Legislature(2013 - 2014)HOUSE FINANCE 519

04/16/2014 08:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Moved HCS CSSB 169(HSS) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 16, 2014                                                                                            
                         8:38 a.m.                                                                                              
8:38:21 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 8:38 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Brittany  Hutchinson, Staff,  Senator Bishop;  Jane Pierson,                                                                    
Staff,   Representative  Steve   Thompson;  Rudi   Vonimhof,                                                                    
President,   Delta   Leasing,  Anchorage;   Angela   Rodell,                                                                    
Commissioner,   Department  of   Revenue;  Michael   Barber,                                                                    
Assistant  Attorney  General,  Department  of  Law;  Senator                                                                    
Cathy  Geissel,   Sponsor;  Jill  Lewis,   Deputy  Director,                                                                    
Division of  Public Health, Department of  Health and Social                                                                    
Services; Michael Pawlowski,  Deputy Commissioner, Strategic                                                                    
Finance,  Department of  Revenue; Joe  Balash, Commissioner,                                                                    
Department of Natural Resources.                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
Sam   Robert  Brice,   Brice   Companies,  Fairbanks;   Ryan                                                                    
Peterkin,  Magtec Alaska,  Kenai; Doug  Johnson, CFO,  Tyler                                                                    
CSSB 138(FIN) am                                                                                                                
          GAS PIPELINE; AGDC; OIL & GAS PROD. TAX                                                                               
          CSSB 138(FIN)  am was HEARD and  HELD in committee                                                                    
          for further consideration.                                                                                            
CSSB 169(FIN)                                                                                                                   
         IMMUNIZATION PROGRAM; VACCINE ASSESSMENTS                                                                              
          HCSCSSB  169(HSS) was  REPORTED  out of  committee                                                                    
          with a  "do pass" recommendation and  with one new                                                                    
          fiscal   note   from   Fund  Transfers   for   the                                                                    
          Department of Health and  Social Services, one new                                                                    
          fiscal  note from  the  Department  of Health  and                                                                    
          Social  Services,  one  new  indeterminate  fiscal                                                                    
          note  from the  Department  of  Health and  Social                                                                    
          Services,  one  previously published  zero  fiscal                                                                    
          note:  FN4  (CED),  and one  previously  published                                                                    
          indeterminate fiscal note: FN5 (ADM).                                                                                 
CSSB 178(FIN)                                                                                                                   
          PASSENGER & REC. VEHICLE RENTAL TAX                                                                                   
          CSSB 178(FIN) was HEARD and  HELD in committee for                                                                    
          further consideration.                                                                                                
CSSB 191(FIN)                                                                                                                   
          GENERAL OBLIGATION BOND FUND TRANSFER                                                                                 
          CSSB 191(FIN) was HEARD and  HELD in committee for                                                                    
          further consideration.                                                                                                
CS FOR SENATE BILL NO. 191(FIN)                                                                                               
     "An Act  relating to the  authority of  the Legislative                                                                    
     Budget  and Audit  Committee to  approve the  temporary                                                                    
     transfer   of   money   from  the   general   fund   to                                                                    
     construction funds  or accounts;  and providing  for an                                                                    
     effective date."                                                                                                           
CS FOR SENATE BILL NO. 178(FIN)                                                                                               
     "An Act relating to the passenger and recreational                                                                         
     vehicle rental taxes; and providing for an effective                                                                       
8:38:21 AM                                                                                                                    
BRITTANY HUTCHINSON, STAFF, SENATOR  BISHOP, offered a brief                                                                    
overview of the bill.                                                                                                           
8:40:59 AM                                                                                                                    
Co-Chair  Stoltze asked  where the  bulk of  the rental  tax                                                                    
monies had been spent to date.                                                                                                  
Ms. Hutchinson replied that she did not know.                                                                                   
8:41:14 AM                                                                                                                    
Co-Chair Stoltze  asserted that the  funds was one  that had                                                                    
been preyed upon by many interests.                                                                                             
Co-Chair Austerman discussed Page 1, line 5:                                                                                    
    Sec. 43.52.010. Levy of passenger and recreational                                                                        
     vehicle rental tax.                                                                                                      
Co-Chair  Austerman understood  that a  person could  fly to                                                                    
Anchorage and rent a recreation  vehicle for 30 days without                                                                    
being subject to the rental tax.                                                                                                
Ms. Hutchinson replied in the affirmative.                                                                                      
Co-Chair Austerman  surmised that the objective  of the bill                                                                    
was to exempt recreational vehicles from the tax.                                                                               
Ms. Hutchinson replied  that the main objective  had been to                                                                    
exempt  passenger vehicles  but  that  drafters had  thought                                                                    
that in  order to  better organize the  statute recreational                                                                    
vehicles should be included.                                                                                                    
Co-Chair  Austerman  asserted  that   the  addition  of  the                                                                    
recreational vehicles created a  stumbling block and muddied                                                                    
the intent.                                                                                                                     
8:43:27 AM                                                                                                                    
Representative Wilson  expressed her  concern that  the bill                                                                    
would result in a loss of revenue.                                                                                              
Ms.  Hutchinson responded  that  the  Department of  Revenue                                                                    
(DOR),  which had  prepared  the fiscal  note,  had noted  a                                                                    
minimal loss of revenue.                                                                                                        
Co-Chair  Stoltze asked  for a  projection of  the range  of                                                                    
revenue loss.                                                                                                                   
Representative  Wilson noted  that the  regulation had  just                                                                    
