                                                                                                                
Ms. DeCherney concurred.                                                                                                        
                                                                                                                                
8:55:39 AM                                                                                                                    
                                                                                                                                
JORDAN   MARSHALL,   EXTERNAL  AFFAIRS   MANAGER,   RASMUSON                                                                    
FOUNDATION, stated that he helped  implement the program. He                                                                    
noted  that  the  campaign  contributors'  names  were  held                                                                    
anonymous,  making  it  difficult to  answer  Representative                                                                    
Edgmon's  questions about  contributions from  rural Alaska.                                                                    
He explained  that the  data available  indicated equivalent                                                                    
participation throughout the state.                                                                                             
                                                                                                                                
Co-Chair  Stoltze  asked for  a  response  to Ms.  Winkler's                                                                    
testimony.                                                                                                                      
                                                                                                                                
Mr.   Marshall   noted    that   the   Rasmuson   foundation                                                                    
participated in a Pick, Click,  Give group with each partner                                                                    
agreeing in  the goal of sustainability.  He recognized that                                                                    
86  percent of  participating  organizations  felt that  the                                                                    
statewide  coordination  and  outreach  contributed  to  the                                                                    
success of the program.                                                                                                         
                                                                                                                                
8:58:34 AM                                                                                                                    
                                                                                                                                
Representative Gara  asked if a  statute was  necessary when                                                                    
the United Way provided administration for the program.                                                                         
                                                                                                                                
Mr.  Marshall replied  that the  collection  of fees  worked                                                                    
most effectively as part of a statute.                                                                                          
                                                                                                                                
Co-Chair Stoltze  understood that  dues were  more difficult                                                                    
to obtain.                                                                                                                      
                                                                                                                                
Mr.  Marshall   credited  the  program  for   its  efficient                                                                    
operations.                                                                                                                     
                                                                                                                                
Co-Chair  Stoltze   understood  that  the  premise   of  the                                                                    
campaign  was  similar  to  the   process  proposed  by  the                                                                    
legislation and the discussed administrative fee.                                                                               
                                                                                                                                
Mr. Marshall agreed.                                                                                                            
                                                                                                                                
9:00:16 AM                                                                                                                    
                                                                                                                                
DAN   DEBARTOLO,  PERMANENT   FUND  DIVISION   DIRECTOR  was                                                                    
available to answer questions.                                                                                                  
                                                                                                                                
Co-Chair  Stoltze asked  about the  application process  and                                                                    
the fiscal framework.                                                                                                           
                                                                                                                                
Mr. DeBartolo replied that the  bill would have no effect on                                                                    
the   division's   mission    or   operations   related   to                                                                    
applications or  dividends. He noted  no fiscal  impact from                                                                    
the  bill. The  $250  fee collected  during the  application                                                                    
process was  routed to the  Department of  Revenue's account                                                                    
for administrative costs related  to the campaign. He stated                                                                    
that  programmers were  not a  component  of the  division's                                                                    
purview.  The  division  contracted   with  United  Way  who                                                                    
received the program applications  to vet the organizations,                                                                    
tax documents and audit materials.                                                                                              
                                                                                                                                
Mr. DeBartolo  discussed the  division's expenditure  of $40                                                                    
thousand  for the  contracted services  from United  Way. He                                                                    
understood that the contract rate  was scheduled to increase                                                                    
in 2014. The  division was authorized a portion  of the fees                                                                    
collected; the balance received  was used for administrative                                                                    
costs.   The   division   spent  the   funds   received   on                                                                    
programmers' hourly wages.                                                                                                      
                                                                                                                                
9:04:30 AM                                                                                                                    
                                                                                                                                
Representative  Costello asked  about  an organization  that                                                                    
was mistakenly left off of the list this year.                                                                                  
                                                                                                                                
