Legislature(2017 - 2018)ADAMS ROOM 519

04/16/2018 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved HCS CSSB 15(L&C) Out of Committee
Moved HCS CSSB 78(FIN) Out of Committee
Moved SB 215 Out of Committee
-- Public Testimony --
Heard & Held
-- Public Testimony --
Moved CSHB 260(FIN) Out of Committee
-- Public Testimony --
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 16, 2018                                                                                            
                         1:33 p.m.                                                                                              
1:33:28 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 1:33 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative Paul  Seaton, Sponsor; Peter  Fellman, Staff,                                                                    
Senator Click  Bishop; Alexei Painter,  Analyst, Legislative                                                                    
Finance  Division;   Ken  Alper,  Director,   Tax  Division,                                                                    
Department of Revenue; Sara  Race, Director, Permanent Fund,                                                                    
Department of Revenue; Jordan  Shilling, Staff, Senator John                                                                    
Coghill; Senator  Gary Stevens, Sponsor; Tim  Lamkin, Staff,                                                                    
Senator  Gary  Stevens;  Senator  Peter  Micciche,  Sponsor;                                                                    
Rachel Hanke,  Staff, Senator Peter Micciche;  Carl Uchytil,                                                                    
President     Alaska    Association     of    Harbormasters;                                                                    
Representative Dan Saddler, Sponsor;                                                                                            
PRESENT VIA TELECONFERENCE                                                                                                    
Richard    Ruggiero,   Consultant,    In3Energy;   Christina                                                                    
Ruggiero,  In3Energy,  Houston;  David Gibbs,  EMS  Manager,                                                                    
Fairbanks   North   Star   Borough;  Rachel   Lord,   Alaska                                                                    
Association  of   Harbormasters  and   Port  Administrators,                                                                    
Homer; Bryan  Hawkins, Harbor Master, City  of Homer, Homer;                                                                    
Matt Donohoe,  Self, Sitka; Rick Gease,  Executive Director,                                                                    
Kenai  River  Sport   Fishing  Association,  Soldatna;  Mark                                                                    
Richards,  Resident Hunters  of Alaska,  Fairbanks; Samantha                                                                    
Weinstein, Southeast Alaska Guides Organization, Juneau;                                                                        
HB 260    FISH & GAME LICENSES;ELECTRONIC FORM                                                                                  
          CSHB 260 (FIN) was  REPORTED out of committee with                                                                    
          a "do  pass" recommendation and with  a previously                                                                    
          published zero fiscal note: FN1 (DFG).                                                                                
HB 411    OIL & GAS PRODUCTION TAX;PAYMENTS;CREDITS                                                                             
          HB  411  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
CSSB 15 (FIN)                                                                                                                   
          E-CIGS/TOBACCO/NICOTINE & MINORS; SALES                                                                               
          HCSCSSB  15 (L&C)  was REPORTED  out of  committee                                                                    
          with  a  "do  pass" recommendation  and  with  two                                                                    
          previously  published   fiscal  notes:   one  zero                                                                    
          impact note: FN6 (GOV -  Combined); and one fiscal                                                                    
          impact note: FN7 (CED).                                                                                               
CSSB 78 (FIN)                                                                                                                   
          PERM FUND DIVIDEND CONTRIBUTIONS/LOTTERY                                                                              
          HCSCSSB 78  (FIN) REPORTED  out of  committee with                                                                    
          four  "do  pass"  recommendations,  four  "do  not                                                                    
          pass"     recommendations,    and     three    "no                                                                    
          recommendation" recommendations and  with five new                                                                    
          fiscal  notes: three  fiscal impact  notes by  the                                                                    
          Department  of Revenue;  one indeterminate  fiscal                                                                    
          note  by the  Department  of  Education and  Early                                                                    
          Development;  and  one  zero fiscal  note  by  the                                                                    
          Department of Law.                                                                                                    
CSSB 92(FIN)am                                                                                                                  
          VESSELS: REGISTRATION/TITLES; DERELICTS                                                                               
          SB 92 was HEARD and  HELD in committee for further                                                                    
SB 215    ENHANCED 911:MULTI-LINE TELEPHONE SYSTEMS                                                                             
          SB 215 was REPORTED out of committee with a "do                                                                       
          pass" recommendation and with a previously                                                                            
          published zero fiscal note: FN1 (CED).                                                                                
Co-Chair Foster reviewed the meeting agenda. He indicated                                                                       
that the committee would take up the bills from the                                                                             
previous meeting. However, the committee would                                                                                  
HOUSE BILL NO. 411                                                                                                            
     "An Act  relating to  the oil  and gas  production tax,                                                                    
     tax  payments,  and  credits;   and  providing  for  an                                                                    
     effective date."                                                                                                           
1:34:30 PM                                                                                                                    
RICHARD     RUGGIERO,     CONSULTANT,     IN3ENERGY     (via                                                                    
teleconference),  introduced  the  PowerPoint  presentation:                                                                    
"HB411:  Tax  Bracket  Analysis, House  Finance,  April  16,                                                                    
2018."(copy on file)                                                                                                            
1:35:04 PM                                                                                                                    
CHRISTINA     RUGGIERO,      IN3ENERGY,     HOUSTON     (via                                                                    
teleconference), turned to Slide 3:                                                                                             
     INDICATIVE RUNS                                                                                                            
     HOW TO VIEW THE RESULTS                                                                                                    
     The  following plots  showing  indicative results  from                                                                    
     changes to the  brackets for HB411 should  be viewed to                                                                    
     understand the approximate magnitude  of any changes as                                                                    
     well as the direction  (positive or negative) from such                                                                    
     changes.  The absolute  $ change  in state  take should                                                                    
     not be used as an exact value.                                                                                             
Ms. Ruggiero advanced to Slide 4, "HB 411 IN3NERGY MODEL":                                                                      
     Per Barrel Model                                                                                                         
     ? Simplistic per barrel model,  taking into account key                                                                    
     fiscal structure  metrics to reflect the  direction and                                                                    
     magnitude of results                                                                                                       
     ? Can compare  the Status Quo tax  structure with HB411                                                                    
     (stepped    progressivity)    and   ACES    (continuous                                                                    
     progressivity) ?  The primary inputs  assumptions below                                                                    
     are taken from the DOR  case presented to HFIN on April                                                                    
     10, 2018                                                                                                                   
     Model Inputs:                                                                                                            
     Non-GVR Daily Production (mmbls/d) 526.6                                                                                 
     GVR Daily Production (mmbbls/d) 50                                                                                         
     Transport and Shipping ($/bbl) 8.87                                                                                      
     Transportation & Shipping Multiplier 100%                                                                                
     Capex ($/bbl) 9.21 Flat                                                                                                  
     Opex ($/bbl) 14.13 Flat                                                                                                  
     Cost Multiplier 100%                                                                                                     
     Tax Rate (Status Quo) 35%                                                                                                
     GVR Reduction 20%                                                                                                        
     GVR per Barrel Credit ($/bbl) 5                                                                                          
     Royalty 12.50%                                                                                                           
     State Corp Income Tax 6.25%                                                                                              
     Federal Corp Income Tax 35% Yes                                                                                          
     Hard Floor No                                                                                                            
     ?  "Multiplier"  fields  are  used  to  apply  a  fixed                                                                    
     increase or decrease to costs at all prices                                                                                
     ? Capex and Opex can be  run either as flat cost values                                                                    
     across all prices, or, if  selected, then can be varied                                                                    
     to   move  proportionally   with  price   increase  and                                                                    
1:37:40 PM                                                                                                                    
Ms. Ruggiero continued to Slide 5, "Key Considerations":                                                                        
Scenario Analysis Simulating Reality                                                                                          
     ? In the  real world, Capex and Opex  values per barrel                                                                    
     increase and                                                                                                               
     decrease with oil price                                                                                                    
     ? For the  purposes of this model, if  cost Variance is                                                                    
     selected, then:                                                                                                            
     ? Price and costs change together                                                                                          
     ? Costs are  assumed to change at 80% of  the change in                                                                    
     oil price                                                                                                                  
     (If the prices increases 100% then cost increase 80%)                                                                      
     ? Costs can  be further multiplied from  the state wide                                                                    
     average DOR values to                                                                                                      
     simulate the large legacy  fields (multiplier less than                                                                    
     100%) or potential new                                                                                                     
     North Slope fields (multiplier greater than 100%)                                                                          
1:38:12 PM                                                                                                                    
Ms. Ruggiero reviewed Slide 6, "Scenario Analysis Cases":                                                                       
     HB 411 With Varied Costs and Tax Brackets                                                                                
     ? There are 4 cases of different tax bracket setups,                                                                       
     detailed in the tables below                                                                                               
     ? Each case has 4 runs labeled A-D                                                                                         
     ? A: Costs FLAT, Costs at 100%                                                                                             
     ? B: Costs VARIED, Costs at 100%                                                                                           
     ? C: Costs VARIED, Costs at 50%                                                                                            
     ? D: Costs VARIED, Costs at 150%                                                                                           
Ms.  Ruggiero  explained  that   the  bottom  of  the  slide                                                                    
contained four cases  of tax brackets. The first  was HB 411                                                                    
as written,  the next  three were  created with  varying tax                                                                    
bases  and steps.  She noted  that  cases 2  through 4  were                                                                    
intended  to  show  variability and  were  not  intended  as                                                                    