been  changed,  which had  seemed  to  have cleared  up  any                                                                    
misinterpretation  of   the  statute.  She   maintained  her                                                                    
concern  that if  the bill  passed the  revenue loss  to the                                                                    
state would be significant.                                                                                                     
8:45:35 AM                                                                                                                    
AT EASE                                                                                                                         
8:45:55 AM                                                                                                                    
JANE PIERSON, STAFF,  REPRESENTATIVE STEVE THOMPSON, thought                                                                    
that the committee would have  a greater understanding as to                                                                    
why the  bill existed  if they listened  to some  public and                                                                    
invited testimony. She  said that she had  worked for months                                                                    
with the department in trying to craft and agreeable bill.                                                                      
Co-Chair Stoltze agreed.                                                                                                        
Co-Chair Stoltze OPENED public testimony.                                                                                       
8:48:12 AM                                                                                                                    
SAM   ROBERT   BRICE,   BRICE  COMPANIES,   FAIRBANKS   (via                                                                    
teleconference),  testified  in  support  of  the  bill.  He                                                                    
stated that most of his  company's vehicle rental use was on                                                                    
the  North  Slope  by producers  and  support  companies  on                                                                    
private roads.  He said  that his facility  was on  a public                                                                    
road at  the end of  the Dalton  Highway, but 99  percent of                                                                    
the rental activity  of the vehicles was on  the private oil                                                                    
field roads. He relayed that  often the length of the rental                                                                    
term was unknown. He said  that his company's liability went                                                                    
back to 2010,  the first year of light  vehicle rental, they                                                                    
paid $31,000 as not to  incur further penalties. He believed                                                                    
that the  bill helped clarify  the intent of the  statue. He                                                                    
thought that  there was  more work  to be  done with  DOR so                                                                    
that all  parties were  clear as to  what was  applicable to                                                                    
the rental tax.                                                                                                                 
8:50:47 AM                                                                                                                    
Co-Chair  Austerman asked  whether  the testifier's  company                                                                    
rented  recreational vehicles.  Mr.  Brice  replied no.  Co-                                                                    
Chair  Austerman   asked  whether  he  had   an  opinion  on                                                                    
recreational  vehicles being  added to  the bill.  Mr. Brice                                                                    
shared  that his  company  mainly  rented half-ton  pick-ups                                                                    
that were used on private roads.                                                                                                
8:51:26 AM                                                                                                                    
Co-Chair  Stoltze asked  if  the  recreational vehicles  had                                                                    
been added  because they  are one of  two types  of vehicles                                                                    
taxed under current law.                                                                                                        
Ms.  Pierson replied  yes. She  noted that  the recreational                                                                    
vehicle rental fee was 3 percent.                                                                                               
Representative Costello asked how  much back taxes were owed                                                                    
to the state by Mr. Brice.                                                                                                      
Mr. Brice  replied that  the amount  was not  disclosed. All                                                                    
light vehicle rentals rented for  less than 90 days would be                                                                    
applicable. He stated  that he went back  and researched his                                                                    
record in  order to come  up with the $31,000  of liability,                                                                    
which the  company had not  collected because they  had been                                                                    
unaware that they were expected to collect the tax.                                                                             
8:52:57 AM                                                                                                                    
Representative  Gara  asked  whether  Mr.  Brice's  business                                                                    
would  be effected  if the  exemption  taxed rentals  longer                                                                    
than a 40 day period.                                                                                                           
Mr.  Brice replied  that  the  days of  rental  were not  as                                                                    
important as was the interpretation  concerning what kind of                                                                    
vehicles met  the requirement for  vehicles that  fell under                                                                    
the  tax.  He reiterated  that  often  the duration  of  the                                                                    
vehicle  rental was  unknown until  it was  returned to  the                                                                    
8:54:10 AM                                                                                                                    
RYAN  PETERKIN, MAGTEC  ALASKA, KENAI  (via teleconference),                                                                    
testified in  support of  the bill. He  noted that  he first                                                                    
learned about the  tax in 2013 when  a criminal investigator                                                                    
from  DOR,  accompanied  by an  armed  enforcement  officer,                                                                    
arrived  at  his  place  of  business  at  Prudhoe  Bay  and                                                                    
informed  him that  he had  been committing  an enforceable,                                                                    
criminal crime  by not charging  the vehicle rental  tax. He                                                                    
asserted  that the  department had  not contacted  him prior                                                                    
about the  tax and that, to  that point, he had  never known                                                                    
of  the  tax.  He  stated  if  any  of  the  vehicle  rental                                                                    
businesses on the  slope had been charging the  tax it would                                                                    
have major  competition between rental companies,  which was                                                                    
not the  case. He said  that he contacted the  department in                                                                    
an effort to  correctly understand the tax code  in order to                                                                    
immediately implement  the collection of the  tax. He opined                                                                    
that  going through  the process  he found  it difficult  to                                                                    
deal with the  vagueness and lack of  clarification from DOR                                                                    
on the  exemptions on  the tax  statute and  regulations. He                                                                    
listed several exemptions that needed clarification.                                                                            
8:59:32 AM                                                                                                                    
Co-Chair   Austerman  asked   if   he  rented   recreational                                                                    
Mr. Peterkin replied no.                                                                                                        
9:00:08 AM                                                                                                                    
