Legislature(2015 - 2016)HOUSE FINANCE 519

04/16/2015 08:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 10:30 a.m. Today --
+ SB 39 REPEAL FILM PRODUCTION TAX CREDIT TELECONFERENCED
Moved CSSB 39(L&C) Out of Committee
+ SB 34 PCE ENDOWMENT FUND INVESTMENT TELECONFERENCED
Moved CSSB 34(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 16, 2015                                                                                            
                         8:37 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
8:37:01 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 8:37 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator  Bill   Stoltze,  Sponsor;  Jerry   Burnett,  Deputy                                                                    
Commissioner, Treasury Division, Department of Revenue;                                                                         
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
DK  Johnson,  Tri-Seven   Pictures,  Anchorage;  Dan  Duque,                                                                    
Seawolf  Student   Filmmakers,  Anchorage;   Ron  Holmstrom,                                                                    
SAG/AFTRA  Representative,  Anchorage; Kevin  Kurka,  Alpine                                                                    
Productions,  Anchorage;   Tess  Weaver,   Self,  Anchorage;                                                                    
Gordon  Carlson,   Self,  Cantwell;  Stacy   Nicholi,  Self,                                                                    
Anchorage;  David McGovern,  Self, Anchorage;  Brad Swenson,                                                                    
Gold Ring  Group, Girdwood; Maxine Doogan,  Community United                                                                    
for Safety and Protection,  Anchorage; Bob Crockett, Piksik,                                                                    
Anchorage;  Kelly  Bender,  Whittier  Chamber  of  Commerce,                                                                    
Whittier;  Deborah Schildt,  Alaska  Film Group,  Anchorage;                                                                    
Byron  Charles,   Self,  Ketchikan;  Cedar   Cussins,  Gecko                                                                    
Services LLC., Anchorage;                                                                                                       
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 39     REPEAL FILM PRODUCTION TAX CREDIT                                                                                     
                                                                                                                                
          CSSB 39(L&C) was REPORTED out of committee with a                                                                     
          "do pass" recommendation and with a previously                                                                        
          published zero fiscal note: FN1 (DOR).                                                                                
                                                                                                                                
                                                                                                                                
SB 34     PCE ENDOWMENT FUND INVESTMENT                                                                                         
                                                                                                                                
          CHSB 34(FIN) was REPORTED out of committee with a                                                                     
          "do pass" recommendation and with a previously                                                                        
          published zero fiscal note: FN1 (DOR).                                                                                
                                                                                                                                
Co-Chair Thompson reviewed the meeting agenda.                                                                                  
                                                                                                                                
SENATE BILL NO. 39                                                                                                            
                                                                                                                                
     "An  Act  repealing  the film  production  tax  credit;                                                                    
     providing  for  an  effective  date  by  repealing  the                                                                    
     effective dates  of secs.  31 - 33,  ch. 51,  SLA 2012;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
8:38:07 AM                                                                                                                    
                                                                                                                                
SENATOR BILL  STOLTZE, SPONSOR, explained  that SB 39  was a                                                                    
very serious  bill which he  had introduced in  the previous                                                                    
year [HB  112 was introduced  during the second year  of the                                                                    
28th  legislature]. He  indicated that  although HB  112 had                                                                    
been reported out of the  House Finance Committee in 2014 he                                                                    
did not push for a  floor vote. Instead, he reported working                                                                    
with the  committee chairman on a  compromise measure, House                                                                    
Bill  306 [Short  Title:  Eval.  Indirect Expenditures;  Tax                                                                    
Credits],  which evaluated  all tax  credits. He  added that                                                                    
tax credits  were ultimately  general fund  expenditures. In                                                                    
order  to ensure  the  passage  of HB  306  there were  some                                                                    
compromises that had  to be made which lead  to drafting new                                                                    
legislation  in the  form of  SB 39.  He suggested  that the                                                                    
state  was   in  a  vastly  different   financial  condition                                                                    
currently and opined that a  value judgement made at present                                                                    
would be much  different than three or five  years prior. He                                                                    
believed  a  fresh  look  at whether  the  state  wanted  to                                                                    
continue  subsidizing the  film industry  was necessary.  He                                                                    
reiterated  that   film  tax   credits  were   general  fund                                                                    
expenditures.  He mentioned  that the  governor was  slowing                                                                    
the breaks  and relayed  that, when queried,  the Department                                                                    
of  Revenue (DOR)  took  the position  that  SB 39  provided                                                                    
clarity.  He  highlighted   the  deliberative  process  that                                                                    
accompanied the  evaluation of the  film tax credit  as well                                                                    
as all  other tax  credits. He noted  that the  "tax credit"                                                                    
reference was a bit of  a misnomer because the film industry                                                                    
did not pay taxes.                                                                                                              
                                                                                                                                