recommendations.  She  explained  that as  the  presentation                                                                    
went on, cases contained 4 runs labeled a through D.                                                                            
Ms. Ruggiero  presented Slide 8,  "Comparison of all  case 1                                                                    
runs" (Ms.  Ruggiero clarified  a typo  in the  title should                                                                    
read  case  4,  and  not  1). She  highlighted  the  case  4                                                                    
brackets and runs  A through D: A was the  flat price, B was                                                                    
the varied price, C was a  50 percent reduction in cost, and                                                                    
D was  a 150 percent  increase in  cost. She pointed  out to                                                                    
the committee that case B  reflected that at roughly $30 per                                                                    
barrel  the  minimum tax  would  start;  case D  showed  $85                                                                    
dollars  per  barrel.  The same  tax  brackets  could  yield                                                                    
varying results under different cost parameters.                                                                                
Mr. Ruggiero  added that at  very high prices,  depending on                                                                    
cost structure,  a significant difference could  be seen. He                                                                    
stressed the importance of showing the cost variability.                                                                        
1:44:45 PM                                                                                                                    
Representative  Guttenberg  asked  whether  there  would  be                                                                    
slides that showed the current  tax regime as compared to HB                                                                    
Mr. Ruggiero responded in the affirmative.                                                                                      
Co-Chair Seaton  expressed appreciation for  the information                                                                    
surrounding variability based on cost.                                                                                          
1:46:25 PM                                                                                                                    
Mr. Ruggiero scrolled  to Slide 9, "1.A Status  Quo v. HB411                                                                    
as  written."  The  slide contained  Department  of  Revenue                                                                    
inputs, HB 411 brackets, costs  flat, and costs 100 percent.                                                                    
The  green bars  represented  the change  in  state take  at                                                                    
varying per  barrel prices. The  two tables  reflected gross                                                                    
value reduction (GVR) and non-GVR numbers.                                                                                      
1:48:36 PM                                                                                                                    
Co-Chair  Seaton asked  Mr. Ruggiero  to  explain the  green                                                                    
bars. He wondered about the effective tax rate.                                                                                 
Mr. Ruggiero  replied that  the yellow  and blue  lines were                                                                    
the effective  tax rates and  were read off  the percentages                                                                    
on the left of the table.  The green bars were the change in                                                                    
state take and were read off the right scale in millions.                                                                       
1:49:28 PM                                                                                                                    
Mr. Ruggiero detailed Slide 10,  "1.B Status Quo v. HB411 as                                                                    
written." The slide contained  Department of Revenue inputs,                                                                    
HB  411  brackets,  Costs  varied,  costs  100  percent.  He                                                                    
explained that  the difference  on this  slide form  Slide 9                                                                    
was  the  varied cost  with  the  change  in oil  price.  He                                                                    
pointed out that a lower  tax take occurred at higher costs,                                                                    
as represented  by the green  bars in each table.  He stated                                                                    
that the  slide reflected the  varying the cost  using state                                                                    
1:51:34 PM                                                                                                                    
Co-Chair  Seaton queried  the language  "cost varies  at 100                                                                    
percent". He understood that this  meant if the price of oil                                                                    
went up  10 percent, then the  cost went up 10  percent, and                                                                    
if the price of oil doubled then the costs would double.                                                                        
Mr.   Ruggiero  referred   to  Slide   5.   He  noted   that                                                                    
historically  the equation  changed the  cost 80  percent of                                                                    
the oil  price. Starting at a  base rate of $60  per barrel,                                                                    
if  the  price  of  oil  went up  to  $120,  a  100  percent                                                                    
increase, costs  would increase 80  percent.  If  oil prices                                                                    
went down  to $30  per barrel,  the costs  would go  down 40                                                                    
percent. The costs move 80  percent of whatever the movement                                                                    
was in the oil price.                                                                                                           
1:53:01 PM                                                                                                                    
Ms. Ruggiero  added that the  label where it said  "cost 100                                                                    
percent" meant  that the base case  was the same as  DOR and                                                                    
where the  label at the end  of the subtitles on  each slide                                                                    
indicating  "cost 50  percent" or  "cost 100  percent" meant                                                                    
that the base case had  decreased by 50 percent or increased                                                                    
to 150 percent.                                                                                                                 
Co-Chair  Seaton  understood  that  in all  cases  the  cost                                                                    
variation was 80 percent of the price change.                                                                                   
Ms. Ruggiero responded in the affirmative.                                                                                      
Representative  Ortiz asked  about  the factors  surrounding                                                                    
cost going up as the price per barrel went up.                                                                                  
Mr. Ruggiero responded  that that was the way  it had always                                                                    
happened. He  said that as  labor rose with  inflation, when                                                                    
oil  priced plummeted  labor costs  decreased. He  said that                                                                    
when  energy costs  rose, things  became more  expensive. He                                                                    
provided  the example  that steel  became more  expensive to                                                                    
make and  deliver. He relayed  that high  prices contributed                                                                    
to long wait times for  fracking units to frack shale wells.                                                                    
He  related that  energy itself  played  into a  lot of  the                                                                    
materials needed  in the oil  patch, when those  prices went                                                                    
up  it  disrupted the  supply  and  demand of  services  and                                                                    
equipment. This resulted  in service prices and  the cost of                                                                    
doing business  rising with a 3  to 6-month lag, with  a 30-                                                                    
day delay when  the oil price decreased. He  said that these                                                                    
factors were not related to taxes or progressivity.                                                                             
1:56:04 PM                                                                                                                    
Mr. Ruggiero returned  to Slide 10. He noted  that the table                                                                    
in the upper left represented  the standard rates in HB 411.                                                                    
He also pointed  to where the non-GVR curve  fell widened at                                                                    
the peak.  He said that  at the  upper end the  numbers fell                                                                    
beneath  the current  status  quo, resulting  in  a loss  at                                                                    
upper prices.                                                                                                                   
1:56:55 PM                                                                                                                    
Mr. Ruggiero moved to Slide 11:  "1C. Status Quo v. HB411 as                                                                    
Written." The  slide reflected DOR inputs,  HB 411 brackets,                                                                    
costs varied,  and costs 50  percent. He explained  that the                                                                    
model reflected  a dramatic difference  at all prices  up to                                                                    
$120  per barrel.  He said  that  the state  would see  more                                                                    
revenue from HB 411 than from  the status quo because of the                                                                    
lower cost  structure. The higher  PTV per  barrel, starting                                                                    
off at a 25  percent tax, as compared to the  5 or 6 percent                                                                    
under the status quo, would  generate additional tax revenue                                                                    
to the state and tax liability to industry.                                                                                     
1:58:52 PM                                                                                                                    
Mr.  Ruggiero continued  to  Slide 12:  "1D.  Status Quo  v.                                                                    
HB411  as written."  The  slide showed  DOR  inputs, HB  411                                                                    
brackets, costs  varies, and cost  150 percent."  He pointed                                                                    
out the $64 total cost base  at the $63 per barrel price. He                                                                    
said  that  any  price  below  the  $60  per  barrel  price,                                                                    
producers were  paying the 4  percent gross minimum  tax out                                                                    
of pocket. He stated that  the crossover point did not occur                                                                    
until $110  per barrel. At 80  percent of the growth  in the                                                                    
oil price, upper  tax brackets remained flat  until $140 per                                                                    
barrel. Costs  moved up as  the price  moved up but  the PTV                                                                    
did not move as quickly.  He said that the additional charts                                                                    
in  the presentation  (Slides 13  through  24) included  the                                                                    
same four charts of cases A,  B, C, D, against the different                                                                    
representative sets  of brackets. He relayed  that when cost                                                                    
was considered in accordance to  what was actually happening                                                                    
in  the oil  patch, the  representation of  what a  specific                                                                    
bill would do  was different that what had  been observed in                                                                    
the past.                                                                                                                       
2:02:31 PM                                                                                                                    
Representative  Grenn asked  Mr. Ruggiero  whether had  been                                                                    
asked to create all the scenarios.                                                                                              
Mr. Ruggiero  responded that the  models had  been generated                                                                    
independently  by IN3NERGY,  without any  preconceptions and                                                                    
for informational purposed only.                                                                                                
2:03:31 PM                                                                                                                    
Co-Chair  Seaton also  provide an  answer to  Representative                                                                    
Grenn's earlier question surrounding  problems in HB 411 and                                                                    
changes that  could be made  to appeal to industry.  He said                                                                    
that a  previous presentation had  suggested that  the state                                                                    
should tax at  a lower rate, at the low  end of prices, then                                                                    
increase the  percentage take  at the  higher end.  He noted                                                                    
that  the models  had been  requested by  the committee  for                                                                    
informational purposes.                                                                                                         
2:05:10 PM                                                                                                                    
Representative  Wilson   thought  industry   testifiers  had                                                                    
thought the tax was a bad  idea. She wondered whether any of                                                                    
the scenarios would entice production.                                                                                          
Mr. Ruggiero responded  that some of the  scenarios with low                                                                    
base rates  could serve to  help the economics  with earlier                                                                    