RUDI   VONIMHOF,   PRESIDENT,  DELTA   LEASING,   ANCHORAGE,                                                                    
testified in support of the  legislation. The primary office                                                                    
was  located in  Prudhoe  Bay.  He discussed  communications                                                                    
with DOR in 2010, which  consisted of two letters explaining                                                                    
that he did  not feel that the tax applied  to his customers                                                                    
for various  reasons. He  stated that  he sent  the letters,                                                                    
along with  his leases,  to the  department and  received no                                                                    
reply. He  relayed that the  following interaction  with DOR                                                                    
included a raid by  armed enforcement agents who confiscated                                                                    
70 cases  of paper  files and  company computers.  He stated                                                                    
that   his   company   remained  under   investigation   for                                                                    
nonpayment of  the vehicle  rental tax.  He stated  that his                                                                    
company cooperated  with the department.  He paid  all back-                                                                    
taxes  even though  they were  never collected.  He asserted                                                                    
that no other  equipment vendors on the  slope had collected                                                                    
the  tax  and  he  wished  to clarify  the  issue  with  the                                                                    
department.  He believed  that there  was a  disagreement on                                                                    
whether Prudhoe Bay roads were considered public right-of-                                                                      
way. He pointed out the  negative impact on his business and                                                                    
thought  that the  language in  the bill  would clarify  the                                                                    
9:09:59 AM                                                                                                                    
Co-Chair Austerman asked if he rented recreation vehicles.                                                                      
Mr. Vonimhof replied no.                                                                                                        
Representative  Costello asked  the amount  he owed  in back                                                                    
Mr. Vonimhof  replied no. She  stated that he wrote  a check                                                                    
in  December  2012  for  $13 thousand  for  three  years  of                                                                    
pervious taxes that could potentially be applicable.                                                                            
9:12:27 AM                                                                                                                    
DOUG  JOHNSON,  CFO,   TYLER  RENTAL  (via  teleconference),                                                                    
testified in support of the  bill. He stated that the rental                                                                    
contracts  were  exempt from  the  current  law because  the                                                                    
vehicles  were  never  driven  on   the  state  highway.  He                                                                    
asserted that  he had never  received notice of the  tax. He                                                                    
shared that  he had paid  the tax  with a protest.  He hoped                                                                    
that  when the  department  responded back  the issue  would                                                                    
simply  be an  audit  issue.  He did  not  believe that  the                                                                    
department  should go  after private  companies. He  thought                                                                    
that  the  28 days  should  remain  in the  legislation.  He                                                                    
relayed that he  did not advertise to the  tourist trade and                                                                    
did not rent recreational vehicles.                                                                                             
9:16:08 AM                                                                                                                    
Co-Chair Stoltze CLOSED public testimony.                                                                                       
ANGELA   RODELL,   COMMISSIONER,  DEPARTMENT   OF   REVENUE,                                                                    
believed the bill  recognized that taxes were  to be applied                                                                    
fairly and  equitably and  without discrimination.  She said                                                                    
that discussing the tax meant  talking about the definitions                                                                    
of: what is a passenger vehicle  rental, what is a truck (if                                                                    
done by weight),  what is a sports utility  vehicle (if done                                                                    
by  mileage)  how  will  rentals  in  small  communities  be                                                                    
effected,  rental terms,  and private  roads versus  public.                                                                    
She believed  that the current  version of the bill  was the                                                                    
fairest  and  most  complete  that  had  been  drafted.  She                                                                    
relayed that  the department  was unsure  of the  impact the                                                                    
legislation would  have on the  state, but felt it  would be                                                                    
9:19:36 AM                                                                                                                    
MICHAEL  BARBER, ASSISTANT  ATTORNEY GENERAL,  DEPARTMENT OF                                                                    
LAW, commented on  the first two sentences of  the letter of                                                                    
intent drafted by the sponsor:                                                                                                  
     It is the  intent of the Senate  Finance Committee that                                                                    
     the passenger  vehicle rental tax described  in SB 178,                                                                    
     including the original law and  the changes made by the                                                                    
     committee substitute, should not  be applied to Alaskan                                                                    
     businesses   doing   business    with   other   Alaskan                                                                    
     The Department  of Revenue (DOR)  should not  apply the                                                                    
     tax  retroactively to  businesses it  determines should                                                                    
     be, or  should have been, collecting  the tax. However,                                                                    
     if DOR  is able to  determine a business  collected the                                                                    
     tax but did  not remit the tax to DOR,  then DOR should                                                                    
     charge back  taxes, penalties and/or interest  on those                                                                    
     unpaid taxes.                                                                                                              
Mr. Barber explained that the  first sentence suggested that                                                                    
Alaskan  businesses in  general  were exempt  from the  tax,                                                                    
which  was not  the case.  He clarified  that there  was not                                                                    
express   exemption   in   current   statute   for   Alaskan                                                                    
businesses, and  while Alaskan  businesses were  the primary                                                                    
beneficiaries  of  the changes  proposed  in  the bill,  the                                                                    
legislation  would  not  create  an  exemption  for  Alaskan                                                                    
businesses. He stated  that if the intent was  to exempt all                                                                    
Alaskan businesses  then it  needed to  be written  into the                                                                    
bill;  however, he  expressed serious  concern that  such an                                                                    
action  would violate  the Dormant  Commerce  Clause of  the                                                                    
United States Constitution.                                                                                                     
Co-Chair Stoltze  asked whether the letter  had been adopted                                                                    
by the Senate. He noted that  it appeared informal as it was                                                                    
not on letterhead, which was unusual.                                                                                           