8:43:24 AM                                                                                                                    
                                                                                                                                
Senator  Stoltze  continued to  explain  that  it was  money                                                                    
being depleted from the general  fund including a charge for                                                                    
a third-party  broker that would otherwise  be available for                                                                    
roads,  schools, and  other items.  He relayed  that in  his                                                                    
legislation he left  the film office in place  in case there                                                                    
were opportunities  where the state  could act as  an agent.                                                                    
He felt  that it  was an  appropriate economic  component of                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED).  However, in  the  governor's budget  deliberations                                                                    
the funding was  removed. He would have left  the funding in                                                                    
place, but  it was a  time of difficult decision  making. He                                                                    
pointed out his  main theme; economics. He  added that there                                                                    
had  been  many  positive  outcomes  within  communities  of                                                                    
Alaska and  for select  business people as  a result  of the                                                                    
film tax  credit. He  made clear that  he was  not impressed                                                                    
with the audit  which found that for every  dollar the state                                                                    
spent  two dollars  feed  the economy.  He  voiced that  the                                                                    
state dividend was far better  at enriching the economy than                                                                    
the  film tax  credit.  He elaborated  that although  monies                                                                    
might go  into the  state's economy,  there were  no dollars                                                                    
going back  into state coffers.  He acknowledged  that there                                                                    
was no  expectation that tax  credits would result  in money                                                                    
being  put back  into  the  treasury. At  the  time the  tax                                                                    
credit  was instituted  significant  funding was  available.                                                                    
However, he argued that due  to the current fiscal situation                                                                    
the state needed to make different decisions.                                                                                   
                                                                                                                                
Senator  Stoltze  further  discussed some  of  the  positive                                                                    
economic  benefits  resulting  from   the  tax  credits  for                                                                    
individual  communities including  bed taxes  and short-term                                                                    
employment. He  stressed that there  had been  benefits, but                                                                    
argued that  if a person  was spending their own  money they                                                                    
might  make  a  different  choice. He  suggested  that  some                                                                    
people view tax credits  as an economic diversification tool                                                                    
for  Alaska. He  stated  that the  largest  employer in  the                                                                    
state  was  the commercial  fishing  industry  in which  the                                                                    
state received unrestricted general  fund revenues from both                                                                    
business and  landing taxes in  the amount of  $24.7 million                                                                    
in the current  year. Costs such as  insurance premiums were                                                                    
about  $58.5 million.  He wanted  to  provide a  perspective                                                                    
comparison and added  that nothing was going  to replace oil                                                                    
revenues. He argued that the  only thing that really created                                                                    
jobs  and provided  revenue was  when  outside capital  came                                                                    
into the state  without the state paying for it.  A film tax                                                                    
credit or  other types  of subsidies  would not  provide the                                                                    
diversification needed in the economy.                                                                                          
                                                                                                                                
Co-Chair    Thompson   acknowledged    that   Representative                                                                    
Guttenberg   and  Representative   Pruitt  had   joined  the                                                                    
meeting.                                                                                                                        
                                                                                                                                
8:48:17 AM                                                                                                                    
                                                                                                                                
Vice-Chair Saddler  assumed the  chair and asked  if members                                                                    
had questions.                                                                                                                  
                                                                                                                                
Representative Gara asked about the current sunset date.                                                                        
                                                                                                                                
Senator Stoltze responded 2018,  which was changed from 2016                                                                    
on the Senate floor.                                                                                                            
                                                                                                                                
Representative  Guttenberg asked  if the  film office  would                                                                    
stay open.                                                                                                                      
                                                                                                                                
Senator  Stoltze  responded that  the  film  office was  not                                                                    
funded.                                                                                                                         
                                                                                                                                
Representative Guttenberg  asked what the film  office would                                                                    
accomplish by staying in place.                                                                                                 
                                                                                                                                
Senator  Stoltze responded  that  the  office would  provide                                                                    
assistance  with identifying  locations,  would be  involved                                                                    
with   Department  of   Natural  Resources,   and  help   in                                                                    
identifying  land  sites. The  rational  was  that a  person                                                                    
would be  available to help  someone wanting to  spend money                                                                    
in the state.                                                                                                                   
                                                                                                                                
Representative  Wilson  asked  about  the  film  group.  She                                                                    
believed  the group  had changed  and  wondered exactly  who                                                                    
would be impacted and where the state stood.                                                                                    
                                                                                                                                
Vice-Chair Saddler invited Mr. Burnett to the table.                                                                            
                                                                                                                                
Senator Stoltze explained that he  had tried to clarify what                                                                    
his bill did and did not do.                                                                                                    
                                                                                                                                
8:51:42 AM                                                                                                                    
                                                                                                                                
JERRY  BURNETT,  DEPUTY   COMMISSIONER,  TREASURY  DIVISION,                                                                    
DEPARTMENT  OF  REVENUE,  restated  Representative  Wilson's                                                                    
question about the amount in  the budget for the film office                                                                    
if  the  bill  did  not   pass.  He  reported  that  in  the                                                                    
governor's version of the DOR  budget all of the funding for                                                                    
the Alaska  Film Office  was removed.  He explained  that it                                                                    
equated  to  three  positions   totaling  $347  thousand  in                                                                    
personal  services. The  three people  in the  positions had                                                                    
been made aware of the  situation. The governor's stance was                                                                    
to  place  a  freeze  to   the  office  and  avoid  creating                                                                    
additional liabilities to the state.                                                                                            
                                                                                                                                
Representative  Kawasaki referred  to the  fiscal note  that                                                                    
mentioned  the $350  thousand that  was not  appropriated in                                                                    
the governor's  budget. He  wondered how  a film  tax credit                                                                    
would exist without  the film office and  mentioned the 2012                                                                    
law.                                                                                                                            
                                                                                                                                