cashflow to a  new project. He felt that  the particulars of                                                                    
each  project would  need to  be examined  in order  to make                                                                    
that determination.                                                                                                             
Representative  Wilson   asked  whether  HB   411  contained                                                                    
scenarios that would please industry.                                                                                           
Mr. Ruggiero requested clarification in the question.                                                                           
Representative  Wilson tried  again.  She  relayed that  Mr.                                                                    
Ruggiero  had  stated  that  a  couple  of  scenarios  would                                                                    
incentivize industry. She wondered  which scenarios under HB                                                                    
411 would incentivize industry.                                                                                                 
Mr.  Ruggiero referred  to Slide  6. He  pointed to  cases 1                                                                    
through 4 on  the bottom half of the slide.  He relayed that                                                                    
the first  showed HB  411 as  it stood,  starting with  a 25                                                                    
percent  base. He  moved  to  case 3,  which  he said  would                                                                    
potentially generate more income for  the operator of a more                                                                    
expensive,  new field.  He said  that case  3 would  be more                                                                    
favorable than case 1.                                                                                                          
2:08:14 PM                                                                                                                    
Representative Wilson  asked how  3 compared to  the current                                                                    
oil regime.                                                                                                                     
Co-Chair Seaton directed members to refer to Slide 17.                                                                          
Mr.   Ruggiero  added   that  Slide   18  reflected   usable                                                                    
information as well. He said  that there were several things                                                                    
that came into  play, but if an operator way  paying a lower                                                                    
tax rate in  the early years of a project,  it would benefit                                                                    
the company in the long run.                                                                                                    
2:10:27 PM                                                                                                                    
Representative Wilson pointed to the  blue line on Slides 17                                                                    
and 18  and surmised that  under HB  411 the state  would be                                                                    
would be taking more and not less.                                                                                              
Mr. Ruggiero agreed. He referred to Slide 20.                                                                                   
Representative Wilson asked to stay  on Slides 17 and 18 and                                                                    
repeated her question.                                                                                                          
Mr. Ruggiero thought her original  question pertained to the                                                                    
status quo  on HB 411, and  not the status quo  under SB 21.                                                                    
He said  that HB 411, relative  to the status quo,  when the                                                                    
blue  line was  above the  yellow line,  and the  green bars                                                                    
above  zero, HB  411  took  more tax  than  the current  tax                                                                    
2:13:00 PM                                                                                                                    
Representative Wilson  restated her question. She  asked how                                                                    
taking more money would incentivize more production.                                                                            
Mr. Ruggiero  replied that the  question was  rhetorical. He                                                                    
reiterated that  the intent of  the information  he provided                                                                    
had been  to show a  way do structure things  differently to                                                                    
help oil flow  down the pipeline. He felt that  staring at a                                                                    
5  percent base  was better  than starting  at a  25 percent                                                                    
Representative Wilson  understood he  was saying HB  411 was                                                                    
bad and that the scenario on  Slide 19 was less bad but that                                                                    
neither incentivized production.                                                                                                
Mr.  Ruggiero  responded that  HB  411,  as proposed,  would                                                                    
cause a tax increase for industry.                                                                                              
Representative  Wilson  surmised  that the  bill  would  not                                                                    
incentivize production.                                                                                                         
Mr. Ruggiero responded, "Likely not."                                                                                           
Representative   Ortiz  asked   for  clarification   on  the                                                                    
acronyms CAPEX and OPEX.                                                                                                        
Mr.  Ruggiero explained  that CAPEX  was  short for  capital                                                                    
expenditures and OPEX was  short for operating expenditures.                                                                    
He added that in Alaska  system, for petroleum tax purposes,                                                                    
they were treated  indifferently in that they  both could be                                                                    
expensed  and  deducted  as spent.  Other  systems  operated                                                                    
Representative Guttenberg  asked whether the state  built in                                                                    
CAPEX and OPEX  or if there were qualifying  exams for those                                                                    
Mr. Ruggiero replied  that Alaska had rules  with respect to                                                                    
which costs could  be deducted. He said that  the first step                                                                    
was to identify whether the  cost could be deducted, and the                                                                    
second step  was to  determine how. Alaska  had a  series of                                                                    
tests to determine  which costs could be  deducted and which                                                                    
could not.                                                                                                                      
Representative  Guttenberg  asked  whether  there  were  any                                                                    
existing  regimes  that  had  a  tax  structure  void  of  a                                                                    
consideration for CAPEX or OPEX.                                                                                                
Mr. Ruggiero  responded that  anyone that  had a  gross tax-                                                                    
based  system were  indifferent  to OPEX  and  CAPEX, a  net                                                                    
system always incorporated those expenses.                                                                                      
2:17:41 PM                                                                                                                    
Co-Chair Seaton thanked Mr. Ruggiero for the presentation.                                                                      
Co-Chair Seaton relayed  that the amendments to  HB 411 were                                                                    
due Thursday, April 19, 2018 at 5:00 PM.                                                                                        
HB  411  was  HEARD  and   HELD  in  committee  for  further                                                                    
2:18:50 PM                                                                                                                    
AT EASE                                                                                                                         
2:26:03 PM                                                                                                                    
CS FOR SENATE BILL NO. 78(FIN)                                                                                                  
     "An Act  creating the education endowment  fund and the                                                                    
     dividend  raffle fund;  authorizing donations  from the                                                                    
     permanent  fund dividend  for educational  purposes and                                                                    
     to enter  the permanent fund dividend  raffle; relating                                                                    
     to  transfers from  the dividend  raffle  fund and  the                                                                    
     education  endowment fund;  relating to  the duties  of                                                                    
     the Department  of Revenue; relating to  the definition                                                                    
     of 'gambling'; and providing for an effective date."                                                                       
2:26:13 PM                                                                                                                    
Co-Chair Seaton invited Mr. Fellman to the table.                                                                               
2:26:39 PM                                                                                                                    
PETER FELLMAN, STAFF, SENATOR CLICK BISHOP, noted that he                                                                       
had no comments.                                                                                                                
2:27:11 PM                                                                                                                    
Representative Guttenberg announced that he would not be                                                                        
offering Amendment 1.                                                                                                           
2:27:34 PM                                                                                                                    
Vice-Chair Gara MOVED to ADOPT Amendment 2, 30-LS0534\Y.8                                                                       
(Martin, 4/12/18) (copy on file):                                                                                               
     Page 1, following line 6:                                                                                                  
          Insert a new bill section to read:                                                                                    
          "* Section 1.  The uncodified law of  the State of                                                                  
          Alaska  is  amended by  adding  a  new section  to                                                                    
          LEGISLATIVE  INTENT.  It  is  the  intent  of  the                                                                    
          legislature  that  the   funds  generated  by  the                                                                    
          permanent  fund dividend  raffle  created in  this                                                                    
          Act  be used  to  supplement and  not to  supplant                                                                    
          state aid  provided by  the public  school funding                                                                    
          formula under AS 14.17.410."                                                                                          
     Page 1, line 7:                                                                                                            
          Delete "Section 1"                                                                                                  
          Insert "Sec. 2"                                                                                                     
     Renumber the following bill sections accordingly. 14                                                                       
     Page 5, line 5, following "appropriation":                                                                                 
          Insert ";  money transferred under  this paragraph                                                                    
          to  the  public  education  fund may  be  used  in                                                                    
          addition to the state  aid to districts calculated                                                                    
          under AS 14.l 7.410(b)(l)"                                                                                            
     Page 5, line 31, following "AS 14.17.300.":                                                                                
          Insert  "Money transferred  under this  subsection                                                                    
          to  the  public  education  fund may  be  used  in                                                                    
          addition to the state  aid to districts calculated                                                                    
          under AS 14.l 7.410(b)(l)."                                                                                           
Representative Wilson OBJECTED for discussion.                                                                                  
Vice-Chair Gara  explained the amendment.  He said  that the                                                                    
intent was  that the legislature could  supplement education                                                                    
funding with the proceeds.                                                                                                      
Representative   Wilson  expressed   appreciation  for   the                                                                    
Representative Wilson WITHDREW her OBJECTION.                                                                                   
Co-Chair  Seaton clarified  that the  amendment was  version                                                                    
There being NO OBJECTION, Amendment 2 was ADOPTED.                                                                              
2:30:51 PM                                                                                                                    
AT EASE                                                                                                                         
2:32:19 PM                                                                                                                    
ALEXEI  PAINTER,  ANALYST,   LEGISLATIVE  FINANCE  DIVISION,                                                                    
reviewed  the fiscal  notes. He  explained  that the  fiscal                                                                    
note was under the  additional foundation funding allocation                                                                    
under K-12  school districts in the  Department of Education                                                                    
