Legislature(2015 - 2016)HOUSE FINANCE 519

04/06/2015 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 135 PUBLIC EMPLOYEE ROTH CONTRIBUTIONS TELECONFERENCED
Moved HB 135 Out of Committee
*+ HB 155 FEES; WAIVERS; CREDITS; DEDUCTIONS;TAXES TELECONFERENCED
Heard & Held
*+ HB 15 CREDITS FOR TIME SERVED/GOOD TIME TELECONFERENCED
Heard & Held
<Bill Hearing Rescheduled from 4/3/15>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 6, 2015                                                                                            
                         1:38 p.m.                                                                                              
                                                                                                                                
1:38:45 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 1:38 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Les Gara                                                                                                         
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
John   Boucher,    Deputy   Commissioner,    Department   of                                                                    
Administration;   Brodie  Anderson,   Staff,  Representative                                                                    
Steve   Thompson;   Ben  Brown,   Commissioner,   Commercial                                                                    
Fisheries  Entry Commission,  Department of  Fish and  Game;                                                                    
Jerry  Burnett,  Deputy   Commissioner,  Treasury  Division,                                                                    
Department   of  Revenue;   Representative  Tammie   Wilson,                                                                    
Sponsor; Remond  Henderson, Deputy  Commissioner, Department                                                                    
of   Corrections;  Kaci   Schroeder,  Legislative   Liaison,                                                                    
Department  of Law;  Nancy  Meade,  General Counsel,  Alaska                                                                    
Court System.                                                                                                                   
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Carrie Belden,  Director, Division  of Parole  in Probation,                                                                    
Department of Corrections.                                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
HB 135    PUBLIC EMPLOYEE ROTH CONTRIBUTIONS                                                                                    
          HB 135 was REPORTED out of committee with a "do                                                                       
          pass" recommendation and with one previously                                                                          
          published zero fiscal note: FN1 (ADM).                                                                                
                                                                                                                                
HB 155    FEES; WAIVERS; CREDITS; DEDUCTIONS; TAXES                                                                             
                                                                                                                                
          HB 155 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HB 15     CREDITS FOR TIME SERVED/GOOD TIME                                                                                     
                                                                                                                                
          HB 15 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
Co-Chair Thompson reviewed the agenda for the day.                                                                              
                                                                                                                                
HOUSE BILL NO. 135                                                                                                            
                                                                                                                                
     "An Act establishing a Roth contribution program for                                                                       
     the public employees' deferred compensation program;                                                                       
     and providing for an effective date."                                                                                      
                                                                                                                                
1:39:42 PM                                                                                                                    
                                                                                                                                
JOHN   BOUCHER,    DEPUTY   COMMISSIONER,    DEPARTMENT   OF                                                                    
ADMINISTRATION, was available for questions.                                                                                    
                                                                                                                                
Co-Chair Thompson OPENED Public Testimony                                                                                       
                                                                                                                                
Co-Chair Thompson CLOSED Public Testimony.                                                                                      
                                                                                                                                
Representative  Munoz   MOVED  to  REPORT  HB   135  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note(s). There  being NO  OBJECTION, it                                                                    
was so ordered.                                                                                                                 
                                                                                                                                
HB 135 was REPORTED out of committee with a "do pass"                                                                           
recommendation and with one previously published zero                                                                           
fiscal note: FN1 (ADM).                                                                                                         
                                                                                                                                
1:42:41 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:43:58 PM                                                                                                                    
RECONVEYENED                                                                                                                    
HOUSE BILL NO. 155                                                                                                            
                                                                                                                                
     "An  Act relating  to fees  charged  by the  commercial                                                                    
     fisheries  entry commission;  repealing an  exploration                                                                    
     incentive credit; amending  the calculation of adjusted                                                                    
     gross  income  for  purposes of  the  tax  on  gambling                                                                    
     activities  aboard large  passenger vessels;  repealing                                                                    
     the amount  that may  be deducted  from the  motor fuel                                                                    
     tax to cover  the expense of accounting  and filing for                                                                    
     the monthly tax return;  repealing a provision allowing                                                                    
     an investigation  expense under the Alaska  Small Loans                                                                    
     Act to be  in place of a fee required  under the Alaska                                                                    
     Business License Act; repealing  the amount that may be                                                                    
     deducted  from  the tobacco  excise  tax  to cover  the                                                                    
     expense of  accounting and filing  for the  monthly tax                                                                    
     return; repealing the discount  on cigarette tax stamps                                                                    
     provided  as compensation  for affixing  the stamps  to                                                                    
     packages;  repealing the  amount that  may be  deducted                                                                    
     from  a tire  fee remittance  to cover  the expense  of                                                                    
     accounting  and filing  for the  quarterly fee  return;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
Co-Chair Thompson began his presentation from a prepared                                                                        
statement:                                                                                                                      
                                                                                                                                
     In the  28th Legislature,  legislation was  passed that                                                                    
     defined Indirect Expenditure as  foregone revenue.  The                                                                    
     legislation  set  forth   a  requirement  that  certain                                                                    
     reports  identify potential  loss of  foregone revenue.                                                                    
     Earlier  this   session  this  committee   received  an                                                                    
     overview   of   the    Legislative   Finance   Indirect                                                                    
     Expenditure  Report identified  certain credits,  fees,                                                                    
     discounts,  and deductions  that should  be terminated.                                                                    
     House  Bill  155  (HB   155)  repealed  those  indirect                                                                    
     expenditures with  an estimated increase of  revenue by                                                                    
     approximately   $450,000.   The  indirect   expenditure                                                                    
     repeal in House  Bill 155 were selected  for repeal for                                                                    
     various  reasons that  range from  the expenditure  did                                                                    
     not  meet legislative  intent, had  limited benefit  or                                                                    
     usage,  and   were  obsolete   due  to   inactivity  or                                                                    
     replacement by electronic filings.                                                                                         
                                                                                                                                