Mr. Barber understood  that the letter had  been attached to                                                                    
the bill that was moved out of the Senate.                                                                                      
Representative  Holmes asked  whether the  letter of  intent                                                                    
was  attached to  the bill  that  had passed  on the  Senate                                                                    
Mr. Barber replied in the affirmative.                                                                                          
Co-Chair  Stoltze  requested  the  record  and  the  journal                                                                    
minutes  pertaining  to  the  meeting  where  the  bill  was                                                                    
9:23:12 AM                                                                                                                    
Representative  Wilson asked  if by  changing the  number of                                                                    
rental days to 28, the original  intent of the bill would be                                                                    
Commissioner Rodell responded yes.                                                                                              
Representative Wilson  asked if the  lease went to  a month-                                                                    
to-month,  rather  than yearly,  would  the  tax problem  be                                                                    
Commissioner  Rodell replied  that the  bill did  not change                                                                    
the time range  of the rentals, but that  the department had                                                                    
begun making  changes including  extensions of  the original                                                                    
contracts  would  be included  in  the  time period  of  the                                                                    
original  contract. She  said that  the process  had stopped                                                                    
while the  bill was in  motion because it referenced  the 90                                                                    
days in the original legislation.  She said that if the bill                                                                    
were to  pass the  regulations would  be amended  to reflect                                                                    
that  any  extensions  of  an  original  contract  would  be                                                                    
included in the contract  period for counting vehicle rental                                                                    
tax exemptions.                                                                                                                 
9:25:01 AM                                                                                                                    
Co-Chair  Austerman   understood  that  if   a  recreational                                                                    
vehicle was rented for more than  28 days then the tax would                                                                    
not be  implemented. He surmised  that the objective  of the                                                                    
bill was  to not impose the  tax on businesses on  the North                                                                    
Slope  that   did  not  frequently  use   public  roads.  He                                                                    
maintained confusion  as to  why recreational  vehicles were                                                                    
included in the legislation.                                                                                                    
Commissioner  Rodell believed  that  the recreation  vehicle                                                                    
exemption already applied  to the 90 days, so  it was rolled                                                                    
into  the  new exemption  in  order  to avoid  creating  two                                                                    
separate  exemptions.   She  said   that  this   created  an                                                                    
administrative ease for DOR in terms of application.                                                                            
Co-Chair  Austerman  understood that  it  would  apply to  a                                                                    
vehicle rented at an airport that was driven for 28 days.                                                                       
Commissioner Rodell replied yes.                                                                                                
Co-Chair  Austerman said  that the  issue made  it difficult                                                                    
for him to support the bill.                                                                                                    
9:27:28 AM                                                                                                                    
Representative Gara  asked whether  Mr. Barber  was prepared                                                                    
to speak to the possibility  that the letter of intent could                                                                    
unconstitutional   in  discriminating   against  non-Alaskan                                                                    
Mr.  Barber clarified  that not  all Alaska  businesses were                                                                    
exempt from  the tax, but  had to meet  exemptions currently                                                                    
in  statute.   He  said  that   an  exemption   for  Alaskan                                                                    
businesses   would   be  facially   discriminatory   against                                                                    
interstate commerce and would be  subject to a high level of                                                                    
scrutiny. He  believed that the  letter of intent  would not                                                                    
be applied unconstitutionally.                                                                                                  
Representative Gara  surmised that passing the  letter would                                                                    
not  open  the   door  for  the  bill  to   be  attacked  on                                                                    
constitutional grounds.                                                                                                         
Mr. Barber  suggested that clarifying  the letter  of intent                                                                    
would be beneficial before the bill's passage.                                                                                  
9:29:48 AM                                                                                                                    
Representative  Munoz discussed  the  10  percent charge  on                                                                    
passenger vehicles and the 3  percent charge on recreational                                                                    
vehicles. She wondered what the  overall revenue was for the                                                                    
two taxes.                                                                                                                      
Commissioner Rodell  replied that the total  tax revenue was                                                                    
approximately $8 million for FY13.                                                                                              
Representative Munoz asked  if most of the  revenue was from                                                                    
recreational vehicles.                                                                                                          
Commissioner Rodell replied that she did not know.                                                                              
9:30:30 AM                                                                                                                    
Representative  Munoz asked  whether removing  references in                                                                    
the code to the passenger tax had been considered.                                                                              
Commissioner  Rodell replied  no.  She  said that  different                                                                    
ways of more narrowly defining  a passenger vehicle had been                                                                    
discussed, but that the issue quickly became complicated.                                                                       
Representative Munoz  thought that the  confusion surrounded                                                                    
the utility vehicles and those  used on the North Slope. She                                                                    
thought  that if  reference from  the passenger  vehicle tax                                                                    
could be removed  in statute it would speak  to the original                                                                    
intent of the tax.                                                                                                              
Co-Chair Stoltze  thought that the department  could look to                                                                    
the hospitality industry for ways  to set clearly demarcated                                                                    
taxes. He  requested further background from  the department                                                                    
concerning the collection of the tax.                                                                                           
9:32:57 AM                                                                                                                    