and Early Development (DEED) but  would impact several areas                                                                    
of the state  budget. He furthered that none  of the impacts                                                                    
would be  felt in FY 19,  so the division felt  that, rather                                                                    
than creating  fiscal notes for  allocation that had  yet to                                                                    
exist,  allocations had  been incorporated  into one  fiscal                                                                    
note.  The  following  items   outline  the  budget  actions                                                                    
associated  with   the  legislation.  Other  than   the  two                                                                    
Department of  Revenue fiscal notes which  request (1) $10.0                                                                    
GF/PR  (Permanent  Fund  Dividend  Division) in  FY  19  for                                                                    
programming changes  to set up  the database; and  (2) $25.0                                                                    
GF/PR (Tax  Division) in  FY 19  for program  promotion, the                                                                    
remaining budget  items would occur  in FY 20  or subsequent                                                                    
fiscal years:                                                                                                                   
     1. Flow to the Department of Education and Early                                                                         
     Development - FY 21                                                                                                      
     50   percent  of   dividend   contributions  shall   be                                                                    
     appropriated to  the Department of Education  and Early                                                                    
     Development (using the new Raffle  fund code which will                                                                    
     be  created  in  FY  20  as  grants  supplementing  the                                                                    
     foundation formula.                                                                                                        
     2. (new) Education Endowment Fund - FY 20                                                                                
     Using the new Raffle fund  code, 25 percent of dividend                                                                    
     contribution will  flow to the new  Education Endowment                                                                    
     Fund.  Eventually, an  additional  Endowment fund  code                                                                    
     will need to  be created for funding that  comes out of                                                                    
     the Endowment  Fund as overflow payments  to the Public                                                                    
     Education Fund.  There is no fiscal  note because there                                                                    
     is no money anticipated during  the first five years of                                                                    
     the program.                                                                                                               
     3. (new) Dividend Raffle Prize Fund - FY 20                                                                              
     25 percent  of the  dividend contribution will  flow to                                                                    
     the  Dividend Raffle  Fund using  the  new raffle  fund                                                                    
     code.  There  will  be  a   new  Prize  fund  code  for                                                                    
     management  of the  Raffle funds  plus any  overflow to                                                                    
     the  Education  Endowment  Fund. Prizes  will  be  paid                                                                    
     without further appropriation.                                                                                             
     4. Programming  costs for  DOR/PFD Dividend  Division -                                                                  
     FY 19                                                                                                                    
     (see DOR/Permanent  Fund Division fiscal note)  - $10.0                                                                    
     GF/PR is  required in  FY 19 for  DOR to  program their                                                                    
     database in time for 2019  PFD applications (which will                                                                    
     be paid out in FY 20).                                                                                                     
     5. Manage  endowment - DOR/Taxation  and Treasury  - FY                                                                  
     (see DOR/Treasury  Division fiscal note) -  The current                                                                    
     fiscal  note estimates  management  costs ranging  from                                                                    
     $4.4 in FY 20  up to $26.3 in FY 24.  This will be paid                                                                    
     for using the new Prize fund code.                                                                                         
2:36:01 PM                                                                                                                    
Representative  Wilson   pointed  to   the  DOR   note,  OMB                                                                    
component  2476,  and DOR  note,  OMB  component 981,  which                                                                    
reflected  program receipts.  She noted  that there  were no                                                                    
program receipts, and she asked  whether the intent had been                                                                    
to show that DOR would provide  the funds and then the money                                                                    
would be paid back as the program made money.                                                                                   
Mr. Fellman replied that that was his understanding.                                                                            
Representative  Wilson  thought  that the  department  would                                                                    
unlikely  have and  additional $35,000  to fund  the initial                                                                    
payouts. She  surmised that the funds  would be undesignated                                                                    
general  fund  (UGF)  dollars   initially,  which  would  be                                                                    
returned as designated general funds (DGF).                                                                                     
Mr.  Fellman responded  that initially,  pre-program dollars                                                                    
were supposed  to be spent  for advertisement. He  said that                                                                    
he  had pointed  out that  the language  in the  fiscal note                                                                    
should be changed.                                                                                                              
Representative  Wilson   directed  committee   attention  to                                                                    
fiscal note OMB # 2476, Page 2:                                                                                                 
     For  FY  19,  the  Department  of  Revenue  intends  to                                                                    
     provide $25,000  in raffle  proceeds to  the Department                                                                    
     of Education  and Early Development. DEED  will use the                                                                    
     funds  to  inform  Alaskans of  the  existence  of  the                                                                    
     raffle  and  that  a  large  portion  of  their  ticket                                                                    
     purchases goes to directly support education programs.                                                                     
Mr. Fellman deferred to Mr.  Alper to respond. He understood                                                                    
that  the  appropriation was  to  cover  the first  year  of                                                                    
2:38:53 PM                                                                                                                    
KEN ALPER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,                                                                       
said that  the note had been  written to relay that  a small                                                                    
fraction of money that came into  the fund would be used for                                                                    
marketing. He  stated that how  to fund that  advertising in                                                                    
year 1 had  been recently discussed. He related  that he did                                                                    
not precisely know  how the first year of  the program would                                                                    
fund advertising.                                                                                                               
Representative Wilson explained that  her issue was with the                                                                    
fund code. She expressed curiosity  that the intent was that                                                                    
the money be  paid back with designated  general funds, when                                                                    
no  fund currently  existed. She  understood that  the state                                                                    
would be  paid back out of  the first $35,000 raised  in the                                                                    
Mr. Painter believed the fiscal  note should indicate UGF if                                                                    
there  were no  DGF to  spend. He  recommended amending  the                                                                    
Representative  Wilson  wanted additional  clarification  in                                                                    
the note in the form of intent language.                                                                                        
2:41:44 PM                                                                                                                    
Representative  Guttenberg referred  to the  DEED note,  OMB                                                                    
component 3112. He  asked whether one-fifth of  the fund was                                                                    
the total of prizes distributed.                                                                                                
Mr.  Fellman replied  that  the  one-fifth represented  one-                                                                    
fifth of the money in the fund.                                                                                                 
Representative Guttenberg expressed concern that only one-                                                                      
fifth of the total fund went out in prizes.                                                                                     
Mr. Fellman responded that one-fifth  was 20 percent. He did                                                                    
not believe  the chart  attached to  the note  reflected the                                                                    
current CS. He  stated that the other 80  percent would stay                                                                    
in  the  fund  for  education.  He said  that  if  the  fund                                                                    
exceeded  $300 million  by a  $1 million,  the $300  million                                                                    
would  be  where   the  prized  were  drawn   from  and  the                                                                    
additional $1  million would go directly  into the Education                                                                    
Endowment Fund.                                                                                                                 
Mr. Alper  stated that currently  the profits  of charitable                                                                    
gaming in the state,  predominately pull-tabs and bingo, was                                                                    
approximately  $350  million,  of which  10  percent  passed                                                                    
through to  eventual recipients  as charitable  donation. He                                                                    
said that a great bulk  of the difference was distributed in                                                                    
prizes and used to pay costs to operate the games.                                                                              
2:45:50 PM                                                                                                                    
Vice-Chair Gara wondered if it  would be proper to meld what                                                                    
Representative  Wilson   and  Mr.  Painter  stated   into  a                                                                    
conceptual amendment that clarified intent.                                                                                     
Vice-Chair  Gara MOVED  to ADOPT  Conceptual Amendment  3 to                                                                    
amend  fiscal note  OMB component  2476, to  change the  the                                                                    
$25,000 to  UGF, and to  state in  the analysis that  it was                                                                    
the intent  of the legislature  that the funds be  repaid in                                                                    
the future out of raffle proceeds.                                                                                              
Representative Wilson OBJECTED.                                                                                                 
Representative Wilson  thought the same amendment  should be                                                                    
made to fiscal note OMB component 981.                                                                                          
Vice-Chair  Gara  agreed.  He  said that  he  would  move  a                                                                    
separate amendment for OMB component 981.                                                                                       
Representative Wilson WITHDREW her OBJECTION.                                                                                   
There  being  NO  OBJECTION,   Conceptual  Amendment  3  was                                                                    
Vice-Chair  Gara MOVED  to ADOPT  Conceptual Amendment  4 to                                                                    
amend fiscal note OMB component  9816, to change the $10,000                                                                    
to UGF, and to state in  the analysis that it was the intent                                                                    
of the  legislature that the  funds be repaid in  the future                                                                    
out of raffle proceeds.                                                                                                         
There being NO OBJECTION, it was so ordered.                                                                                    
Representative Kawasaki was uncertain  that he would support                                                                    
the bill  on the  floor but  would not  stop it  from moving                                                                    
forward from  committee. He expounded  on his  reasoning. He                                                                    
expressed  concern that  non-profits would  lose funds  from                                                                    
the Pick-Click-Give program.                                                                                                    
2:51:48 PM                                                                                                                    