BRODIE  ANDERSON,  STAFF,   REPRESENTATIVE  STEVE  THOMPSON,                                                                    
placed himself on the record and  stated that HB 155 was the                                                                    
next  step  in  addressing  foregone revenue  to  the  state                                                                    
identified in the 2015 Indirect Expenditure Report. HB 155                                                                      
repealed the following indirect expenditures as follows:                                                                        
                                                                                                                                
    •    Small Loan Company Business License Exemption                                                                          
       Pg. 3 of the 2015 Indirect Expenditure Report                                                                            
                                                                                                                                
     •    Commercial Fisheries Entry Commission (CFEC)                                                                          
          Reduced Permit Fees,                                                                                                  
      Pg. 48 of the 2015 Indirect Expenditure Report                                                                            
                                                                                                                                
     •    CFEC Reduced Application Fees                                                                                         
      Pg. 50 of the 2015 Indirect Expenditure Report                                                                            
                                                                                                                                
     •    CFEC Reduced Expediting Fees                                                                                          
      Pg. 51 of the 2015 Indirect Expenditure Report                                                                            
                                                                                                                                
     •    CFEC Reduced Transfer Fees                                                                                            
      Pg. 52 of the 2015 Indirect Expenditure Report                                                                            
                                                                                                                                
     •    Exploration Incentive Credit                                                                                          
      Pg. 97 of the 2015 Indirect Expenditure Report                                                                            
                                                                                                                                
     •    Tobacco Product Tax Deduction for Timely Filing                                                                       
          Pg. 141 of the 2015 Indirect Expenditure Report                                                                       
                                                                                                                                
     •    Cigarette Tax Stamp Discount                                                                                          
          Pg. 142 of the 2015 Indirect Expenditure Report                                                                       
                                                                                                                                
     •    Motor Fuel Tax Timely Filing                                                                                          
          Pg. 143 of the 2015 Indirect Expenditure Report                                                                       
    •    Large Passenger Vessel Gambling Tax Deduction                                                                          
          Pg. 163 of the 2015 Indirect Expenditure Report                                                                       
                                                                                                                                
     •    Tire Tax Discount for Timely Filing                                                                                   
          Pg. 167 of the 2015 Indirect Expenditure Report                                                                       
                                                                                                                                
Mr. Anderson provided a sectional analysis of the bill and                                                                      
read from a prepared statement:                                                                                                 
                                                                                                                                
     Section 1: Adds  a new section AS  16.43.100 to address                                                                    
     the removal of  the low income permit  fees and require                                                                    
     the  (Commercial Fisheries  Entry  Commission) CFEC  to                                                                    
     issue permits at the same cost to all permit holders.                                                                      
                                                                                                                                
     Section 2: Amended AS 16.43.160(a) requiring the                                                                           
     commission to make each person pay the same fee with                                                                       
     the exception of the non-resident surcharge. The non-                                                                      
     resident  exemption was  included to  ensure compliance                                                                    
     with the Carlson decision.                                                                                                 
                                                                                                                                
     Section 3:  Removed references to AS  38.05.180(i), the                                                                    
    Exploration Incentive Credit from AS 41.09.010(a).                                                                          
                                                                                                                                
     Section 4:  Removed references to AS  38.05.180(i) from                                                                    
     AS 41.09.010(b).                                                                                                           
                                                                                                                                
     Section 5:  Removed references to AS  38.05.180(i) from                                                                    
     AS 43.20.043(g).                                                                                                           
                                                                                                                                
     Section 6: Amended 43.55.210  to disallow the deduction                                                                    
     for federal  taxes for the purposes  of calculating the                                                                    
     state  tax  on  large passenger  cruise  ship  gambling                                                                    
     activity.                                                                                                                  
                                                                                                                                
     Section   7:  Amended   AS  43.40.010(c)   by  removing                                                                    
     language that  allowed motor fuel  dealers to  retain a                                                                    
     portion of  the motor  fuel tax  due to  cover expenses                                                                    
     for filing motor fuel tax return.                                                                                          
                                                                                                                                
     Section 8:  Removed references to AS  43.50.540 from AS                                                                    
     43.50590(a)   to   conform   to  the   repeal   of   AS                                                                    
     43.50.540(c) in Section 12.                                                                                                
                                                                                                                                
1:49:19 PM                                                                                                                    
                                                                                                                                
     Section  9:  Removed   references  of  the  Exploration                                                                    
     Incentive  Credit from  AS 43.55.011(m)  to conform  to                                                                    
     the repeal of AS 38.05.180(i) in Section 12.                                                                               
                                                                                                                                
     Section  10:  Removed  references  to  the  Exploration                                                                    
     Incentive    Credit   (AS    38.05.180(i))   from    AS                                                                    
     43.55.023(a)   to  conform   to   the   repeal  of   AS                                                                    
     38.05.180(i) in Section 12.                                                                                                
                                                                                                                                
     Section 11: Removed references  to AS 38.05.180(i) from                                                                    
     AS  43.55.023(l)  to  conform   to  the  repeal  of  AS                                                                    
     38.05.180(i) in Section 12.                                                                                                
                                                                                                                                
Mr. Anderson continued with Section 12 that contained the                                                                       
Statute Repealers:                                                                                                              
                                                                                                                                
        · AS 06.20.030(c) was the subsection that allowed                                                                       
          the license fee Small Loan Company License to                                                                         
          replace the Alaska Business License.                                                                                  
        · AS   16.43.160(d)   was    the   subsection   that                                                                    
          established the reduced fee  for low income permit                                                                    
          holders within the CFEC.                                                                                              
                                                                                                                                