Mr. Burnett  relayed that  the way  the statute  was written                                                                    
DOR would operate the film  office subject to appropriation.                                                                    
Department of  Revenue would not  be reviewing  film scripts                                                                    
and the  film tax incentive  review commission would  not be                                                                    
meeting  under the  current budget.  He  added that  without                                                                    
funding for  the program the  department would not  take new                                                                    
applications  after July  1. There  were  existing and  pre-                                                                    
approved films that were ongoing  and the associated credits                                                                    
would be processed with existing staff within DOR.                                                                              
                                                                                                                                
Representative   Kawasaki   clarified   that   without   the                                                                    
additional  funding for  the  film office  in  DOR the  film                                                                    
industry credit was defunct.                                                                                                    
                                                                                                                                
Mr.  Burnett   responded  that  no  new   credits  would  be                                                                    
approved.                                                                                                                       
                                                                                                                                
Representative Kawasaki  asked if  Mr. Burnett's  answer was                                                                    
yes.                                                                                                                            
                                                                                                                                
Mr. Burnett responded in the affirmative.                                                                                       
                                                                                                                                
Representative   Munoz    asked   how   many    notices   of                                                                    
qualifications were issued prior to July 1, 2015.                                                                               
                                                                                                                                
Mr. Burnett was unsure of  the exact amount. He offered that                                                                    
there were approximately $38  million in outstanding credits                                                                    
that  had not  been  paid.  He stated  that  in the  current                                                                    
program,  which had  a $200  million cap,  there would  have                                                                    
been $172 million  left under the cap. He  suggested that it                                                                    
did  not  fit with  the  $38  million  because there  was  a                                                                    
previous program.                                                                                                               
                                                                                                                                
8:55:22 AM                                                                                                                    
                                                                                                                                
Representative Munoz  reiterated that the  legislation would                                                                    
allow for the payment of outstanding credits.                                                                                   
                                                                                                                                
Mr. Burnett  responded that  it would allow  for any  of the                                                                    
outstanding credits.                                                                                                            
                                                                                                                                
Representative  Munoz reconfirmed  that anything  after July                                                                    
1st would not be allowed.                                                                                                       
                                                                                                                                
Mr.  Burnett  stated  that  no  new  applications  would  be                                                                    
processed. He  did not believe  there were  any applications                                                                    
that  were approved  since Governor  Walker took  office for                                                                    
films  that were  actually going  to be  made in  Alaska. He                                                                    
could not  verify his information  due to the nature  of the                                                                    
proprietary applications.                                                                                                       
                                                                                                                                
Representative  Edgmon wanted  to  hear from  DOR about  the                                                                    
broader impact  of the  film industry.  He believed  that it                                                                    
was a clear case that the  state was paying more in terms of                                                                    
tax credits  than the  state was  receiving in  benefits. He                                                                    
wanted to know if any  documentation was available such as a                                                                    
McDowell study,  or a Northern Economics  study that pointed                                                                    
to an economic multiplier effect.  In other words, the state                                                                    
was paying a  significant amount of money  for a significant                                                                    
number of bad reality shows in return.                                                                                          
                                                                                                                                
Senator Stoltze stated  that he was not a  spokesman for the                                                                    
film  industry.  He  believed   that  there  had  been  some                                                                    
positive impacts  on individual towns. He  also relayed that                                                                    
the City of Unalaska had to  hire a public relations firm to                                                                    
undo some  of the  damage to the  economic wellbeing  and to                                                                    
the perception  that the community  experienced as  a result                                                                    
of some  of the  non-fiction reality television  shows. Many                                                                    
people of  Alaska had issues  of how they were  portrayed as                                                                    
well. He added that some  from the film industry stated that                                                                    
the introduction  of the  bill killed  the film  industry in                                                                    
Alaska.  He reported  that the  governor  had suspended  the                                                                    
program  prior to  Senator Stoltzes'  bill introduction.  He                                                                    
wanted to clarify the sequence of events.                                                                                       
                                                                                                                                
8:58:56 AM                                                                                                                    
                                                                                                                                
Representative Gara  stated that Alaska had  "C" corporation                                                                    
taxes but  did not have  "S" corporation taxes and  that the                                                                    
taxes collected  were based on company  profits. He wondered                                                                    
if the state  had received corporate income tax  from any of                                                                    
the film corporations.  He wanted to know  if Alaska pursued                                                                    
any taxes and whether the state was entitled.                                                                                   
                                                                                                                                
Mr. Burnett replied that the  question was very difficult to                                                                    
answer for a  number of reasons. He understood  that most of                                                                    
the production companies that came  to Alaska were set up as                                                                    
limited partnerships and  limited liability companies (LLC).                                                                    
He suggested that there might  be a corporate sponsor entity                                                                    
that  received  income.  However,  he  made  it  clear  that                                                                    
identifying  the entity  was next  to  impossible. He  added                                                                    
that if  a "C"  corporation was  actively doing  business in                                                                    
Alaska and  earned an  income anywhere  in the  country they                                                                    
would  be required  to file  an  Alaska tax  return and  pay                                                                    
taxes.  He  was unsure  how  the  production companies  were                                                                    
organized  and did  not believe  any were  organized as  "C"                                                                    
corporations in Alaska.                                                                                                         
                                                                                                                                
Representative  Gara asked  if  the state  had received  any                                                                    
revenue and whether he thought  the department's efforts had                                                                    
been adequate in determining whether  the state was entitled                                                                    
to any corporate tax revenue.                                                                                                   
                                                                                                                                