Representative Grenn  would be objecting to  moving the bill                                                                    
from   committee.   He  echoed   Representative   Kawasaki's                                                                    
concerns that non-profits would lose funding.                                                                                   
Representative Wilson  praised the innovative nature  of the                                                                    
bill. She  thought that it  was clear where the  money would                                                                    
be distributed. She expressed 100 percent support.                                                                              
2:57:19 PM                                                                                                                    
Representative Guttenberg  categorized the legislation  as a                                                                    
"gaming bill  disguised as educational funding."  He thought                                                                    
that the  assumptions built  into the  bill were  random and                                                                    
arbitrary.  He felt  that a  more comprehensive  analysis of                                                                    
the repercussions of the legislation  should be executed. He                                                                    
thought that gambling  was disproportionately detrimental to                                                                    
the poor. He expressed opposition to the bill.                                                                                  
3:00:17 PM                                                                                                                    
Co-Chair  Seaton was  in support  of the  bill. He  spoke of                                                                    
suggested  tax   credits  to  industry  members   that  made                                                                    
significant  contributions to  education. He  felt that  the                                                                    
inducement was  more significant than the  potential payout.                                                                    
He   thought  that   the  supplemental   funding  would   be                                                                    
beneficial to all districts in the state.                                                                                       
3:02:30 PM                                                                                                                    
Representative  Grenn   thought  if   the  bill   was  about                                                                    
education and not  gambling, the proceeds would  be given to                                                                    
3:02:59 PM                                                                                                                    
Representative Grenn asked where  in the application, on the                                                                    
website,  would  be  the  option   to  purchase  the  raffle                                                                    
SARA RACE, DIRECTOR, PERMANENT  FUND, DEPARTMENT OF REVENUE,                                                                    
responded  that  the this  was  currently  unknown but  that                                                                    
there  was a  new application  under development  that broke                                                                    
out voluntary options for directing funds.                                                                                      
Representative  Grenn  asked  whether  the  items  would  be                                                                    
listed on the same page.                                                                                                        
Ms. Race replied in the affirmative.                                                                                            
Representative Grenn asked who would oversee advertising.                                                                       
Ms.  Race thought  that DOR  would advertise  in partnership                                                                    
with the Permanent Fund.                                                                                                        
3:04:32 PM                                                                                                                    
Representative Grenn  was uncomfortable with  the logistical                                                                    
3:04:46 PM                                                                                                                    
Vice-Chair  Gara respected  the various  views of  committee                                                                    
members  on  the  bill. He  believed  that  the  legislation                                                                    
should  be debated  on the  floor. He  supported moving  the                                                                    
bill from committee.                                                                                                            
3:07:05 PM                                                                                                                    
Representative  Pruitt  supported  moving the  bill  out  of                                                                    
committee. He  echoed concerns mentioned by  other committee                                                                    
members.  He felt  that  the  bill should  be  voted on  the                                                                    
3:08:29 PM                                                                                                                    
Representative Ortiz  wondered how  the raffle  option would                                                                    
be clearly separated from the Pick-Click-Give option.                                                                           
Mr.  Fellman  felt  that  the   options  that  were  already                                                                    
available.  He believed  that the  option  would be  clearly                                                                    
delineated on  the alienation. He stressed  that assumptions                                                                    
were  hard to  make but  that  sometimes chances  had to  be                                                                    
Ms. Race added  if an individual was  selecting many options                                                                    
that they  wanted to voluntarily  give to, making  sure that                                                                    
there was  a clear understanding  of payment priority  was a                                                                    
Representative  Ortiz asked  whether  it  would possible  to                                                                    
require  clicking a  button  that took  the  applicant to  a                                                                    
separate donation page for the raffle option.                                                                                   
Ms.  Race  responded  that  it was  possible  and  had  been                                                                    
considered during the application redesign process.                                                                             
3:12:12 PM                                                                                                                    
Representative Kawasaki  wondered about  an analysis  of the                                                                    
economic  repercussion of  the lottery  money not  filtering                                                                    
through the economy by other means or regular spending.                                                                         
Mr.  Fellman responded  that many  businesses advertise  PFD                                                                    
specials. He said that it was  hard to tell how people would                                                                    
spend their dividends, but that  the money would filter down                                                                    
eventually. He  noted that there  were already  15 different                                                                    
variations of raffles in the  state, generating $388 million                                                                    
yearly.  He could  not say  whether an  evaluation of  those                                                                    
fund had been conducted.                                                                                                        
Representative  Kawasaki cautioned  that  there  could be  a                                                                    
negative impact  on Pick-Click-Give  recipients, as  well as                                                                    
less PFD money circulating in the state economy.                                                                                
Mr.  Fellman  argued  that  at least  75  percent  would  go                                                                    
directly  into savings  or education.  He contended  that at                                                                    
least 50 percent of the raffle  funds would go back into the                                                                    
3:16:22 PM                                                                                                                    
Co-Chair  Seaton  MOVED to  report  HCSCSSB  78(FIN) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
Representative Grenn OBJECTED.                                                                                                  
Representative Wilson  asked clarifying questions  about the                                                                    
fiscal notes.                                                                                                                   
Co-Chair  Foster suggested  calling them  forthcoming fiscal                                                                    
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Ortiz,  Pruitt,  Thompson, Tilton,  Wilson,  Gara,                                                                    
Kawasaki, Foster, Seaton                                                                                                        
OPPOSED: Grenn, Guttenberg                                                                                                      
The MOTION to report the bill from committee PASSED (9/2).                                                                      
HCSCSSB 78  (FIN) REPORTED  out of  committee with  four "do                                                                    
pass" recommendations,  four "do not  pass" recommendations,                                                                    
and three "no recommendation"  recommendations and with five                                                                    
new  fiscal   notes:  three  fiscal  impact   notes  by  the                                                                    
Department of Revenue; one indeterminate  fiscal note by the                                                                    
Department of Education and Early  Development; and one zero                                                                    
fiscal note by the Department of Law.                                                                                           
3:18:24 PM                                                                                                                    
AT EASE                                                                                                                         
3:21:15 PM                                                                                                                    
SENATE BILL NO. 215                                                                                                             
    "An Act relating to multi-line telephone systems."                                                                          
3:21:31 PM                                                                                                                    
Co-Chair Seaton  noted that  the committee  had been  in the                                                                    
middle of consideration on Amendment  1 during at the end of                                                                    
the morning meeting.                                                                                                            
Representative  Tilton  MOVED  to  ADOPT  Amendment  1,  30-                                                                    
LS1455\D.1 (Nauman, 4/11/18) (copy on file).                                                                                    
Representative Kawasaki OBJECTED for discussion.                                                                                
Representative Tilton addressed  the amendment. She WITHDREW                                                                    
Amendment 1.                                                                                                                    
3:24:10 PM                                                                                                                    
Representative Wilson  asked about the  multi-line telephone                                                                    
system. She explained her understanding.                                                                                        
Representative Grenn deferred to staff for the definition.                                                                      
JORDAN  SHILLING,  STAFF,  SENATOR JOHN  COGHILL,  explained                                                                    
that multi-lines telephone  lines were defined of  Page 4 of                                                                    
the legislation.                                                                                                                
3:27:17 PM                                                                                                                    
DAVID GIBBS, EMS MANAGER, FAIRBANKS  NORTH STAR BOROUGH (via                                                                    
teleconference), clarified  that the type of  telephone line                                                                    
that  Representative  Wilson  was referring  to  was  called                                                                    
"Key" telephone  systems that  would not  require additional                                                                    
costs to small businesses.                                                                                                      
Representative Wilson  asked if upgrades to  a Key telephone                                                                    
system would fall under new requirements.                                                                                       
Mr. Gibbs responded  that the only system  that would result                                                                    
in  addition expense  to  small business  would  be the  PBX                                                                    
system,  which  would  require  the  purchase  of  a  system                                                                    
telephone switch  and was generally reserved  for very large                                                                    
Co-Chair Seaton  clarified what the committee  was trying to                                                                    
establish  a definition  for "multi-line  phone system".  He                                                                    
asked if one phone, with  two lines, was considered a multi-                                                                    
line phone system.                                                                                                              
3:30:03 PM                                                                                                                    
Mr. Gibbs  answered that  a business  with a  two-phone line                                                                    
system would be  so small that the  location associated with                                                                    
either  line  would  be   accurate;  ensuring  that  correct                                                                    
address  information  was  provided   when  signing  up  for                                                                    
service would not cause additional cost.                                                                                        
Representative  Thompson understood  that if  he called  911                                                                    