        · AS   38.05.180(i)   was    the   subsection   that                                                                    
          established the Exploration Incentive Credit.                                                                         
                                                                                                                                
        · AS 41.09.030  is the  section that  referenced the                                                                    
          relationship of  the Exploration  Incentive Credit                                                                    
          to Title 41 Chapter 9  (which is Title 41 - Public                                                                    
          Resources / Chapter 09   - Oil and Gas Exploration                                                                    
          Incentive Credits).                                                                                                   
                                                                                                                                
        · AS  43.50.330(b) was  the subsection  establishing                                                                    
          the  filing  deduction  for   the  Excise  Tax  on                                                                    
          Tobacco Products.                                                                                                     
                                                                                                                                
        · AS   43.50.540(c)   was    the   subsection   that                                                                    
          established  the discount  for  the Cigarette  Tax                                                                    
          Stamps.                                                                                                               
                                                                                                                                
        · AS  43.50.540(h) established  a definition  of the                                                                    
          stamps that were eligible for the discount.                                                                           
                                                                                                                                
        · AS   43.98.025(e)   was    the   subsection   that                                                                    
          established the  deduction for filing in  the Tire                                                                    
          Fees.                                                                                                                 
                                                                                                                                
Mr. Anderson cited the three Code repealers in Section 13:                                                                      
                                                                                                                                
        · 20  AAC 05.250(b)  was the  code that  established                                                                    
          the  reduced fee  for  low  income permit  holders                                                                    
          within the CFEC.                                                                                                      
                                                                                                                                
        · 20   AAC  05.425(e)(1)(2)   was   the  code   that                                                                    
          established  the reduced  fee for  expediting fees                                                                    
          for low income permit holders within the CFEC.                                                                        
                                                                                                                                
        · 20 AAC  05.1910(h) was  the code  that established                                                                    
          the reduced  fee for transfer fees  for low income                                                                    
          permit holders within the CFEC.                                                                                       
                                                                                                                                
Mr. Anderson spoke to the final three sections:                                                                                 
                                                                                                                                
     Section 14:  Provided transitional language  related to                                                                    
     the  repeal of  the  Exploration  Incentive Credit  and                                                                    
     CFEC low income transfers.                                                                                                 
                                                                                                                                
     Section 15: Contained the effective  date of January 1,                                                                    
     2016 for the  gambling tax activities based  off of the                                                                    
     federal  tax  calendar  year  and  the  fact  that  the                                                                    
     gambling tax was paid annually.                                                                                            
                                                                                                                                
     Section  16: Contained  the effective  date of  July 1,                                                                    
     2015 for  all other  sections in  order to  comply with                                                                    
     the  State  of Alaska  fiscal  calendar  and all  other                                                                    
     related   fees,   discounts,   deductions   that   were                                                                    
     calculated monthly.                                                                                                        
                                                                                                                                
Representative   Wilson  shared   that  she   supported  the                                                                    
legislation.                                                                                                                    
                                                                                                                                
Representative  Kawasaki  wanted  to  know  whether  HB  155                                                                    
included all  of the  indirect expenditures  recommended for                                                                    
termination  in the  Indirect  Expenditure  Report (copy  on                                                                    
file).                                                                                                                          
                                                                                                                                
Mr. Anderson  responded that  the report  identified several                                                                    
indirect  expenditures for  termination  having  to do  with                                                                    
corporate income  tax. Other indirect  expenditure regarding                                                                    
corporate income tax were recommended  for policy review and                                                                    
reconsideration.  He relayed  that the  sponsor thought  the                                                                    
corporate  income tax  indirect  expenditures  needed to  be                                                                    
further scrutinized and examined  comprehensively as a whole                                                                    
and were not included in the legislation.                                                                                       
                                                                                                                                
1:54:42 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki  asked whether the  finance analysis                                                                    
in the  report was provided  by LFD. Mr.  Anderson confirmed                                                                    
that the  recommendations came from  LFD and added  that the                                                                    
numbers were provided by the Department of Revenue (DOR).                                                                       
                                                                                                                                
Representative Kawasaki  asked whether DOR had  any comments                                                                    
regarding the recommendations from LFD.                                                                                         
                                                                                                                                
JERRY  BURNETT,  DEPUTY   COMMISSIONER,  TREASURY  DIVISION,                                                                    
DEPARTMENT  OF REVENUE,  indicated that  the department  had                                                                    
had discussions about the  recommendations. He reported that                                                                    
the department supported the legislation.                                                                                       
                                                                                                                                
Representative  Kawasaki understood  terminating the  direct                                                                    
expenditures that  had never been  used or did  not generate                                                                    
revenue.  He  wondered  whether  DOR  was  comfortable  with                                                                    
terminating  the credits  that had  a fiscal  impact because                                                                    
the credits  were rarely used  or had a  negligible benefit.                                                                    
Mr. Burnett responded affirmatively.                                                                                            
                                                                                                                                
Co-Chair  Thompson  asked  why   the  new  DOR  fiscal  note                                                                    
contained  an appropriation  for $50  thousand for  updating                                                                    
tax forms  and contractor work  to program the  changes into                                                                    
the Tax  Revenue Management System  (TRMS). He  thought that                                                                    
the appropriation was high.                                                                                                     
                                                                                                                                
Mr.  Burnett responded  that  he would  have  to review  the                                                                    
estimate  from  the  contractor.  He added  that  each  time                                                                    
changes were made to the  system the contractor was required                                                                    
to  update the  system. He  stated that  the amount  was the                                                                    
departments "best estimate" of the contractor's charges.                                                                        
                                                                                                                                
Representative Gattis referred  to legislation regarding the                                                                    
Tire Tax  [HB 88 Fees For  Tires] and hoped that  along with                                                                    
passage  of HB  155 the  tax system  would only  collect the                                                                    
taxpayers' information that was absolutely necessary.                                                                           
                                                                                                                                