Mr.  DeBartolo  was  unaware of  an  organization  that  was                                                                    
mistakenly removed from  the list. He stated  that the audit                                                                    
requirements were sometimes a problem  and led to a decrease                                                                    
in the listing  of names. He stated  that some organizations                                                                    
missed the filing deadline.                                                                                                     
                                                                                                                                
9:06:03 AM                                                                                                                    
                                                                                                                                
Representative   Costello   asked  about   the   application                                                                    
process.                                                                                                                        
                                                                                                                                
Mr. DeBartolo  responded that the application  process began                                                                    
in  the beginning  of  the  year and  was  the  same as  the                                                                    
dividend application window. If  the applications were late,                                                                    
they were removed from the list.                                                                                                
                                                                                                                                
9:06:55 AM                                                                                                                    
                                                                                                                                
Representative   Thompson   asked  about   programmers   and                                                                    
application  fees.  He  asked  about  the  hourly  rate  and                                                                    
benefits.                                                                                                                       
                                                                                                                                
Mr.  DeBartolo  replied that  rate  was  based on  the  mean                                                                    
programmer salary.  The programmers tracked their  hours and                                                                    
multiplied them  by the  rate paid by  the division.  He was                                                                    
unsure about benefits.                                                                                                          
                                                                                                                                
Representative Thompson requested an answer about benefits.                                                                     
                                                                                                                                
9:08:07 AM                                                                                                                    
                                                                                                                                
Representative Wilson asked if  the department supported the                                                                    
bill.                                                                                                                           
                                                                                                                                
Mr. DeBartolo replied yes.                                                                                                      
                                                                                                                                
Co-Chair Stoltze asked  if the division was  ready to absorb                                                                    
the cost without the help of philanthropists.                                                                                   
                                                                                                                                
Mr. DeBartolo replied that he  was not authorized to provide                                                                    
an answer.                                                                                                                      
                                                                                                                                
Co-Chair  Stoltze  wondered  about   an  estimated  rate  to                                                                    
sustain    the   management    of   the    program   without                                                                    
philanthropists. He asked if 7 percent would suffice.                                                                           
                                                                                                                                
Mr.  DeBartolo replied  that the  division  would require  a                                                                    
gross contribution of greater than 7 percent.                                                                                   
                                                                                                                                
Co-Chair Stoltze appreciated the director's candor.                                                                             
                                                                                                                                
9:10:17 AM                                                                                                                    
                                                                                                                                
Representative Gara thought that if  the United Way was able                                                                    
to administrate for less than  7 percent, they might provide                                                                    
a better option.                                                                                                                
                                                                                                                                
Mr.  DeBartolo  agreed that  the  United  Way was  the  best                                                                    
entity to provide the administrative service.                                                                                   
                                                                                                                                
9:11:24 AM                                                                                                                    
                                                                                                                                
MR.  CHRIS CHRISTENSEN  III,  ASSOCIATE  VICE PRESIDENT  FOR                                                                    
STATE  RELATIONS,  UNIVERSITY  OF  ALASKA,  appreciated  the                                                                    
university's  ability to  participate  in  the campaign.  He                                                                    
noted that  the university raised approximately  $6 thousand                                                                    
to $28  thousand through the  campaign. He pointed  out that                                                                    
ExxonMobil   had    generously   offered   to    match   the                                                                    
contributions. The  university foundation had agreed  to use                                                                    
private money to pay the  application fees for participation                                                                    
in the program for the first year.                                                                                              
                                                                                                                                
Representative   Gara  asked   if  the   bill  required   an                                                                    
application fee for each campus.                                                                                                
                                                                                                                                
Mr. Christensen  replied that a  fee was required  from each                                                                    
campus that chose to participate.                                                                                               
                                                                                                                                
Representative Gara  asked if the university  would allow an                                                                    
interested campus to participate.                                                                                               
                                                                                                                                
Mr.  Christensen  believed  that the  application  would  be                                                                    
allowed.                                                                                                                        
                                                                                                                                