from  his  office   in  the  Capitol,  the   call  would  be                                                                    
identified  as  coming  from  room   500  in  the  building;                                                                    
however,  if  the building  had  a  switchboard system  (one                                                                    
number for  all offices) the  physical address of  where the                                                                    
call was coming form would be undetermined.                                                                                     
3:31:39 PM                                                                                                                    
Mr.   Gibbs  responded   that  regarding   the  switchboard,                                                                    
essentially  a  key  telephone  system,  would  need  to  be                                                                    
updated to reflect the location of the call.                                                                                    
3:32:41 PM                                                                                                                    
Representative   Wilson  maintained   confusion  about   the                                                                    
definitions of the various systems.                                                                                             
3:33:31 PM                                                                                                                    
Vice-Chair  Gara reviewed  the  previously published  fiscal                                                                    
note  #1  from  the  Department of  Commerce  and  Community                                                                    
Representative Wilson spoke to Page 2 of the note:                                                                              
     The  bill mandates  that an  operator  of a  multi-line                                                                    
     system that does  not allow for direct  911 dialing and                                                                    
     is not  required by ordinance to  install enhances 911,                                                                    
     posts  a prominent  notice instructing  callers how  to                                                                    
     reach 911.                                                                                                                 
She wondered  how many businesses  would be affected  by the                                                                    
mandate and how the post-able notices would be distributed.                                                                     
Mr.   Schilling   relayed   that  the   structure   of   the                                                                    
notifications was in the bill on Page 4, line 4:                                                                                
     (d) The operator of a  multi-line telephone system that                                                                    
     is  not  required  by ordinance  to  comply  with  this                                                                    
     section and that does not  allow for direct 911 dialing                                                                    
     shall post, in a visible  place not more than five feet                                                                    
     from  each telephone  that is  connected to  the multi-                                                                    
     line telephone system, a notice that                                                                                       
      (1)  states that  911 services  cannot be  accessed by                                                                    
     dialing 911 directly 9 on the telephone;                                                                                   
      (2)  indicates how  a caller  may access  911 services                                                                    
     through the telephone;                                                                                                     
      (3) is  printed in contrasting  colors in a  bold font                                                                    
     not smaller than 16 points;                                                                                                
      (4)   includes    the   following    information,   as                                                                    
     applicable, about the location of the telephone:                                                                           
      (A) the street address and business name;                                                                                 
      (B) the office, unit, or building number;                                                                                 
      (C) the room number or equivalent designation.                                                                            
3:35:24 PM                                                                                                                    
Representative Wilson understood that businesses would be                                                                       
responsible for creating and posting the signage.                                                                               
Mr. Shilling replied in the affirmative.                                                                                        
3:35:51 PM                                                                                                                    
Vice-Chair Gara MOVED to report SB 215 out of Committee                                                                         
with individual recommendations and the accompanying fiscal                                                                     
There being NO OBJECTION, it was so ordered.                                                                                    
SB 215 was REPORTED out of committee with a "do pass"                                                                           
recommendation and with a previously published zero fiscal                                                                      
note: FN1 (CED).                                                                                                                
3:36:49 PM                                                                                                                    
AT EASE                                                                                                                         
3:38:22 PM                                                                                                                    
CS FOR SENATE BILL NO. 15(FIN)                                                                                                
     "An  Act  relating  to   possession  of  an  electronic                                                                    
     smoking product  or a product containing  nicotine by a                                                                    
     minor  and to  selling or  giving a  product containing                                                                    
     nicotine or  an electronic smoking product  to a minor;                                                                    
     relating  to  business  license  endorsements  to  sell                                                                    
     cigarettes,   cigars,   tobacco,  products   containing                                                                    
     tobacco,  electronic  smoking   products,  or  products                                                                    
     containing  nicotine;  and  relating to  citations  for                                                                    
     certain    offenses   concerning    tobacco,   products                                                                    
     containing nicotine, or electronic smoking products."                                                                      
3:38:35 PM                                                                                                                    
SENATOR GARY STEVENS, SPONSOR, introduced himself.                                                                              
TIM LAMKIN, STAFF, SENATOR GARY STEVENS, introduced                                                                             
Senator Stevens explained that more young Alaskans were                                                                         
becoming addicted to smoking due, in part, to electronic                                                                        
cigarettes (e-cigarettes).                                                                                                      
3:40:28 PM                                                                                                                    
AT EASE                                                                                                                         
3:43:48 PM                                                                                                                    
Representative Wilson MOVED to ADOPT Amendment 1.                                                                               
     Page 5, lines 13-14:                                                                                                       
          Delete "or any other substance intended for human                                                                     
     Page 5, lines 23-24:                                                                                                       
          Delete "chemical substances that may cause an                                                                         
          adverse effect on human health"                                                                                       
          Insert "nicotine"                                                                                                     
Representative Grenn OBJECTED.                                                                                                  
Representative Wilson explained the amendment. She said                                                                         
that the intent was to exclude products that did not                                                                            
contain nicotine.                                                                                                               
Representative Wilson WITHDREW Amendment 1.                                                                                     
Vice-Chair Gara reviewed the fiscal notes for SB 15.                                                                            
3:46:43 PM                                                                                                                    
Vice-Chair  Gara MOVED  to report  HCSCSSB 15  (L&C) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
Representative Wilson OBJECTED.                                                                                                 
3:47:58 PM                                                                                                                    
AT EASE                                                                                                                         
3:48:17 PM                                                                                                                    
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Pruitt,    Thompson,    Tilton,    Gara,    Grenn,                                                                    
Guttenberg, Seaton                                                                                                              
OPPOSED: Wilson                                                                                                                 
Representative    Kawasaki,   Representative    Ortiz,   and                                                                    
Representative Foster were absent from the vote.                                                                                
The MOTION to report HCSCSSB 15 (L&C) PASSED(7/1).                                                                              
HCSSB  15 (L&C)  was REPORTED  out of  committee with  a "do                                                                    
pass"  recommendation  and  with  two  previously  published                                                                    
fiscal notes:  one zero impact  note: FN6 (GOV  - Combined);                                                                    
and one fiscal impact note: FN7 (CED).                                                                                          
3:49:14 PM                                                                                                                    
AT EASE                                                                                                                         
3:52:35 PM                                                                                                                    
CS FOR SENATE BILL NO. 92(FIN) am                                                                                             
     "An  Act relating  to abandoned  and derelict  vessels;                                                                    
     relating to  the registration  of vessels;  relating to                                                                    
     certificates  of title  for  vessels;  relating to  the                                                                    
     duties  of the  Department of  Administration; relating                                                                    
     to the  duties of the Department  of Natural Resources;                                                                    
     establishing  the derelict  vessel prevention  program;                                                                    
     establishing  the  derelict vessel  prevention  program                                                                    
     fund; relating  to the authority of  certain persons to                                                                    
     enforce   laws  relating   to  derelict   vessels;  and                                                                    
     providing for an effective date."                                                                                          
Co-Chair Foster  relayed the legislation  had been  heard on                                                                    
March  28th.  He  said  that   the  meeting  would  offer  a                                                                    
reintroduction  of  the   legislation,  including  reopening                                                                    
public testimony.                                                                                                               
3:53:10 PM                                                                                                                    
SENATOR PETER  MICCICHE, SPONSOR, relayed that  the bill was                                                                    
about  personal responsibility.  He stressed  that the  bill                                                                    
was  unrelated  to property  taxes.  He  quoted the  Sponsor                                                                    
     A report titled Trends  and Opportunities in the Alaska                                                                    
     Maritime  Industrial Support  Sector  (2014) noted  "By                                                                    
     2025,  the  Alaska  fleet will  include  roughly  3,100                                                                    
     vessels  between 28'  and  59' that  are  more than  45                                                                    
     years old...                                                                                                               
He shared that  he personally owned 6 vessels,  one of which                                                                    
was  aging. He  lamented  that abandoned  boats  could be  a                                                                    
danger to other  vessels. He said that the  bill provided an                                                                    
avenue  for  the  state  or  municipalities  to  remove  the                                                                    
derelict vessels  from the water  before they sink.  He said                                                                    
that  the management  of  the vessels  early  will save  the                                                                    
state money.                                                                                                                    
3:56:17 PM                                                                                                                    
RACHEL HANKE,  STAFF, SENATOR  PETER MICCICHE,  reviewed the                                                                    