Mr. Burnett stated that he  had discussed the issue with the                                                                    
deputy director  of the tax  division and reported  that the                                                                    
division   was  committed   to   reducing   the  amount   of                                                                    
information required.                                                                                                           
                                                                                                                                
1:59:50 PM                                                                                                                    
                                                                                                                                
Co-Chair Neuman  cited the fiscal note  and wondered whether                                                                    
the  department had  a contingency  plan  if the  contractor                                                                    
costs were less than $50 thousand.                                                                                              
                                                                                                                                
Mr.  Burnett replied  that with  passage of  the legislation                                                                    
the fiscal  note would appropriate  the entire  $50 thousand                                                                    
to the department. He qualified  that if the costs were less                                                                    
DOR  would work  with  LFD  and either  lapse  the funds  or                                                                    
include  them in  the supplemental  budget. Co-Chair  Neuman                                                                    
commented that the fiscal note should be further examined.                                                                      
                                                                                                                                
Representative  Guttenberg  cited  page  97  of  the  report                                                                    
regarding  the Oil  and Gas  Production  Tax, State  Royalty                                                                    
credit and read the following:                                                                                                  
                                                                                                                                
     Recommend termination. The  credit appears obsolete and                                                                    
     ineffective given  that it hasn't  been used in  over a                                                                    
     decade.  The  Alternative  Credit for  Exploration  (AS                                                                    
     43.55.025 (a)  (1-4)) appears to  be a  more attractive                                                                    
     incentive.                                                                                                                 
                                                                                                                                
Representative  Guttenberg  indicated  that there  were  two                                                                    
incentives but  only one was  being used. He wanted  to know                                                                    
how it  was determined which  incentive was the best  one to                                                                    
remove.                                                                                                                         
                                                                                                                                
Mr.  Burnett was  not prepared  to answer  the question.  He                                                                    
believed  there had  been an  ongoing discussion  about what                                                                    
credits  were   necessary.  He  guessed  that   the  credits                                                                    
included in  AS 43.55.025 were  the most recent and  the one                                                                    
recommended for termination was outdated.                                                                                       
                                                                                                                                
Representative Pruitt  referenced Section 7, related  to the                                                                    
motor  fuel  tax.  He  asked whether  the  bill  was  simply                                                                    
removing the  incentive to file  on time and no  penalty was                                                                    
applied. Mr. Anderson was not able to answer the question.                                                                      
                                                                                                                                
Mr. Burnett  stated that  all taxes  had penalties  for late                                                                    
filing.  He  elaborated  that penalties  and  interest  were                                                                    
charged  to late  filers. Currently,  filing taxes  was much                                                                    
easier than when the incentives were initially implemented.                                                                     
                                                                                                                                
Representative Pruitt  wanted to  understand the  tax system                                                                    
in  a historical  context. He  confirmed  that currently  an                                                                    
incentive  and  a penalty  was  in  place. He  deduced  that                                                                    
currently incentives were less necessary  due to the ease of                                                                    
filing. Mr. Burnett responded in the affirmative.                                                                               
                                                                                                                                
2:05:32 PM                                                                                                                    
                                                                                                                                
Representative Munoz  asked what the amount  of the gambling                                                                    
tax collected by the state  was.  Mr. Burnett responded that                                                                    
he  would follow  up with  the answer.  Representative Munoz                                                                    
asked what the  amount of revenue was  generated through the                                                                    
gambling tax. Mr. Burnett could  not recall the exact amount                                                                    
and pledged to provide the answer.                                                                                              
                                                                                                                                
Representative  Munoz  asked  why  the  sponsor  decided  to                                                                    
remove  the   deduction  of  federal  taxes   from  gambling                                                                    
proceeds.  Mr.  Anderson  responded  that  typically,  state                                                                    
taxes were  deducted from  federal taxes  and not  the other                                                                    
way around.  He indicated that  the change was  suggested to                                                                    
align with  the state's tax structure.  Representative Munoz                                                                    
asked  if the  state was  assessing the  tax on  the federal                                                                    
portion of gambling proceeds as  well. Mr. Anderson deferred                                                                    
to Mr. Burnett.                                                                                                                 
                                                                                                                                
Mr. Burnett explained  that DOR assessed a tax  based on all                                                                    
of  the  revenues  earned  on   gambling  in  state  waters.                                                                    
Currently,  the  federal  tax paid  was  deducted  prior  to                                                                    
determining the  state tax. The  legislation would  levy the                                                                    
tax  on the  entire earnings  and the  federal tax  would be                                                                    
levied on the revenue less  the state tax, which was aligned                                                                    
with how the department collected most other taxes.                                                                             
                                                                                                                                
Representative   Edgmon   had    questions   regarding   the                                                                    
Commercial Fisheries Entry Commission  (CFEC). He cited page                                                                    
48 from the Indirect Expenditure  Report and asked where the                                                                    
233 individuals  eligible for the  reduced permit  fees were                                                                    
located in the state.                                                                                                           
                                                                                                                                
BEN   BROWN,   COMMISSIONER,  COMMERCIAL   FISHERIES   ENTRY                                                                    
COMMISSION,  DEPARTMENT OF  FISH AND  GAME, replied  that he                                                                    
unaware of  the specific geographic regions  the individuals                                                                    
resided  in  and  offered to  provide  the  information.  He                                                                    
guessed  that  many  of the  individuals  resided  in  rural                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Representative  Edgmon  wondered  what  the  impact  of  the                                                                    
additional costs of the permit  fees would have on the areas                                                                    
where the individuals resided. He  wondered what the reduced                                                                    
fee amounted to per individual.                                                                                                 
                                                                                                                                