Mr. Burnett  could not speak  directly to whether  the state                                                                    
had received any income, but  believed that the department's                                                                    
efforts to  pursue income from  corporate entities  had been                                                                    
adequate.                                                                                                                       
                                                                                                                                
Representative  Gara wanted  confirmation about  the receipt                                                                    
of revenue. He opined that  there were "C" corporations that                                                                    
had produced  some of  the larger films  and that  the state                                                                    
should have received some revenue.                                                                                              
                                                                                                                                
Vice-Chair Saddler  asked if  the bill  sponsor had  any new                                                                    
information regarding  how film tax credits  operated in the                                                                    
Lower 48.                                                                                                                       
                                                                                                                                
Senator Stoltze replied that the  trend was that states were                                                                    
backing away from film tax  credits. He reported that he had                                                                    
attended a National Conference  of State Legislatures (NCSL)                                                                    
for  fiscal   policy  leaders.  He  stated   that  attendees                                                                    
included  state treasurers  and state  office of  management                                                                    
and  budget directors.  A dominant  theme of  the conference                                                                    
was  out-of-control  tax  credits.  He  argued  that  SB  21                                                                    
[Secretary's note:  Oil and  gas production  tax legislation                                                                    
passed in 2014]  was legislation that attempted  to reign in                                                                    
tax  credits. He  conveyed that  tax  credits and  subsidies                                                                    
were part  of the  budget debate. At  the NCSL  conference a                                                                    
common   discussion   was   eliminating  tax   credits   and                                                                    
incentives,   inherently  general   fund  expenditures.   He                                                                    
suggested that  doing away  with film  tax credits  was only                                                                    
one piece of  getting control of tax credits.  He added that                                                                    
the state had  significant tax credits and only  a couple of                                                                    
tax payers.                                                                                                                     
                                                                                                                                
9:04:35 AM                                                                                                                    
                                                                                                                                
Representative Kawasaki asked about  HB 306 and the Indirect                                                                    
Expenditures book  from the current year.  He wondered about                                                                    
the qualified  capital expenditure  credit. He  relayed that                                                                    
the  Legislative Finance  Division (LFD)  reported that  the                                                                    
credit  was  not  being  used   as  intended  and  that  oil                                                                    
companies were  using the qualified capital  expenditures to                                                                    
do  general   maintenance,  rather   than  using   them  for                                                                    
development. He  interjected that  he had voted  against the                                                                    
film  tax credit  along with  the finance  co-chair and  the                                                                    
majority  leader.  He  wanted proof  that  the  tax  credits                                                                    
worked. He  suggested an audit  had been conducted  prior to                                                                    
the second iteration of the  bill becoming law. He suggested                                                                    
that the legislature  allow the credit to die on  its own on                                                                    
the sunset date in 2018. He  voiced that the film tax credit                                                                    
was effectively gutted  and would not convey  credits in the                                                                    
future.                                                                                                                         
                                                                                                                                
Senator Stoltze  stated that a  decision could be made  by a                                                                    
single person.  He spoke of  his legislation  providing more                                                                    
certainty and clarity.                                                                                                          
                                                                                                                                
Representative Gara understood the  resistance to paying for                                                                    
salaries  of   Hollywood  actors  and  producers.   He  also                                                                    
understood that  the state wanted  the business but  did not                                                                    
want to  pay out a large  sum of money. He  wondered about a                                                                    
provision that would cap the  program at a certain amount to                                                                    
offset travel costs to get to Alaska.                                                                                           
                                                                                                                                
Senator  Stoltze  opined that  if  the  state was  going  to                                                                    
continue   offering   tax  credits   Representative   Gara's                                                                    
suggestion  would  be  productive in  terms  of  subsidizing                                                                    
smarter.   However,   he   was  uncertain   about   existing                                                                    
structural problems and  thought that it would  be better to                                                                    
address the  issue when  evaluating all  state expenditures.                                                                    
He added  that there were already  complexities and problems                                                                    
and  that   the  ongoing  obligation  of   tax  credits  and                                                                    
subsidies  was a  larger issue.  He  felt that  it would  be                                                                    
better  to raise  the house  and build  a better  foundation                                                                    
with a new structure, with a new bill.                                                                                          
                                                                                                                                
9:09:34 AM                                                                                                                    
                                                                                                                                
Representative  Gattis commented  that the  film tax  credit                                                                    
was not  free marketing. She recalled  Representative Gara's                                                                    
statement that  the film tax  credits were  essentially free                                                                    
marketing for  Alaska's tourism.  She concluded that  it was                                                                    
the state that was paying for the marketing.                                                                                    
                                                                                                                                
Representative Gara agreed.                                                                                                     
                                                                                                                                
Representative  Gattis  commented   about  compensating  for                                                                    
travel costs. She agreed that  it was expensive to travel to                                                                    
and  around  Alaska.  She   recalled  the  television  show,                                                                    
Northern Exposure.  The show provided credit  to Alaska even                                                                    
though it  was not  filmed in the  state. She  reported that                                                                    
there were  other shows  filmed about  Alaska in  a location                                                                    
outside the  state. She  stressed that  the state  needed to                                                                    
cease subsidizing  during a  fiscal crunch.  She appreciated                                                                    
the idea of doing a  better job. However, she suggested that                                                                    
the state could not afford subsidies at present.                                                                                
                                                                                                                                