changes in  the committee substitute. She  said that Section                                                                    
4  exempted  vessels  24  feel   and  under  and  created  a                                                                    
mechanism  for  lack of  adequate  proof  of ownership.  The                                                                    
increase in  registration fees had  been removed.  Section 6                                                                    
reflected the  removal of an increase  in registration fees.                                                                    
She said  that the original  definition of "barge"  had been                                                                    
retained  in Section  7.  Article 3,  in  exiting AS  30.30,                                                                    
which dealt with vessels abandoned  on the business premises                                                                    
of persons engaged in a repair business, had been repealed.                                                                     
RACHEL LORD,  ALASKA ASSOCIATION  OF HARBORMASTERS  AND PORT                                                                    
ADMINISTRATORS,   HOMER   (via  teleconference),   expressed                                                                    
support  for  the legislation.  She  revealed  that she  was                                                                    
available for questions.                                                                                                        
Representative  Wilson  requested   clarification  on  which                                                                    
boats would be charged registration fees.                                                                                       
Senator Micciche responded  that there was no  change in the                                                                    
current bill for a vessel that  was 24 feet or under, except                                                                    
at  the choice  of  the  owner. He  said  that a  documented                                                                    
vessel (minimum  of 5 gross  tons and above)  would increase                                                                    
in  registration  fee cost  by  $8,  per year.  Undocumented                                                                    
vessels above  24 feet would  see an increase of  a one-time                                                                    
titling fee.                                                                                                                    
3:59:59 PM                                                                                                                    
Representative Wilson  asked whether all boating  fees would                                                                    
go into the fund.                                                                                                               
Ms. Hanke  responded that the  barge registration  fee, boat                                                                    
title, and  duplicate boat title fees,  would be distributed                                                                    
in the program fund.                                                                                                            
Representative  Wilson asked  about the  fees non-commercial                                                                    
vessels   under   24   feet.  She   wondered   where   those                                                                    
registration fees were allocated.                                                                                               
Ms. Ranke relayed that all titling  and fees would go to the                                                                    
derelict vessel program fund.                                                                                                   
Representative Wilson asked whether  funds would be diverted                                                                    
from the Kids Don't Float program.                                                                                              
Ms. Hanke  stated that  the bill would  not affect  the fund                                                                    
for boater safety programs.                                                                                                     
Representative Wilson expressed confusion.                                                                                      
Ms.  Hanke   explained  that  the  registration   fees  were                                                                    
separate from  the title  fees. Title fees  would go  to the                                                                    
4:02:03 PM                                                                                                                    
Co-Chair Seaton queried the difference  in the definition of                                                                    
"barge" and  the term "flat-bottomed" as  the descriptor. He                                                                    
wondered about  vessels that had  had their  engines removed                                                                    
and were now barges for all intents and purposes.                                                                               
Senator Micciche deferred to Rachel Lord.                                                                                       
4:03:26 PM                                                                                                                    
Ms. Lord  reported that the  definition had been  an ongoing                                                                    
issue.  She   relayed  that   task  force   discussions  had                                                                    
highlighted a  significant number  of abandoned  barges. She                                                                    
thought  the definition  had been  intended  to capture  the                                                                    
barge   fleet  that   was  not   currently  captured   under                                                                    
registration provisions.                                                                                                        
Co-Chair  Seaton  asked about  the  no  title mechanism  for                                                                    
harbor master work.                                                                                                             
Ms.  Lord replied  that  the  titling provisions  introduced                                                                    
under the  bill were valuable  as another piece  in defining                                                                    
ownership.  She thought  that concerns  had not  been raised                                                                    
about the mechanism.                                                                                                            
Senator  Micciche  responded that  the  intent  had been  to                                                                    
avoid any bonding issues.                                                                                                       
Co-Chair Seaton  asked whether the sponsor  had any concerns                                                                    
about a person  registering a vessel without  applying for a                                                                    
Senator  Micciche  thought  that  the  issue  would  resolve                                                                    
4:08:59 PM                                                                                                                    
Co-Chair Foster OPENED public testimony.                                                                                        
CARL    UCHYTIL,    PRESIDENT    ALASKA    ASSOCIATION    OF                                                                    
HARBORMASTERS,  testified on  behalf  of the  43 harbors  in                                                                    
Alaska. He offered support for the legislation.                                                                                 
Co-Chair  Seaton  asked  Mr.  Uchytil  whether  he  had  any                                                                    
suggestions regarding the definition of a barge.                                                                                
Mr.  Uchytil  deferred  to  Ms.  Lord. He  did  not  have  a                                                                    
solution to a description of a barge.                                                                                           
4:12:04 PM                                                                                                                    
Co-Chair Seaton  asked whether harbormasters had  a position                                                                    
on the repeal of Article 3.                                                                                                     
Mr. Uchytil indicated that the  harbormasters did not have a                                                                    
stance on the issue.                                                                                                            
4:12:56 PM                                                                                                                    
BRYAN  HAWKINS, HARBOR  MASTER,  CITY OF  HOMER, HOMER  (via                                                                    
teleconference),  reported  he  the vice  president  of  the                                                                    
Alaska Association  of Harbormasters. He voiced  support for                                                                    
the legislation.                                                                                                                
4:13:51 PM                                                                                                                    
MATT  DONOHOE, SELF,  SITKA (via  teleconference), expressed                                                                    
dissatisfaction with  some portion  of the  bill on  Page 2,                                                                    
lines 28-29. He reported not being  able to be in the harbor                                                                    
in Sitka  without boat registration or  a documented vessel.                                                                    
He   asked   why  the   state   would   not  recognize   the                                                                    
documentation from  the United  States Government  but would                                                                    
recognize a  documented foreign  vessel. Next,  he mentioned                                                                    
language  on Page  3. He  was unclear  about the  meaning of                                                                    
"operated". Vessels  are not  always operating  when sitting                                                                    
on the dock. He noted  that fishermen would be unhappy about                                                                    
duplication requirements.                                                                                                       
4:18:36 PM                                                                                                                    
Co-Chair Foster CLOSED public testimony.                                                                                        
4:18:48 PM                                                                                                                    
Representative Wilson  asked the  sponsor to respond  to the                                                                    
testifier's questions.                                                                                                          
4:19:07 PM                                                                                                                    
Senator Micciche  explained if a vessel  was documented then                                                                    
it had  to be  registered in  order to  establish ownership.                                                                    
The   registration  system   would  contain   a  record   of                                                                    
ownership. He  stated that Line  18 of the bill  was already                                                                    
in existing law.                                                                                                                
Representative  Wilson asked  whether there  was duplication                                                                    
of registration and titling efforts in the legislation.                                                                         
Senator Micciche  replied no.  He believed  that identifying                                                                    
ownership  and dealing  with derelict  vessels  in a  timely                                                                    
manner would be of benefit to the state.                                                                                        
Co-Chair Seaton asked about the elimination of Article 3.                                                                       
Ms.  Hanke  responded  that  Article  3  had  been  repealed                                                                    
because  when  the  legislation  was  crafted  it  had  been                                                                    
intended  for  use  by the  state  and  municipalities.  she                                                                    
deferred to Ms. Lord.                                                                                                           
4:23:41 PM                                                                                                                    
Ms.  Lord  explained  that  Article 3  had  implied  that  a                                                                    
private business  was held to  similar legal standards  as a                                                                    
public  entity, which  was not  the  case, and  had led  the                                                                    
taskforce to determine that the removal was justified.                                                                          
Co-Chair  Seaton  commented   that  private  businesses  had                                                                    
voiced concern  that not having  a statutory  mechanism made                                                                    
the legalities vague.                                                                                                           
Ms. Lord  added that the Harbormasters  Association had been                                                                    
a member of  the taskforce that crafted  the legislation and                                                                    
that the  sitting members on  the force had been  from state                                                                    
and  federal  agencies,  local municipalities,  as  well  as                                                                    
tribal representation.                                                                                                          
4:26:57 PM                                                                                                                    
Representative  Guttenberg  asked   for  the  definition  of                                                                    
"water of the state".                                                                                                           
Senator Micciche thought  it was anywhere within  3 miles of                                                                    
mean  highwater. He  thought that  "state  waters" could  be                                                                    
anywhere that a derelict vessel could become a problem.                                                                         
Representative  Guttenberg thought  that all  rivers outside                                                                    
of saltwater would be exempt from the legislation.                                                                              
Senator  Micciche   responded  that  all  rivers   would  be                                                                    
included in the legislation.  He added that "Steamboat Slew"                                                                    
was the number one freshwater target for the bill.                                                                              
Co-Chair  Foster  set  the  amendment  deadline  for  5  pm,                                                                    