Mr. Brown  indicated that the  reduction was 50  percent and                                                                    
fees ranged  from $75  to $3000  depending on  the statutory                                                                    
formula.  Therefore,  the reduction  for  a  $3000. fee  was                                                                    
substantial.  He  believed  that   elimination  of  the  fee                                                                    
reduction  was "relative"  and  that  collectively was  "not                                                                    
that  much for  the  department ($17,921.)  but  could be  a                                                                    
hardship for the individual.                                                                                                    
                                                                                                                                
2:12:26 PM                                                                                                                    
                                                                                                                                
Representative Gara  asked whether  there was any  other tax                                                                    
that operated  like the gambling  tax; allowing  a deduction                                                                    
of federal taxes before paying  state taxes. Mr. Burnett was                                                                    
not aware of any other tax similarly levied in the state.                                                                       
                                                                                                                                
Representative  Gara stated  that he  was having  difficulty                                                                    
understanding  the  statue   references  from  the  indirect                                                                    
expenditure report concerning  exploration incentive credits                                                                    
and what  credits were  terminated in  HB 155.  He expressed                                                                    
confusion  and wanted  to ensure  the wrong  credit was  not                                                                    
being  eliminated.  Discussion  ensued among  the  committee                                                                    
members in an attempt to clarify the issue.                                                                                     
                                                                                                                                
Co-Chair   Thompson   acknowledged   that  the   issue   was                                                                    
complicated and pointed out that  his staff was available to                                                                    
answer committee member's questions.                                                                                            
                                                                                                                                
Representative   Gara  asked   for   confirmation  that   AS                                                                    
38.05.180  (i),   the  exploration  credit   designated  for                                                                    
elimination in the bill had not  been used in over a decade.                                                                    
Mr. Burnett responded in the affirmative.                                                                                       
                                                                                                                                
2:19:30 PM                                                                                                                    
                                                                                                                                
HB  155  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 15                                                                                                             
                                                                                                                                
     "An Act relating to credits toward a sentence of                                                                           
     imprisonment and to good time deductions."                                                                                 
                                                                                                                                
REPRESENTATIVE TAMMIE WILSON,  SPONSOR, discussed the intent                                                                    
of  the bill.  She announced  that the  bill dealt  with the                                                                    
period   of  pre-trial;   before  possible   conviction  and                                                                    
sentencing. She  explained that  currently if  an individual                                                                    
served the  time awaiting  trial in  jail and  was convicted                                                                    
credit  was given  for time  served.  The legislation  would                                                                    
grant credit  for time  served under  electronic monitoring.                                                                    
She read the following from page  1, beginning on line 10 of                                                                    
the bill:                                                                                                                       
                                                                                                                                
     …if  the person  has not  committed a  criminal offense                                                                    
     while  under   electronic  monitoring  and   the  court                                                                    
     imposes  substantial   restrictions  on   the  person's                                                                    
     freedom  of  movement  and  behavior  while  under  the                                                                    
     electronic monitoring program,  including requiring the                                                                    
     person to be confined to a residence…                                                                                      
                                                                                                                                
Representative Wilson  specified that  the bill  changed the                                                                    
definition of  residence from strictly  a private home  to a                                                                    
halfway house,  residential treatment center, or  other type                                                                    
of residential rehabilitative housing.                                                                                          
                                                                                                                                
Representative Wilson  continued to  read from page  1, line                                                                    
14 of the bill:                                                                                                                 
                                                                                                                                
     …except for a                                                                                                              
     (1) court appearance;                                                                                                      
     (2) meeting with counsel; or                                                                                               
     (3) period  during which  the person  is at  a location                                                                    
     ordered by  the court  for the purposes  of employment,                                                                    
     attending  an   educational  or   vocational  training,                                                                    
     performing  community volunteer  work,  or attending  a                                                                    
     rehabilitative activity or medical appointment.                                                                            
                                                                                                                                
Representative   Wilson   communicated  that   very   little                                                                    
opportunity  to receive  treatment existed  during the  pre-                                                                    
trial period and many individuals  lost their jobs or homes.                                                                    
She  elaborated that  the bill  had  no effect  on a  person                                                                    
qualified  for  electronic  monitoring.  Conversely,  HB  15                                                                    
would   not   change   the  prohibition   against   allowing                                                                    
electronic  monitoring for  sex  offenders.  She provided  a                                                                    
scenario regarding  how the bill  would work.  An individual                                                                    
charged with a crime would appear  in court and be placed on                                                                    
electronic  monitoring  and  other conditions  of  pre-trial                                                                    
release. If  subsequently convicted, and the  individual was                                                                    
compliant  during pre-trial  credit  would  be received  for                                                                    
time served.  She believed that the  scenario was preferable                                                                    
over  placing  the  individual  in  jail  pre-trial  without                                                                    
receiving rehabilitative treatment or services.                                                                                 
                                                                                                                                
2:19:43 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Saddler wondered  whether one  day served  under                                                                    
electronic  monitoring was  worth one  day's credit  against                                                                    
incarceration.  Representative  Wilson  confirmed  that  the                                                                    
credit was a 1 to 1 ratio.                                                                                                      
                                                                                                                                
Co-Chair Neuman asked  how a person who  was technically not                                                                    
guilty during the pre-trial time  but was subsequently found                                                                    
guilty  could  legally be  granted  the  time served  before                                                                    
sentencing.                                                                                                                     
                                                                                                                                