9:14:24 AM                                                                                                                    
                                                                                                                                
Representative Edgmon  asked about  the Bristol  Bay Campus.                                                                    
He wondered  if the money  would flow through  the Fairbanks                                                                    
campus if the Bristol Bay campus chose to participate.                                                                          
                                                                                                                                
Mr. Christensen replied that he  would provide the answer to                                                                    
the committee at a later date.                                                                                                  
                                                                                                                                
Representative  Wilson did  not see  the benefit  in listing                                                                    
individual universities.                                                                                                        
                                                                                                                                
Mr.  Christensen replied  that contributors  appreciated the                                                                    
ability  to  direct  donations  to  individual  programs  or                                                                    
campuses.                                                                                                                       
                                                                                                                                
Co-Chair  Stoltze   recalled  prior  testimony   related  to                                                                    
fundraising in a previous session.                                                                                              
                                                                                                                                
Mr. Christensen stated that  the contributions were directed                                                                    
toward individual campuses.                                                                                                     
                                                                                                                                
9:17:08 AM                                                                                                                    
                                                                                                                                
Representative Gara  commented that  the process  might lead                                                                    
to zero profit for the university.                                                                                              
                                                                                                                                
Co-Chair   Stoltze   believed  that   appropriators   viewed                                                                    
donations as an endorsement rather than a detriment.                                                                            
                                                                                                                                
Representative Gara  hoped that donations from  the campaign                                                                    
would not lessen university appropriations.                                                                                     
                                                                                                                                
Mr.  Christensen   replied  that   such  a   practice  would                                                                    
discourage private giving.                                                                                                      
                                                                                                                                
9:19:07 AM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze CLOSED public testimony.                                                                                       
                                                                                                                                
Representative Seaton  supported most of  the sustainability                                                                    
ideas  discussed  in  the  hearing. He  was  unaware  of  an                                                                    
organization  refusing  to  participate  if  the  7  percent                                                                    
administrative fee  was implemented.  He clarified  that the                                                                    
university  would  apply  by campus.  He  noted  30  letters                                                                    
supporting  the  bill,  which   were  included  in  members'                                                                    
packets.                                                                                                                        
                                                                                                                                
Co-Chair  Stoltze  enjoyed  the  variety  of  testimony  and                                                                    
looked forward to working with the administration.                                                                              
                                                                                                                                
Representative   Costello  added   that   Bill  Thomas   was                                                                    
instrumental  in the  program. She  enjoyed the  use of  the                                                                    
word  "enhancement"  versus   "proposed  amendment"  by  Ms.                                                                    
Winkler during her testimony.                                                                                                   
                                                                                                                                
9:22:57 AM                                                                                                                    
                                                                                                                                
Representative Thompson  appreciated the bill's  intent, the                                                                    
updates and the  sponsor's efforts. He stated  that his wife                                                                    
owned a CPA practice.                                                                                                           
                                                                                                                                
Co-Chair Stoltze believed that it  was useful to declare the                                                                    
issues and interests of committee members.                                                                                      
                                                                                                                                
HB  75  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
9:24:47 AM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 9:24 a.m.                                                                                          

Document Name Date/Time Subjects
HB 75 About Pick.Click.Give..pdf HFIN 3/14/2014 8:30:00 AM
HB 75
HB 75 Alaska Statute 43.23.062.pdf HFIN 3/14/2014 8:30:00 AM
HB 75
HB 75 IRS Form 990 for tax-exempt organizations.pdf HFIN 3/14/2014 8:30:00 AM
HB 75
HB 75 Letters of Support - 2014 update.pdf HFIN 3/14/2014 8:30:00 AM
HB 75
HB 75 PickClickGive Application 2013.pdf HFIN 3/14/2014 8:30:00 AM
HB 75
HB 75 Sponsor Statement.pdf HFIN 3/14/2014 8:30:00 AM
HB 75