Commissioner  Rodell  replied   that  the  department  would                                                                    
enforce the  statutes as drafted.  She stated that  when the                                                                    
department   received   information  that   individuals   or                                                                    
companies   were  not   in  compliance,   investigation  and                                                                    
auditing was necessary.  She stated that the  mission of the                                                                    
Department  of Revenue  was to  collect taxes.  She asserted                                                                    
that  businesses owners  were  responsible  for knowing  the                                                                    
laws that  governed the  business. She  felt that  there had                                                                    
been confusion regarding the tax passed in 2004.                                                                                
9:35:20 AM                                                                                                                    
Co-Chair Austerman  believed that the intention  was to save                                                                    
businesses money  on certain things.  He asked  about simply                                                                    
implementing   an  exemption   strictly  for   oil  or   gas                                                                    
Commissioner  Rodell   replied  no.   She  noted   that  the                                                                    
department was  relying on rental  companies to  collect the                                                                    
tax on behalf of the  state; the taxpayer was the individual                                                                    
or company  renting the  vehicle. She  asserted that  it was                                                                    
important to recognize the impositions  that would be placed                                                                    
on  companies   to  guarantee  that  the   audit  was  being                                                                    
collected correctly.                                                                                                            
9:36:54 AM                                                                                                                    
Co-Chair Stoltze asked for  emails and notifications letters                                                                    
that had  been sent to  companies in  2003 and 2004  for the                                                                    
public record.                                                                                                                  
Commissioner Rodell agreed to provide the information.                                                                          
CSSB 178(FIN)  was HEARD and  HELD in committee  for further                                                                    
9:38:01 AM                                                                                                                    
AT EASE                                                                                                                         
9:40:03 AM                                                                                                                    
CS FOR SENATE BILL NO. 169(FIN)                                                                                               
     "An Act  establishing in the  Department of  Health and                                                                    
     Social  Services a  statewide immunization  program and                                                                    
     the  State  Vaccine   Assessment  Council;  creating  a                                                                    
     vaccine   assessment  account;   requiring  a   vaccine                                                                    
     assessment from  assessable entities and  other program                                                                    
     participants  for   statewide  immunization  purchases;                                                                    
     repealing  the temporary  child and  adult immunization                                                                    
     program; and providing for an effective date."                                                                             
9:40:13 AM                                                                                                                    
SENATOR CATHY  GEISSEL, SPONSOR,  spoke to the  graphic, "SB
169 Vaccine Assessment Program"  (copy on file). The graphic                                                                    
charted the  various fund  transfers that  would occur  as a                                                                    
result  of  the  vaccine   assessment  program.  She  turned                                                                    
committee attention  to another  graphic, "SB  169 Statewide                                                                    
Immunization Program"(copy  on file), which  emphasized that                                                                    
the  program  was  optional  for   all  providers,  with  an                                                                    
additional provision  to opt out  of the program  within the                                                                    
first 3 years. She said that  one of the goals of the Alaska                                                                    
Healthcare  Commission was  to purchase  healthcare services                                                                    
with public funds and the  bill was a representation of that                                                                    
goal. She stated that homeless  teens and young adults would                                                                    
benefit  from  the  legislation. She  added  that  community                                                                    
healthcare clinics  in rural Alaska would  also benefit from                                                                    
the bill.                                                                                                                       
9:45:41 AM                                                                                                                    
Senator   Geissel    discussed   her   response    memo   to                                                                    
Representative Wilson's  question in the last  hearing (copy                                                                    
on file):                                                                                                                       
     Dear Finance Committee Members:                                                                                            
     I was  asked by Representative Tammy  Wilson's aide how                                                                    
     many Alaskans  would be  affected of  SB 169  fails and                                                                    
     received  the below  information from  the Division  of                                                                    
     Public Health. The impact would be huge:                                                                                   
     Without SB169  and once HB310 funds  fun out, providers                                                                    
     will have  to purchase  vaccine for  50 percent  of the                                                                    
     children  and  100  percent  of  the  adults.  That  is                                                                    
     estimated  to be  about  310,000  individuals of  which                                                                    
     80,000  are children  and 230,000  are adults.  This is                                                                    
     based  on current  population  and immunization  rates.                                                                    
     Only  the 50  percent  of children  covered by  federal                                                                    
     Vaccines for  Children and a small  number of high-risk                                                                    
     children  and  adults  covered  with  other  state  and                                                                    
     federal funds  will continue to  receive state-supplied                                                                    
     In  terms of  dollars,  without  SB169, the  providers'                                                                    
     share of  vaccine spending will increase  from about 50                                                                    
     percent currently to about 75  percent, or an extra $12                                                                    
     million, increasing  from $23  million to  $35 million.                                                                    
     This assumes  immunization rates  stay steady  and that                                                                    
     providers continue to purchase  vaccine for the insured                                                                    
     and uninsured.                                                                                                             
Senator  Giessel  spoke to  the  cost  of vaccinations.  She                                                                    
stated that  the measles,  mumps, rubella  (MMR) vaccination                                                                    
for  children, under  the Center  for Disease  Control (CDC)                                                                    
purchasing  plan,  costs  $20  per  dose.  She  shared  that                                                                    