Representative  Wilson  responded  that the  system  already                                                                    
gave credit  against time served  before sentencing.  When a                                                                    
person was charged  with a crime and was  jailed during pre-                                                                    
trial,  the individual  was collecting  time served  against                                                                    
sentencing  time.  She  shared  that  HB  15,  under  strict                                                                    
conditions  metered out  by judge,  would allow  counseling,                                                                    
employment, treatment, etc. during  the pre-trial time under                                                                    
electronic  monitoring   and  receive   credit  for   it  if                                                                    
sentenced.  She  opined  that doing  something  constructive                                                                    
like   counseling   or   employment  was   preferable   over                                                                    
languishing in jail  at much higher costs to  the state. She                                                                    
reiterated that  the bill  allowed for  pre-trial electronic                                                                    
monitoring under  very strict conditions and  that currently                                                                    
electronic monitoring was only permitted post sentencing.                                                                       
                                                                                                                                
2:26:24 PM                                                                                                                    
                                                                                                                                
Representative Gara commented that  the language in the bill                                                                    
mattered. He expressed concern over  the words "[while under                                                                    
electronic  monitoring and  the  court imposes]  substantial                                                                    
restrictions on the person's freedom."  He wondered what the                                                                    
definition of  "substantial restrictions" was.  He suggested                                                                    
that an individual  who acted exemplary in  carrying out his                                                                    
pre-trial  conditions under  electronic  monitoring but  was                                                                    
"just  short of  substantial restrictions"  could be  denied                                                                    
credit  for pre-trial  time served.  He wondered  what would                                                                    
happen    to   the    person   with    "almost   substantial                                                                    
restrictions." He wondered why  the language was included in                                                                    
the bill.                                                                                                                       
                                                                                                                                
Representative  Wilson   clarified  that  the   court  would                                                                    
determine  the   substantial  restrictions  placed   on  the                                                                    
individual; therefore,  that the  person would  know exactly                                                                    
what conditions to comply with  during the pre-trial period.                                                                    
She informed the committee that  the Department of Law (DOL)                                                                    
suggested the substantial restriction language.                                                                                 
                                                                                                                                
Representative Gara stated that it  was not "good enough for                                                                    
him"  that  the language  was  inserted  in the  legislation                                                                    
under the direction of DOL.  He believed that the department                                                                    
tended to be "harder" on  defendants than other agencies. He                                                                    
provided  an example  of a  person  living at  home with  an                                                                    
ankle   monitor  working   to  get   their  GED,   obtaining                                                                    
employment, and  abiding by other conditions  imposed by the                                                                    
court. He  did not  think that the  scenario would  meet the                                                                    
definition  of  substantial   restrictions.  He  wanted  the                                                                    
person under his scenario to  receive credit for time served                                                                    
while monitored.                                                                                                                
                                                                                                                                
Representative Wilson understood that  a previous court case                                                                    
set precedent that mandated  substantial restrictions or the                                                                    
"equivalent of being in jail."                                                                                                  
                                                                                                                                
Representative Gattis  agreed with Representative  Gara. She                                                                    
thought that "people  with bad behavior should  be given the                                                                    
opportunity  to  "rehabilitate;"  if the  person  reoffended                                                                    
then at  least the opportunity  was offered. She  saw people                                                                    
in  her district  who  had "made  a  mistake and  recognized                                                                    
their  mistake, but  could not  get  out of  the hole."  She                                                                    
claimed  that the  state was  not providing  the opportunity                                                                    
for  rehabilitation and  inmates were  merely "existing"  in                                                                    
prison at high financial costs  to the state. She wanted the                                                                    
system  to help  convicted  "citizens" work  their way  into                                                                    
becoming productive  members of society and  "move forward."                                                                    
She believed that  "sitting in jail was not  the answer" nor                                                                    
was  replicating   jail  because  the  current   system  was                                                                    
failing.                                                                                                                        
                                                                                                                                
2:33:06 PM                                                                                                                    
                                                                                                                                
Vice-Chair Saddler  asked about the meaning  of "substantial                                                                    
restrictions  on movement"  and asked  how the  language was                                                                    
interpreted.  He inquired  whether it  was confined  to what                                                                    
was listed as allowable in HB  15 or whether the court could                                                                    
impose  other  activities  or  restrictions.  Representative                                                                    
Wilson  answered that  the court  system  would decide  what                                                                    
restrictions  on movement  to impose  within the  provisions                                                                    
listed in the bill.                                                                                                             
                                                                                                                                
Co-Chair  Neuman  observed  that  different  judges  imposed                                                                    
different sentences for  the same crime and "was  not a fair                                                                    
system."  He  wanted  a  clear  definition  of  "substantial                                                                    
restrictions."  He   suggested  that  the  bill   list  what                                                                    
substantial  restrictions were  as  opposed  to leaving  the                                                                    
definition open to interpretation.                                                                                              
                                                                                                                                
Representative   Wilson  pointed   out  the   difficulty  in                                                                    
achieving  consensus  among  the Department  of  Corrections                                                                    
(DOC), public  defenders, district attorneys, and  the Court                                                                    
System when  crafting the legislation.  She shared  that the                                                                    
bill  was  a  compromise  between the  entities  within  the                                                                    
confines of the court  case precedent. She expressed concern                                                                    
over  the  public's  safety   and  thought  that  sufficient                                                                    
restrictions  were  needed  to  safeguard  the  public.  She                                                                    
agreed that having the definition  in writing would help but                                                                    
wanted  to wait  and see  how HB  15 would  play out  in the                                                                    
courts,   if   adopted.   She  surmised   that   substantial                                                                    
restrictions  would act  as a  deterrent for  the individual                                                                    
under electronic  monitoring while allowing  the opportunity                                                                    
for reform.                                                                                                                     
                                                                                                                                
2:38:30 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg  stated  his  concern  about  the                                                                    
definition   of  substantial   restrictions.  He   was  also                                                                    
concerned  about court  imposed restrictions  that were  not                                                                    
criminal  offenses  i.e.,  restricting drinking  or  smoking                                                                    
marijuana, and wondered how the  bill was dealing with those                                                                    
restrictions.                                                                                                                   
                                                                                                                                