Senator Stoltze  commented that  he had  watched one  of the                                                                    
movies  produced  in Alaska  that  featured  the Knik  River                                                                    
valley,  one  of the  most  beautiful  spots in  his  Senate                                                                    
district. He indicated  that the beauty of the  area was not                                                                    
portrayed as  such in the  film. He furthered that  the film                                                                    
did not  necessarily benefit or  harm the area,  but alleged                                                                    
that  the state  had  spent a  significant  amount of  money                                                                    
subsidizing the film.                                                                                                           
                                                                                                                                
Vice-Chair Saddler  relayed that  there were  several people                                                                    
online waiting to provide testimony.                                                                                            
                                                                                                                                
Senator  Stoltze  thanked the  committee  for  its time  and                                                                    
indicated  his staff  would be  available for  questions. He                                                                    
would be leaving for another committee.                                                                                         
                                                                                                                                
9:13:01 AM                                                                                                                    
                                                                                                                                
Vice-Chair Saddler OPENED public testimony.                                                                                     
                                                                                                                                
9:13:14 AM                                                                                                                    
                                                                                                                                
DK    JOHNSON,    TRI-SEVEN   PICTURES,    ANCHORAGE    (via                                                                    
teleconference),  opposed  SB 39.  He  relayed  that he  had                                                                    
spent the  previous few years working  side-by-side with one                                                                    
of the  most talented  and dedicated  production communities                                                                    
ever assembled. He  highlighted the hard work  that had been                                                                    
done  in   spite  of  consistent   roadblocks  set   by  the                                                                    
legislature.  He furthered  that  the  community had  worked                                                                    
with  lawmakers to  better the  state's production  industry                                                                    
making  it  work  for  the  benefit of  the  state  and  its                                                                    
residents.  He  discussed  the benefits  of  the  production                                                                    
industry  such   as  diversification  of  the   economy.  He                                                                    
mentioned  that each  year members  of the  industry had  to                                                                    
come  before  the  legislature   to  defend  the  industry's                                                                    
progress. As  a result, he opined  that industry development                                                                    
was often  delayed by  a minimum of  two years.  He stressed                                                                    
that SB  39 created  an unstable  work environment  and that                                                                    
the passage of  the bill would put hundreds  of Alaskans out                                                                    
of work. He mentioned that  an example of a lost opportunity                                                                    
resulting from  legislation was the feature  film, "Hunter -                                                                    
Killer." He  spoke against the  elimination of  the program.                                                                    
He opined that  the state had a large  gambling problem with                                                                    
its  budget  and  believed that  a  different  strategy  was                                                                    
needed. He urged committee members to vote against SB 39.                                                                       
                                                                                                                                
9:16:11 AM                                                                                                                    
                                                                                                                                
Representative  Guttenberg expressed  his concern  about the                                                                    
structure  of the  film tax  credits. He  thought the  state                                                                    
could  do  a  better   job  of  encouraging  the  production                                                                    
industry.                                                                                                                       
                                                                                                                                
9:16:54 AM                                                                                                                    
                                                                                                                                
DAN  DUQUE,  SEAWOLF   STUDENT  FILMMAKERS,  ANCHORAGE  (via                                                                    
teleconference), spoke in opposition  of SB 39. He indicated                                                                    
that he  was not a  fan of reality television.  He suggested                                                                    
that there were post  production companies in Anchorage that                                                                    
were happy  to hire  new talent. He  continued to  relay his                                                                    
experience.  He  mentioned  the  talent  of  the  people  in                                                                    
Alaskan villages. He  believed that the people  of the state                                                                    
were the state. He did  not understand how legislators could                                                                    
not see the benefits of  the program including a 100 percent                                                                    
return on investment. He opposed  the legislation and wanted                                                                    
incentives left in place.                                                                                                       
                                                                                                                                
9:20:00 AM                                                                                                                    
                                                                                                                                
RON  HOLMSTROM,  SAG/AFTRA  REPRESENTATIVE,  ANCHORAGE  (via                                                                    
teleconference),  clarified  that reality  television  shows                                                                    
hired  very few  people, generated  very little  revenue for                                                                    
the  state,  and  had  programing  sold  prior  to  filming.                                                                    
Whereas,  the  motion  picture industry  hired  hundreds  of                                                                    
people,  invested  millions of  dollars  in  the state,  but                                                                    
still had  to sell its  product. He opined that  the reality                                                                    
television shows  would remain  in Alaska  whether or  not a                                                                    
film   tax  credit   continued.   He   furthered  that   the                                                                    
legislation  ended  Alaska's  interest  in  a  multi-billion                                                                    
dollar  global  industry.  He  mentioned  other  states  and                                                                    
countries  investing in  infrastructure to  improve programs                                                                    
in order  to attract additional motion  picture development.                                                                    
He  suggested  that  Alaska adjusted  its  program  multiple                                                                    
times making  it unclear to producers  what state incentives                                                                    
were in place.  He pointed out that in  the 27th legislature                                                                    
the  state cut  out directly  paying actors,  producers, and                                                                    
writers.  He   believed  that  Alaska's  film   program  was                                                                    
unattractive. He  conveyed that SB 39  suspended the program                                                                    
placing a hold on the  film industry. He urged the committee                                                                    
to vote against SB 39.                                                                                                          
                                                                                                                                