Tuesday, April 17, 2018.                                                                                                        
Representative Thompson expressed concern that the bill                                                                         
might not make it through the legislative process in 2018.                                                                      
Co-Chair Foster reported that Co-Chair Seaton was willing                                                                       
to move the deadline for amendments to tomorrow morning in                                                                      
order to expedite the process.                                                                                                  
SB 92 was HEARD and HELD in committee for further                                                                               
HOUSE BILL NO. 260                                                                                                            
     "An Act  relating to  electronic possession  of certain                                                                    
     licenses, tags, and identification  cards issued by the                                                                    
     Department  of  Fish and  Game;  and  providing for  an                                                                    
     effective date."                                                                                                           
4:31:12 PM                                                                                                                    
REPRESENTATIVE DAN SADDLER, SPONSOR, read the sponsor                                                                           
     Smart  phones  have  become an  indispensable  part  of                                                                    
     modern   Alaska   life.   They   provide   users   with                                                                    
     inexpensive,  convenient and  reliable information  and                                                                    
     services,    including   communications,    navigation,                                                                    
     scheduling,  research, photography,  and entertainment.                                                                    
     There  is almost  no aspect  of  life that  smartphones                                                                    
     don't make easier and better.                                                                                              
     HB   260  seeks   to  leverage   modern  communications                                                                    
     technology  to   enhance  the  timeless   pleasures  of                                                                    
     traditional  Alaskan  activities of  hunting,  fishing,                                                                    
     and  trapping, by  allowing  state  licenses for  these                                                                    
     activities to be displayed on  digital devices, as well                                                                    
     as in  paper form. In  addition, it seeks to  provide a                                                                    
     peace   officer   examining    an   electronic   device                                                                    
     displaying a  license with immunity from  liability for                                                                    
    damage to the device resulting from the inspection.                                                                         
     State law  currently requires outdoorsmen and  women to                                                                    
     carry   paper   licenses    while   enjoying   licensed                                                                    
     activities.  But as  anyone who's  ever tumbled  into a                                                                    
     stream while landing  a king salmon or sat  in the rain                                                                    
     in a  duck blind knows,  paper licenses can  be damaged                                                                    
     or lost at the worst  possible time. And while a person                                                                    
     might  misplace  their   wallet,  their  smartphone  is                                                                    
     almost  always  within  arm's   reach.  But  for  those                                                                    
     circumstances when a person fails  to have a license in                                                                    
     actual possession, HB 260 turns  the citation issued by                                                                    
     a  peace  officer into  a  "fix-it  ticket," whereby  a                                                                    
     person can nullify any violation  for failure to have a                                                                    
     license  in actual  possession, by  presenting a  valid                                                                    
     license within 30 days.                                                                                                    
     Alaskans  have been  authorized since  2013 to  display                                                                    
     secure proof of insurance on  a digital device, and the                                                                    
     benefits  of  extending  that  capability  to  outdoors                                                                    
     recreational licenses are clear. They would:                                                                               
        • Make it easier and more convenient for hunters,                                                                       
          fishers and trappers to obtain and carry required                                                                     
        • Help entice new participants in these activities,                                                                     
          by lowering one barrier to entry                                                                                      
        • Make Alaska a more attractive tourist destination                                                                     
          by making it easier for visitors to get licenses                                                                      
        • Improve compliance with state fish and wildlife                                                                       
          management laws, by making it easier for                                                                              
          enforcement officials to verify users are legal                                                                       
        • Save money for the state and private license                                                                          
          vendors, by reducing or eliminating printing                                                                          
        • Enhance licensing   security   with   harder-to-                                                                      
          counterfeit digital licenses                                                                                          
     HB 260  also lays  the foundation  for smartphone-based                                                                    
     "apps" that  will eventually  let ADF&G  deliver timely                                                                    
     information  on local  regulations,  opening dates  and                                                                    
     times, and hazards to  users; while letting outdoorsman                                                                    
     reciprocate by  sending back real-time data  on harvest                                                                    
     effort  and  success.  Until then,  the  advantages  of                                                                    
     digital  licenses  are  significant enough  to  warrant                                                                    
     swift passage of HB 260.                                                                                                   
4:34:51 PM                                                                                                                    
Co-Chair Foster relayed the list of available testifiers                                                                        
4:35:22 PM                                                                                                                    
Co-Chair Foster OPENED public testimony.                                                                                        
4:35:53 PM                                                                                                                    
RICK GEASE,  EXECUTIVE DIRECTOR,  KENAI RIVER  SPORT FISHING                                                                    
ASSOCIATION,  SOLDATNA  (via teleconference),  relayed  that                                                                    
the Kenai  River Sport  Fishing Association  fully supported                                                                    
HB  260. He  thought it  was consistent  with being  able to                                                                    
make  application  online.  He  suggested  incorporating  an                                                                    
electronic harvest card in the future.                                                                                          
4:37:17 PM                                                                                                                    
Co-Chair  Seaton  asked  how the  fisheries  or  hunts  that                                                                    
required recording of  catch would be designed for  use on a                                                                    
Mr. Gease responded that if  an electronic harvest card that                                                                    
allowed  anglers to  report  on their  phones  while in  the                                                                    
field were authorized now, the  department could develop the                                                                    
Representative  Saddler offered  that currently  capture was                                                                    
recorded  on the  back of  the paper  license. He  said that                                                                    
under the  legislation a form  would need to be  printed and                                                                    
filled out  to record the  capture of king  salmon. However,                                                                    
the  Board  of Fish  had  recently  decided that  regulation                                                                    
would  be  changed  so  that   a  record  of  harvest  of  a                                                                    
specifically managed  species would  not have to  be written                                                                    
in ink. He thought it was the next obvious step.                                                                                
4:40:05 PM                                                                                                                    
MARK RICHARDS,  RESIDENT HUNTERS  OF ALASKA,  FAIRBANKS (via                                                                    
teleconference), fully supported HB 260.  He told a story of                                                                    
one  of  the  members  of Resident  Hunters  of  Alaska.  He                                                                    
thought  the  bill  was  a   great  idea.  He  believed  the                                                                    
department and  the Alaska State  Troopers would  support it                                                                    
4:41:18 PM                                                                                                                    
SAMANTHA  WEINSTEIN, SOUTHEAST  ALASKA GUIDES  ORGANIZATION,                                                                    
JUNEAU  (via  teleconference),  spoke   in  support  of  the                                                                    
legislation. She read a prepared statement (copy on file).                                                                      
4:42:34 PM                                                                                                                    
Co-Chair Foster CLOSED public testimony.                                                                                        
4:43:39 PM                                                                                                                    
Representative  Pruitt MOVED  to ADOPT  Conceptual Amendment                                                                    
     Page 2, Line 8                                                                                                             
     Delete "any"                                                                                                               
     Following "device":                                                                                                        
     Insert ", except that a peace officer may be liable                                                                        
     for civil damages that are the result of the peace                                                                         
     officer's intentional misconduct"                                                                                          
Representative   Wilson   OBJECTED   for  the   purpose   of                                                                    
Representative Pruitt explained the amendment.                                                                                  
There being NO OBJECTION, it was so ordered.                                                                                    
Representative  Wilson MOVED  to ADOPT  Conceptual Amendment                                                                    
Page 2, Line 2                                                                                                                  
Delete "in"                                                                                                                     
Following "produces"                                                                                                            
Insert ",  to an office  of the arresting or  citing agency,                                                                    
not later than  90 days after the issuance  of the citation,                                                                    
a license previously issued to  the person that was valid at                                                                    
the time of the offense."                                                                                                       
Representative   Pruitt   OBJECTED   for  the   purpose   of                                                                    
Representative Wilson explained the amendment.                                                                                  
Representative Pruitt WITHDREW his OBJECTION.                                                                                   
There being NO OBJECTION, it was so ordered.                                                                                    
Vice-Chair Gara reviewed the fiscal note.                                                                                       
4:49:04 PM                                                                                                                    
Co-Chair Seaton MOVED to report CSHB 260 (FIN) out of                                                                           
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
There being NO OBJECTION, it was so ordered.                                                                                    
CSHB 260 (FIN) was REPORTED out of committee with a "do                                                                         
pass" recommendation and with a previously published zero                                                                       
fiscal note: FN1 (DFG).                                                                                                         
Co-Chair Foster discussed housekeeping.                                                                                         
4:52:31 PM                                                                                                                    
The meeting was adjourned at 4:52 p.m.                                                                                          

Document Name Date/Time Subjects
IN3NERGY_HFIN HB411_04162018.pdf HFIN 4/16/2018 1:30:00 PM
HB 411
SB 15 Amendment #1 Wilson.pdf HFIN 4/16/2018 1:30:00 PM
SB 15
HB 260 Conceptual Amendment #1.pdf HFIN 4/16/2018 1:30:00 PM
HB 260