Representative  Wilson referred  to lines  11 through  12 on                                                                    
page 1 and interpreted the  language to mean that during the                                                                    
period  of electronic  monitoring  a person  may not  commit                                                                    
another crime and receive credit  for time served. She cited                                                                    
that the  definition of substantial restrictions  was listed                                                                    
on  page  2  and  that the  court  would  impose  definitive                                                                    
restrictions around  where and when the  person was expected                                                                    
to be at all times.                                                                                                             
                                                                                                                                
Representative  Gara understood  the bill  to read  that the                                                                    
allowances   listed   on   page  two:   court   appearances,                                                                    
employment, rehabilitative  activity, etc.,  were exceptions                                                                    
to court restrictions.                                                                                                          
                                                                                                                                
2:43:26 PM                                                                                                                    
                                                                                                                                
Representative  Gara  interpreted  the legislation  to  mean                                                                    
that  the  items  listed  on   page  2  were  exempted  from                                                                    
substantial   restrictions  and   wanted   to  clarify   the                                                                    
interpretation for the committee.                                                                                               
                                                                                                                                
Representative  Wilson  responded  that she  understood  the                                                                    
bill to read that unless the  monitored person was at one of                                                                    
the locations  listed in the  bill they would  be restricted                                                                    
to their place of residence.                                                                                                    
                                                                                                                                
Representative Gara opined that  it was "mind boggling" that                                                                    
someone who committed  a minor crime would  be denied credit                                                                    
for time  served if they  were not placed  under substantial                                                                    
restriction  than  a person  who  committed  a more  serious                                                                    
crime  and remained  in jail  during  pretrial and  received                                                                    
credit for  time served.  He added that  he was  certain the                                                                    
list on page two contained exemptions and not restrictions.                                                                     
Representative  Wilson agreed  that  the term  "substantial"                                                                    
made the  bill "more difficult to  understand." She restated                                                                    
that the  term was necessary due  to a court case  the state                                                                    
lost  that  determined  that  in  order  to  allow  pretrial                                                                    
monitoring the  restrictions had  to be equivalent  to being                                                                    
in jail. The  bill attempted to define  what that equivalent                                                                    
meant.                                                                                                                          
                                                                                                                                
Vice-Chair  Saddler requested  to hear  from DOL  or DOC  to                                                                    
answer the  question whether electronic monitoring  was more                                                                    
restrictive than  confinement in jail  presentencing whether                                                                    
it was  known how many  people were eligible  for monitoring                                                                    
and took advantage of the opportunity.                                                                                          
                                                                                                                                
REMOND   HENDERSON,  DEPUTY   COMMISSIONER,  DEPARTMENT   OF                                                                    
CORRECTIONS,  reported that  457 people  were on  electronic                                                                    
monitoring  post-sentencing and  that currently  1875 people                                                                    
were in  pre-trial status. He did  not know how many  of the                                                                    
pre-trial  individuals  would  be  eligible  for  electronic                                                                    
monitoring. He  detailed that the  department's goal  was to                                                                    
move   more  post-trial   convicts   onto  monitoring   when                                                                    
possible.                                                                                                                       
                                                                                                                                
Representative   Wilson  interjected   that   most  of   the                                                                    
monitoring was performed by private entities.                                                                                   
                                                                                                                                
Vice-Chair  Saddler asked  how  many people  post-conviction                                                                    
were  eligible  for  electronic  monitoring  and  accept  it                                                                    
versus those that choose  incarceration. He wondered whether                                                                    
convicts viewed electronic monitoring  as an easier sentence                                                                    
than confinement.                                                                                                               
                                                                                                                                
2:49:48 PM                                                                                                                    
                                                                                                                                
CARRIE BELDEN,  DIRECTOR, DIVISION OF PAROLE  AND PROBATION,                                                                    
DEPARTMENT  OF  CORRECTIONS (via  teleconference),  declared                                                                    
that  she could  not answer  the question  because it  was a                                                                    
matter of  the convict's personal preference  and capability                                                                    
to accept electronic monitoring.                                                                                                
                                                                                                                                
Representative Wilson indicated that  it was not possible to                                                                    
compare  post-trial to  pre-trial. She  explained that  if a                                                                    
person  in jail  during pre-trial  was convicted  the credit                                                                    
they received for time served  was called "good time" versus                                                                    
a person  choosing electronic  monitoring who  would receive                                                                    
day  for day  credit. Presently,  more incentive  existed to                                                                    
remain  in  jail   post-conviction  than  choose  electronic                                                                    
monitoring.  She  stated that  her  bill  was attempting  to                                                                    
"even out" the incongruity.                                                                                                     
                                                                                                                                
Representative Gara  asked whether  the bill was  limited to                                                                    
individuals  prior  to  conviction and  sentencing  or  also                                                                    
applied to offenders post-sentencing.                                                                                           
                                                                                                                                
KACI  SCHROEDER,  LEGISLATIVE  LIAISON, DEPARTMENT  OF  LAW,                                                                    
responded   that  the   legislation  applied   to  pre-trial                                                                    
sentencing.                                                                                                                     
                                                                                                                                
Representative Gara  asked whether  Section 1 and  Section 2                                                                    
of HB 15 only applied  to pretrial sentencing. Ms. Schroeder                                                                    
responded in  the affirmative. She  added that  a post-trial                                                                    
offender was  under the jurisdiction of  DOC. The department                                                                    
decided   on  convicts   placements,  which   could  include                                                                    
electronic monitoring with restrictions.                                                                                        
                                                                                                                                