9:23:04 AM                                                                                                                    
                                                                                                                                
KEVIN    KURKA,   ALPINE    PRODUCTIONS,   ANCHORAGE    (via                                                                    
teleconference),  spoke  in  opposition   of  the  bill.  He                                                                    
reported  that he  was  a cameraman  for  reality shows  and                                                                    
motion  pictures.  He  discussed  the benefits  of  the  tax                                                                    
credits. He suggested a suspension  of the tax credit rather                                                                    
than  removing  it  entirely.  He  suggested  adjusting  and                                                                    
improving the  tax credits  in the  interim. He  thanked the                                                                    
committee for its time.                                                                                                         
                                                                                                                                
9:24:55 AM                                                                                                                    
                                                                                                                                
TESS WEAVER, SELF, ANCHORAGE  (via teleconference), spoke in                                                                    
strong  opposition to  SB 39.  She reported  that she  was a                                                                    
freelance stylist  for the previous six  years. She conveyed                                                                    
that she and her family  made their living from film making.                                                                    
She describe  the work she  had been doing for  the previous                                                                    
two years.  She believed that  SB 39 would kill  the current                                                                    
project she  was working  on. She  furthered that  the state                                                                    
would  lose hard-working  Alaskans upon  the passage  of the                                                                    
bill. She appealed  to the legislature to  allow the program                                                                    
to continue  at least until  2018 when her project  would be                                                                    
completed. She  opined that  the incentive  provided endless                                                                    
possibilities.  She  thanked  committee  members  for  their                                                                    
time.                                                                                                                           
                                                                                                                                
9:26:13 AM                                                                                                                    
                                                                                                                                
GORDON CARLSON,  SELF, CANTWELL (via  teleconference), spoke                                                                    
in opposition to SB 39. He  discussed working on a film that                                                                    
had been produced  in Alaska and the  associated benefits to                                                                    
the  area. He  reported  that the  film  left a  significant                                                                    
amount of revenue in Alaska.  He was disheartened to hear of                                                                    
legislators' believing only one  industry could save Alaska.                                                                    
He  disagreed and  believed in  branching out.  He furthered                                                                    
that  with  enough  diversification oil  revenues  could  be                                                                    
replaced. He asked  the committee to give  the film industry                                                                    
a chance by maintaining the  current tax credits. He thanked                                                                    
the committee for the opportunity to testify.                                                                                   
                                                                                                                                
9:27:32 AM                                                                                                                    
                                                                                                                                
STACY NICHOLI,  SELF, ANCHORAGE (via  teleconference), spoke                                                                    
in  opposition to  SB 39.  She reported  that she  had heard                                                                    
many misconceptions about reality  television shows and film                                                                    
companies  in earlier  testimonies. She  purported that  the                                                                    
two  businesses were  significantly different.  She believed                                                                    
that there  were very shoddy reality  television shows which                                                                    
she admitted  opposing. She  was not  opposed to  large film                                                                    
groups  and  companies coming  to  Alaska  that hired  local                                                                    
Alaskans  such as  herself. She  relayed that  she took  the                                                                    
time  to vote.  She also  brought  up oil  tax credits.  She                                                                    
expressed concern  that people only took  interest in Alaska                                                                    
when there  were incentives.  She expressed  her frustration                                                                    
with  the legislature.  She commented  that  she would  have                                                                    
difficulty feeding her  two children and her  husband if the                                                                    
legislature killed  the film industry  in Alaska  by passing                                                                    
SB 39.                                                                                                                          
                                                                                                                                
9:31:34 AM                                                                                                                    
                                                                                                                                
DAVID MCGOVERN, SELF,  ANCHORAGE (via teleconference), spoke                                                                    
in opposition  of SB  39 and  conveyed that  he was  a self-                                                                    
employed entrepreneur. He relayed  his disappointment in the                                                                    
legislation. He  opined that the  bill was a  vicious attack                                                                    
against  an  industry that  had  done  nothing to  harm  the                                                                    
state,  the  administration,  or   the  current  budget.  He                                                                    
mentioned the  possibility of a  bidding war  with incentive                                                                    
programs. He  shared three  things about  the people  in the                                                                    
Alaska film  industry; they were  not greedy, they  were not                                                                    
all   "left-wingers",  and   they   were   not  asking   the                                                                    
legislature  to create  an opportunity.  He  shared about  a                                                                    
current project  he was  working on with  a veteran  to help                                                                    
him raise funds to participate  in the Challenge Alaska hand                                                                    
cycle race.  He was  not making  a dime  on the  project. He                                                                    
conveyed  his disappointment  in  state  legislators and  in                                                                    
particular  the legislators  in  his  district. He  stressed                                                                    
that Alaskans  had been making opportunities  for themselves                                                                    
as far back as 1921 when  the Native Alaskan, Ray Wise Mala,                                                                    
first  began his  film  career  and went  on  to have  great                                                                    
success in  front of and  behind the camera. He  thanked the                                                                    
committee for the opportunity to testify.                                                                                       
                                                                                                                                
9:34:12 AM                                                                                                                    
                                                                                                                                
BRAD    SWENSON,   GOLD    RING    GROUP,   GIRDWOOD    (via                                                                    
teleconference), spoke against SB 39.  He shared that he and                                                                    
his business partner were  considering suspending their film                                                                    
production  in Alaska  due to  the proposed  legislation. He                                                                    
stated  that  their  decision would  be  based  strictly  on                                                                    
economics. He mentioned an article  in Forbes Magazine about                                                                    
the long  range forecast for oil  being at or below  $65 per                                                                    
barrel. He opined that the  economy was changing. He relayed                                                                    
a story  about a  prior legislator in  the 90's  ranting and                                                                    
raving  about  the  economic  studies   in  the  80's  which                                                                    
revealed that Alaska's economy  suffered from its dependence                                                                    
on oil. He urged legislators  to promote a sustainable long-                                                                    
term  economy.  He  urged  legislators   to  keep  the  film                                                                    
industry alive.                                                                                                                 
                                                                                                                                