individual providers purchasing the  same dosage on the open                                                                    
market paid  $56 per dose.  She said that one  adult vaccine                                                                    
dose  for pneumonia  purchased  through  the CDC  purchasing                                                                    
would  be  $23;  individual  providers would  pay  $68.  She                                                                    
discussed the cost discrepancies for various vaccinations.                                                                      
9:49:39 AM                                                                                                                    
Representative  Wilson   asked  whether  the   current  bill                                                                    
version required mandatory participation after 3 years.                                                                         
Senator Giessel replied that no  one would be mandated to be                                                                    
part of the program.                                                                                                            
Representative  Wilson  understood  that  private  insurance                                                                    
companies would  also have the  ability to opt in,  but that                                                                    
the state was exempt.                                                                                                           
Senator  Giessel  replied  requests  for  the  program  from                                                                    
insurance companies had led to the legislation.                                                                                 
9:51:22 AM                                                                                                                    
Representative  Munoz  asked  if   all  providers  would  be                                                                    
charged the same rate per vaccine.                                                                                              
Senator Giessel replied yes.                                                                                                    
9:52:14 AM                                                                                                                    
Representative Holmes discussed the  5 fiscal notes attached                                                                    
to the bill.                                                                                                                    
9:55:07 AM                                                                                                                    
JILL  LEWIS, DEPUTY  DIRECTOR,  DIVISION  OF PUBLIC  HEALTH,                                                                    
DEPARTMENT OF  HEALTH AND SOCIAL  SERVICES, stated  that the                                                                    
fiscal notes  netted to zero  because for every  dollar that                                                                    
was  spent,  there  was  a  new  dollar  coming  in  of  new                                                                    
assessment  fees. She  directed committee  attention to  the                                                                    
hand  out,   "SB  169   Vaccine  Assessment   Program."  She                                                                    
recommended comparing  the first  two fiscal  notes side-by-                                                                    
side. She  said that  the money would  flow between  the two                                                                    
notes and  net to zero. She  stated that the first  note was                                                                    
for  informational purposes  only and  likened to  a deposit                                                                    
slip from the bank, the  "checking account" being the fiscal                                                                    
note for epidemiology. She relayed  that the $4 million from                                                                    
note 2 would  be subtracted under the fund  source and would                                                                    
be  moved  into  an  account  outside  of  the  department's                                                                    
budget. She  furthered that  assessments would  be collected                                                                    
in advance from the assessable  entities and the money would                                                                    
be used to purchase additional vaccine.                                                                                         
9:59:57 AM                                                                                                                    
Representative  Wilson surmised  that there  was no  request                                                                    
being made for new revenue.                                                                                                     
Ms. Lewis replied in the affirmative.                                                                                           
10:01:32 AM                                                                                                                   
Representative  Wilson said  that the  other figures  in the                                                                    
notes  appeared in  anticipation  of  the best  mathematical                                                                    
Ms. Lewis  said that  there was  a lot  of math  involved in                                                                    
calculating  and  estimating  the   costs  involved  in  the                                                                    
program. She stated that entities  would phase in during the                                                                    
first 3  years and that some  could opt out. She  added that                                                                    
there  could be  providers that  might  want to  opt in  for                                                                    
vaccine that they would otherwise  have to purchase on their                                                                    
Representative Wilson  asked whether  the change  could have                                                                    
negative impact on the department.                                                                                              
Ms.  Lewis  replied  no.  She  acknowledged  that  federally                                                                    
funded  entities had  additional obstacles,  which had  been                                                                    
accounted for by allowing the 3 year phase in option.                                                                           
Representative Holmes MOVED to  REPORT HCS CSSB 169(HSS) out                                                                    
of  committee   with  individual  recommendations   and  the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
HCS CSSB 169(HSS)  was REPORTED out of committee  with a "do                                                                    
pass" recommendation and with one  new fiscal note from Fund                                                                    
Transfers for the Department of  Health and Social Services,                                                                    
one  new  fiscal note  from  the  Department of  Health  and                                                                    
Social Services, one new indeterminate  fiscal note from the                                                                    
Department  of Health  and Social  Services, one  previously                                                                    
published zero  fiscal note: FN4  (CED), and  one previously                                                                    
published indeterminate fiscal note: FN5 (ADM).                                                                                 
CS FOR SENATE BILL NO. 138(FIN) am                                                                                            
     "An Act  relating to the  purposes, powers,  and duties                                                                    
     of   the   Alaska  Gasline   Development   Corporation;                                                                    
     relating  to  an  in-state  natural  gas  pipeline,  an                                                                    
     Alaska  liquefied natural  gas project,  and associated                                                                    
     funds; requiring  state agencies and other  entities to                                                                    
     expedite  reviews and  actions related  to natural  gas                                                                    
     pipelines  and projects;  relating  to the  authorities                                                                    
     and  duties of  the commissioner  of natural  resources                                                                    
     relating to a North Slope  natural gas project, oil and                                                                    
     gas and gas only leases,  and royalty gas and other gas                                                                    
     received  by  the  state   including  gas  received  as                                                                    
     payment for the production tax  on gas; relating to the                                                                    
     tax on oil  and gas production, on  oil production, and                                                                    
     on  gas  production;  relating to  the  duties  of  the                                                                    
     commissioner  of  revenue  relating to  a  North  Slope                                                                    
     natural  gas project  and gas  received as  payment for                                                                    