2:54:22 PM                                                                                                                    
                                                                                                                                
Representative   Gara   described   a  scenario   where   an                                                                    
individual  was sentenced  pre-trial with  an ankle  monitor                                                                    
and conditions  that fell short of  substantial restrictions                                                                    
on  freedom of  movement. He  questioned why  the individual                                                                    
would not receive credit for time served.                                                                                       
                                                                                                                                
Ms.  Schroeder  indicated  that the  language,  "substantial                                                                    
restrictions  on  the  person's   freedom  of  movement  and                                                                    
behavior"  was  derived directly  from  case  law. Case  law                                                                    
defined criteria  "like incarceration"  and the  judge would                                                                    
be  familiar  with  the criteria.  She  cited  AS.12.55.027,                                                                    
which  was  not  included  in  the  bill  that  referred  to                                                                    
residential  treatment   and  delineated   the  restrictions                                                                    
necessary to qualify for jail credit.                                                                                           
                                                                                                                                
Representative  Gara  asked  whether including  or  removing                                                                    
"substantial"  was  a  policy   call  for  the  legislature.                                                                    
Representative   Wilson  understood   that  if   substantial                                                                    
restrictions  was removed  the  law would  be challenged  in                                                                    
court.  She  reiterated that  the  bill  was shaped  through                                                                    
compromise between  the four  entities. She  emphasized that                                                                    
"substantial restrictions"  was a big issue  in drafting the                                                                    
HB  15.  She wanted  the  legislation  to be  effective  and                                                                    
utilized.                                                                                                                       
                                                                                                                                
Representative  Gara  directed  the   question  to  DOL  and                                                                    
wondered  whether  removing substantial  restrictions  would                                                                    
render the policy invalid.                                                                                                      
                                                                                                                                
Ms.  Schroeder  explained  that pre-trial  jail  credit  was                                                                    
"very well  fleshed out in the  court system." Additionally,                                                                    
many cases  support disallowance  of time served  under pre-                                                                    
trail   electronic  monitoring.   However,   the  bill   was                                                                    
countering   the  precedent   by  stating   that  electronic                                                                    
monitoring  could  be  the  equivalent  to  jail  under  the                                                                    
conditions  specified in  the bill.  The language  in HB  15                                                                    
reflected  a   policy  shift  and  nothing   prohibited  the                                                                    
legislature   from  making   another   policy  call,   which                                                                    
eventually would be considered in the courts.                                                                                   
                                                                                                                                
Co-Chair Thompson invited Nancy  Meade to testify clarifying                                                                    
the judge's role in pre-trial sentencing.                                                                                       
                                                                                                                                
2:58:52 PM                                                                                                                    
                                                                                                                                
NANCY   MEADE,  GENERAL   COUNSEL,   ALASKA  COURT   SYSTEM,                                                                    
explained  that  judges  refrain  from  ordering  electronic                                                                    
monitoring "per se."  Pre-trial defendants received specific                                                                    
bail  conditions;  one  condition  required  a  third  party                                                                    
custodian.   Therefore,  some   defendants  cannot   find  a                                                                    
suitable  custodial  guardian. Subsequently,  the  defendant                                                                    
can hire a company  that provided custodial guardianship via                                                                    
an  ankle  monitor.  She  voiced  that  the  defendant  must                                                                    
convince  the judge  the method  was  appropriate under  the                                                                    
bail  conditions   and  the   company  must   establish  its                                                                    
capability  of responsible  guardianship. She  reported that                                                                    
DOC  was  not involved  in  pre-trial  monitoring. Upon  the                                                                    
judge's  approval,  an   order  specifying  the  defendant's                                                                    
monitoring  conditions was  written  by the  judge, who  was                                                                    
placed  on notice  by the  defendant that  he would  request                                                                    
credit for time served under monitoring when sentenced.                                                                         
                                                                                                                                
Representative Gara  asked whether  substantial restrictions                                                                    
must be imposed in order  to receive credit for time served.                                                                    
Ms. Meade thought that  the substantial restriction language                                                                    
was  included specifically  for  receiving  credit for  time                                                                    
spent  in  residential  treatment.   She  related  that  the                                                                    
court's position  was that the legislature  could create any                                                                    
policy it  wanted in  regards to  pre-trial time  served and                                                                    
electronic monitoring and the court would apply it.                                                                             
                                                                                                                                
3:03:17 PM                                                                                                                    
Representative  Gara thought  that a  defendant who  did not                                                                    
have a drug and alcohol  problem and was placed on pre-trial                                                                    
electronic  monitoring but  was not  subject to  substantial                                                                    
restrictions on  his freedom of movement  should gain credit                                                                    
for time served. He asked for Ms. Meade's thoughts.                                                                             
                                                                                                                                
Ms. Meade responded that bill  did exclude the person in the                                                                    
described scenario  and reiterated that the  committee could                                                                    
include any  type of  policy call it  desired in  regards to                                                                    
the issue and the court would apply the law.                                                                                    
                                                                                                                                
Vice-Chair Saddler  asked what  percentage of  people placed                                                                    
on  electronic monitoring  complied  with the  restrictions.                                                                    
Ms. Meade replied that she  did not have the exact statistic                                                                    
but  compliance was  "quite high."  She elaborated  that the                                                                    
defendant was paying a high  fee for the monitoring service.                                                                    
The electronic monitoring companies  acted swiftly to file a                                                                    
petition when  a defendant transgressed and  were trusted by                                                                    
the courts.                                                                                                                     
                                                                                                                                
Representative Wilson maintained that  the bill was a change                                                                    
in policy  and reminded the committee  that Alaska's prisons                                                                    
were   at  "101   percent"  capacity   and  she   hoped  the                                                                    
legislation was  a first step  to stop the  "revolving door"                                                                    
of incarceration.                                                                                                               
                                                                                                                                
HB  15  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:07:31 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:07 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

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