9:36:38 AM                                                                                                                    
                                                                                                                                
MAXINE DOOGAN,  COMMUNITY UNITED FOR SAFETY  AND PROTECTION,                                                                    
ANCHORAGE (via teleconference), opposed  SB 39. She believed                                                                    
there  was  a  need  for  diversification  in  Alaska's  job                                                                    
market.   The  film   industry  provided   other  types   of                                                                    
employment.  She  opined  that   without  the  Alaska  state                                                                    
subsidy movies  such as "Frozen  Ground" would not  be made.                                                                    
She  reiterated  that she  opposed  SB  39 and  thanked  the                                                                    
committee for hearing her testimony.                                                                                            
                                                                                                                                
9:37:44 AM                                                                                                                    
                                                                                                                                
BOB CROCKETT, PIKSIK,  ANCHORAGE (via teleconference), spoke                                                                    
in  opposition of  SB 39.  He  discussed the  nature of  his                                                                    
business  and  stated  that the  legislation  would  heavily                                                                    
effect  his  business.  He believed  an  economic  incentive                                                                    
leveled  the  playing field  and  allowed  Alaska to  remain                                                                    
competitive   globally.   He    suggested   that   it   took                                                                    
approximately  two  years  to   process  a  tax  credit.  He                                                                    
reviewed  a list  of impacts  of the  bill. He  suggested to                                                                    
legislators that  they hold off  on passing  the legislation                                                                    
before  the   committee  for  a  year   to  further  discuss                                                                    
alternative   options.   He   thanked  members   for   their                                                                    
consideration and time.                                                                                                         
                                                                                                                                
9:39:55 AM                                                                                                                    
                                                                                                                                
KELLY BENDER,  WHITTIER CHAMBER  OF COMMERCE,  WHITTIER (via                                                                    
teleconference),  opposed SB  39. She  highlighted that  the                                                                    
film industry  crossed over many different  business sectors                                                                    
including  transportation, lodging,  food,  and others.  She                                                                    
discussed  the  benefits of  the  film  tax credit  and  its                                                                    
contribution  to  feeding  Alaska's economy.  She  estimated                                                                    
that  her  small  business  in   Whittier  would  have  made                                                                    
approximately  $20  thousand  to  $30  thousand  in  revenue                                                                    
associated  with the  movie,  "Hunter-Killer." She  stressed                                                                    
the effects  on her employees  and her Alaskan  vendors. She                                                                    
relayed  additional  details of  the  benefits  of the  film                                                                    
industry. She urged the committee  to consider its decision.                                                                    
She thanked committee members for their time.                                                                                   
                                                                                                                                
9:42:09 AM                                                                                                                    
                                                                                                                                
DEBORAH   SCHILDT,  ALASKA   FILM   GROUP,  ANCHORAGE   (via                                                                    
teleconference), stated that SB 39  was the wrong choice for                                                                    
Alaska. She  recommended suspending the program  rather than                                                                    
ending the  program altogether. She relayed  some statistics                                                                    
regarding tax  credits. She opined  that ending  the program                                                                    
did  not  save  the  state money.  She  suggested  that  the                                                                    
program  offered  diversification  and  economic  prosperity                                                                    
circulating dollars through the  economy through local hire,                                                                    
local vendors,  and local businesses  across the  state. She                                                                    
urged the committee to oppose  SB 39 and thanked members for                                                                    
their time.                                                                                                                     
                                                                                                                                
9:45:00 AM                                                                                                                    
                                                                                                                                
BYRON   CHARLES,  SELF,   KETCHIKAN  (via   teleconference),                                                                    
opposed SB 39.  He pointed out that the  film industry would                                                                    
continue to grow.  He suggested that the  legislation be set                                                                    
aside for additional input. He thanked the committee.                                                                           
                                                                                                                                
9:47:00 AM                                                                                                                    
                                                                                                                                
CEDAR   CUSSINS,  GECKO   SERVICES   LLC.,  ANCHORAGE   (via                                                                    
teleconference),  spoke in  opposition  of the  legislation.                                                                    
She reported  having benefited greatly from  the tax credit.                                                                    
Her husband worked  on the film, "Big  Miracle." She relayed                                                                    
that he  made enough money  to purchase two pieces  of heavy                                                                    
equipment and  launch a  landscaping business.  She conveyed                                                                    
another beneficial  personal experience related to  the film                                                                    
industry. She believed that the  citizens of Alaska catering                                                                    
to the  film industry  profited substantially.  She strongly                                                                    
urged the committee  to vote in opposition to  the bill. She                                                                    
thanked the committee for its consideration.                                                                                    
                                                                                                                                
9:49:34 AM                                                                                                                    
                                                                                                                                
Vice-Chair Saddler CLOSED public  testimony and set the bill                                                                    
aside  [This bill  was heard  later in  the meeting  and was                                                                    
reported out of committee. See 10:18:53 for detail.]                                                                            
                                                                                                                                