     tax;  relating to  confidential information  and public                                                                    
     record  status of  information provided  to  or in  the                                                                    
     custody of the Department  of Natural Resources and the                                                                    
     Department  of   Revenue;  relating   to  apportionment                                                                    
     factors of the Alaska Net  Income Tax Act; amending the                                                                    
     definition of gross value at  the 'point of production'                                                                    
     for  gas for  purposes of  the oil  and gas  production                                                                    
     tax; clarifying that  the exploration incentive credit,                                                                    
     the oil or gas producer  education credit, and the film                                                                    
     production tax credit may not  be taken against the gas                                                                    
     production tax paid in gas;  relating to the oil or gas                                                                    
     producer education  credit; requesting the  governor to                                                                    
     establish  an  interim  advisory board  to  advise  the                                                                    
     governor  on municipal  involvement  in  a North  Slope                                                                    
     natural gas  project; relating to the  development of a                                                                    
     plan  by the  Alaska  Energy  Authority for  developing                                                                    
     infrastructure  to deliver  affordable energy  to areas                                                                    
     of  the state  that will  not have  direct access  to a                                                                    
     North Slope  natural gas pipeline and  a recommendation                                                                    
     of   a  funding   source   for  energy   infrastructure                                                                    
     development; establishing the  Alaska affordable energy                                                                    
     fund; requiring the commissioner  of revenue to develop                                                                    
     a  plan  and  suggest legislation  for  municipalities,                                                                    
     regional corporations,  and residents  of the  state to                                                                    
     acquire ownership  interests in  a North  Slope natural                                                                    
     gas  pipeline  project; making  conforming  amendments;                                                                    
     and providing for an effective date."                                                                                      
10:03:57 AM                                                                                                                   
MICHAEL PAWLOWSKI,  DEPUTY COMMISSIONER,  STRATEGIC FINANCE,                                                                    
DEPARTMENT   OF    REVENUE,   introduced    the   PowerPoint                                                                    
presentation    titled    "Response   to    Question    from                                                                    
Representative Edgmon"  (copy on  file). He  discussed Slide                                                                    
2, which  was an example  of the opportunities  that existed                                                                    
for small-scale use of LNG:                                                                                                     
     "The  CIRI   Talkeetna  Lodge  is  a   212  room  Lodge                                                                    
     operating  the the  tourism  season.  FNG provides  LNG                                                                    
     year round  for heating,  hot water and  cooking. There                                                                    
     is   10,000  gallons   of  LNG   storage  on-site   for                                                                    
     uninterrupted   supply  of   natural  gas.   The  Lodge                                                                    
     receives  a delivery  of  LNG  approximately every  two                                                                    
Mr. Pawlowski relayed  that very rough estimates  by AEA put                                                                    
the cost of equipment currently  at $1,000,000. He said that                                                                    
when  discussing future  deposits to  the Affordable  Energy                                                                    
Fund it  should be  noted that  the fund  is for  all energy                                                                    
Mr.  Pawlowski  turned to  Slide  3,  "SB 138  Includes  AEA                                                                    
energy planning." He noted that  the important issue related                                                                    
to the  affordable infrastructure and areas  not directly on                                                                    
the pipeline  route. Section 69  of SB 138 directs  the AEA,                                                                    
in consultation with  AGDC, AIDEA and DOR to  prepare a plan                                                                    
for developing  infrastructure to deliver  affordable energy                                                                    
to areas of  the state that are not expected  to have direct                                                                    
access to a North Slope natural gas pipeline.                                                                                   
10:08:15 AM                                                                                                                   
Representative Edgmon hoped that  there was substance behind                                                                    
the commitment to provide affordable  energy to all parts of                                                                    
the Alaska,  and not just  the more convenient areas  of the                                                                    
state.  He  wondered  if  there  was a  way  to  tie-in  the                                                                    
language in the bill to  the existing language pertaining to                                                                    
the energy policy in the uncodified state statutes.                                                                             
10:09:24 AM                                                                                                                   
Mr.  Pawlowski referred  to Page  60,  section 67  of the  H                                                                    
version of  the bill.  He believed  that the  uncodified law                                                                    
existed as  direction to the  state, but a reference  in the                                                                    
section to the context of that policy could appropriate.                                                                        
10:10:28 AM                                                                                                                   
Representative  Edgmon requested  a statement  regarding the                                                                    
offtake points exit points and expense.                                                                                         
10:11:30 AM                                                                                                                   
Mr.  Pawlowski replied  that the  commitment of  the offtake                                                                    
points  in  the  HOA  was  to  look  for  the  benefits  for                                                                    
Alaskans, with  access to  reliable and  predicable supplies                                                                    
of   energy.  He   said  that   the  trick   would  be   the                                                                    
affordability  of access  as distance  became  a factor.  He                                                                    
stated that it  would need to be examined  whether taking at                                                                    
the  offtake  would  be  the   best  option,  or  whether  a                                                                    
localized  energy  solution would  be  a  better option.  He                                                                    
assured the committee that both  options would be pursued as                                                                    
part of the development of  the agreements. He said that the                                                                    
commitment to  the issue was  deep and that the  section put                                                                    
the right  tools in place  to build on regional  energy work                                                                    
already being done by AEA.                                                                                                      
10:12:30 AM                                                                                                                   
JOE BALASH,  COMMISSIONER, DEPARTMENT OF  NATURAL RESOURCES,                                                                    
added  that  the  department had  contributed  to  the  work                                                                    