SENATE BILL NO. 34                                                                                                            
                                                                                                                                
     "An Act relating to investment of the power cost                                                                           
     equalization endowment fund; and providing for an                                                                          
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
9:49:52 AM                                                                                                                    
                                                                                                                                
Mr. Burnett referred to SB 34,  the companion bill to HB 86.                                                                    
He  relayed that  the  current version  was  changed in  the                                                                    
Senate  Finance  Committee  adding  only  a  few  words.  He                                                                    
reported that  in the  original bill  in lines  9 to  10 the                                                                    
word "seven" was deleted. In  the newest version "seven" was                                                                    
replaced with  "four" and new language  was added specifying                                                                    
"over a five-year  period." The rest of the  language in the                                                                    
bill remained the  same. He conveyed that  DOR supported the                                                                    
changes and offered that the  changes provided an achievable                                                                    
floor and  comfortable risk factor.  He summarized  that the                                                                    
intent of  the bill was to  create a situation in  which the                                                                    
state could invest in a  risk profile sufficient to meet the                                                                    
needs of the program.                                                                                                           
                                                                                                                                
Representative  Edgmon  asked  if  there  would  ever  be  a                                                                    
scenario  in which  the state  would invest  in a  long-term                                                                    
endowment targeting less than 4 percent.                                                                                        
                                                                                                                                
Mr. Burnett  responded that in  the current  environment the                                                                    
department  was looking  at  a  profile in  the  range of  6                                                                    
percent. He suggested that there  could be a situation where                                                                    
the capital  market assumptions were invested  at 4 percent.                                                                    
He indicated that  the state had not had  any capital market                                                                    
assumptions below  4 percent in  the last several  years (30                                                                    
years). He  pointed out that  at present the  Permanent Fund                                                                    
was  invested to  achieve  just  over a  6  percent rate  of                                                                    
return, gross of fees, for a very long-term endowment.                                                                          
                                                                                                                                
Representative  Edgmon thought  that  Mr. Burnett'  response                                                                    
tied into the earlier discussion  about the House vehicle of                                                                    
the bill. He  felt the change was academic in  the scheme of                                                                    
things and  he reported he  would be supporting  the changes                                                                    
to the bill.                                                                                                                    
                                                                                                                                
Representative Wilson wanted to know  if the chair was going                                                                    
to move  the bill. Vice-Chair  Saddler stated that  he would                                                                    
wait until the co-chairmen returned to the committee.                                                                           
                                                                                                                                
9:54:25 AM                                                                                                                    
                                                                                                                                
Vice-Chair Saddler OPENED public testimony.                                                                                     
                                                                                                                                
Vice-Chair Saddler CLOSED public testimony.                                                                                     
                                                                                                                                
9:54:43 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:59:59 AM                                                                                                                    
RECONVEYNED                                                                                                                     
                                                                                                                                
Vice-Chair  Saddler called  the  meeting back  to order  and                                                                    
indicated that he would entertain a motion on SB 34.                                                                            
                                                                                                                                
Representative Wilson  MOVED to  REPORT CSSB 34(FIN)  out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
There being NO  OBJECTION, CHSB 34(FIN) was  REPORTED out of                                                                    
committee  with  a  "do  pass"  recommendation  and  with  a                                                                    
previously published zero fiscal note: FN1 (DOR).                                                                               
                                                                                                                                
10:02:10 AM                                                                                                                   
RECESSED                                                                                                                        
                                                                                                                                
10:18:53 AM                                                                                                                   
RECONVEYNED                                                                                                                     
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 39                                                                                                            
                                                                                                                                
     "An  Act  repealing  the film  production  tax  credit;                                                                    
     providing  for  an  effective  date  by  repealing  the                                                                    
     effective dates  of secs.  31 - 33,  ch. 51,  SLA 2012;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
Co-Chair  Thompson   brought  CSSB   39(L&C)  back   up  for                                                                    
discussion.                                                                                                                     
                                                                                                                                
Co-Chair  Neuman  MOVED  to  REPORT   CSSB  39(L&C)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
There being NO  OBJECTION, CSSB 39(L&C) was  REPORTED out of                                                                    
committee  with  a  "do  pass"  recommendation  and  with  a                                                                    
previously published zero fiscal note: FN1 (DOR).                                                                               
                                                                                                                                
Co-Chair  Thompson reviewed  the  agenda  for the  afternoon                                                                    
meeting.                                                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
10:20:00 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:20 a.m.                                                                                         

Document Name Date/Time Subjects
SB39 Alaska Film Office Annual Report 2014 with Signed Letter.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Alaska Film Office Annual Report Worksheet.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Department of Revenue Alaska Film Office - Program Status as of 4-1-15.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Legal Services Memo 15-211 and Amendment.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Letters of Opposition from SL&C.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Letters of Support from SL&C.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Public Testimony to SFIN.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Sectional Analysis ver E (L&C CS) (1).pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Sponsor Statement.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Status of Alaska Film Production Incentive Fy 2009-FY 2013.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB39 Summary of Changes from Initial Version.pdf HFIN 4/16/2015 8:30:00 AM
SB 39
SB34 Sponsor Statement.pdf HFIN 4/16/2015 8:30:00 AM
SB 34
SB34 Supporting Document - DOR Bill Summary 4.15.15.pdf HFIN 4/16/2015 8:30:00 AM
SB 34