pertaining to  the tap in points  to the line. He  said that                                                                    
pre-installing the  takeoff points during the  initial build                                                                    
would  be cheaper.  He relayed  that  the incremental  costs                                                                    
associated with a tap was approximately $1 million.                                                                             
10:13:37 AM                                                                                                                   
Mr. Pawlowski  interjected that  in pervious  gasline plans,                                                                    
the offtake  had potentially been  expensive because  of the                                                                    
high natural  gas liquids content  in the proposed  plan. He                                                                    
asserted that the  current plan involved very  clean LNG gas                                                                    
and did  not require  the expensive equipment  necessary for                                                                    
the stripping of liquids.                                                                                                       
Representative Guttenberg  assumed that  a takeoff  point in                                                                    
Nikiski would have  charges based upon the  GTP, tariffs and                                                                    
distance sensitive  rates. He asked about  the Asian market;                                                                    
if the flow  was backtracked to the middle  of the pipeline,                                                                    
the rate  would be  relevant to the  takeoff point,  and not                                                                    
everything else downstream.                                                                                                     
Mr. Pawlowski  responded yes, and  that the  distinction was                                                                    
critical.  He  added  that  under the  MOU,  the  state  had                                                                    
already  agreed to  distance sensitive  rates for  the areas                                                                    
along the pipeline in three  zones: the Nanana Zone, the Big                                                                    
Lake Zone, and the delivery to the LNG plant.                                                                                   
Representative  Guttenberg asked  how  the  Nanana Zone  was                                                                    
Commissioner   Balash  replied   that   the  zone   included                                                                    
everything north of Nanana.                                                                                                     
10:17:39 AM                                                                                                                   
Representative Wilson understood the  benefits to the owners                                                                    
and  TransCanada,  but  she expressed  discomfort  with  the                                                                    
balance the energy issues in  the interior and the bush. She                                                                    
wished to better understand why  the project was a good deal                                                                    
for state residents.                                                                                                            
Commissioner   Balash   replied  that   the   transportation                                                                    
infrastructure would provide a  relatively low-cost means of                                                                    
delivering  the commodity  either  from the  North Slope  or                                                                    
Cook Inlet. He said at  that point options would be examined                                                                    
and that the  lowest cost option to get gas  to the corridor                                                                    
would be selected.                                                                                                              
Commissioner Balash referred  to Slide 2 from  the Black and                                                                    
Veatch presentation, "State  Participation on AKLNG Project,                                                                    
April 15,  2014"(copy on  file). The slide  showed at  a $16                                                                    
dollar commodity  price in Asia  the state's  wellhead value                                                                    
would be approximately $7/MMBtu. He  said that taking the $7                                                                    
price,  adding the  treatment plan  cost of  $2, adding  the                                                                    
pipeline cost to  the interior of $1 would total  $10 to get                                                                    
gas  to Fairbanks.  He  furthered that  if  natural gas  was                                                                    
priced a  $6 in  the Cook Inlet  Basin, the  backhaul rates,                                                                    
negotiated  with  TransCanada in  the  MOU,  would mean  the                                                                    
benefit  of  Cook Inlet  pricing  in  Fairbanks without  the                                                                    
transportation cost. He predicted  that as the market demand                                                                    
in  Cook Inlet  grew, additional  supplies would  be proven,                                                                    
and  additional opportunities  for  smaller producers  would                                                                    
open up. He asserted that the  same thing would occur on the                                                                    
North Slope, as  long as a viable third  party mechanism was                                                                    
maintained  through  the  state's  equity  capacity  in  the                                                                    
pipeline, there would be companies  and operators with small                                                                    
amounts of gas that would  be looking to make in-state sales                                                                    
and could be willing to sell  their gas for less than $7. He                                                                    
said that  the biggest  distinction between the  project and                                                                    
the TAPS  scenario was that the  states crude oil had  to be                                                                    
refined in order to make  it useful; natural gas and methane                                                                    
took very little refinement.                                                                                                    
10:23:03 AM                                                                                                                   
Representative Wilson  understood that  all of  the language                                                                    
was in the bill.                                                                                                                
Commissioner Balash replied that it  was not in the bill. He                                                                    
said that how transportation charges  would be priced was in                                                                    
the MOU with  TransCanada. He said that in  2015 there would                                                                    
be a piece of legislation approving the Firm Transportation                                                                     
Services Agreement (FTSA) with the specific terms laid out.                                                                     
Representative Wilson said she would prefer to see the                                                                          
terms before voting on the legislation.                                                                                         
Co-Chair Stoltze discussed housekeeping.                                                                                        
10:24:58 AM                                                                                                                   
Mr. Pawlowski stated that he appreciated the guidance about                                                                     
the technical amendments on the bill.                                                                                           
CSSB 138(FIN) am was HEARD and HELD in committee for                                                                            
further consideration.                                                                                                          
10:26:03 AM                                                                                                                   
The meeting was adjourned at 10:25 a.m.                                                                                         

Document Name Date/Time Subjects
SB 178 Amendment #1 Gara.pdf HFIN 4/16/2014 8:30:00 AM
SB 178
SB169 Vax Assess Fund diagram.pdf HFIN 4/16/2014 8:30:00 AM
SB 169
SB169PayerPyramid_15Apr2014.pdf HFIN 4/16/2014 8:30:00 AM
SB 169
SB169 without it.pdf HFIN 4/16/2014 8:30:00 AM
SB 169
Marks SB 138 Gara Response 041514.pdf HFIN 4/16/2014 8:30:00 AM
SB 138
SB 138 4.16.14 Presentation HFIN Edgmon Question.pdf HFIN 4/16/2014 8:30:00 AM
SB 138
SB 138 4.16.14 Resource Reports Required by Appendix A to Part 380 of FERC Regulations.pdf HFIN 4/16/2014 8:30:00 AM
SB 138
SB 138 enalytica - response to Rep Gara.pdf HFIN 4/16/2014 8:30:00 AM
SB 138