Legislature(2003 - 2004)
05/07/2003 09:00 AM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 07, 2003
9:00 A.M.
TAPE HFC 03 - 80, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 9:00 A.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Carl Moses
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
Representative Reggie Joule
ALSO PRESENT
Chris Knauss, Staff, Representative Pete Kott; Barbara
Bitney, Staff, Representative Bill Stoltze; Larry Persily,
Deputy Commissioner, Department of Revenue
PRESENT VIA TELECONFERENCE
Shane Herr, Wolverine Farms, Palmer; River Bean, President,
Alaska Organic Association, Palmer; Gerald DeVibiss,
Wolverine Farms, Palmer; River Bean, President, Alaska
Organic Association, Palmer
SUMMARY
HB 174 An Act relating to the state centralized
correspondence study program, to funding for
educational programs that occur primarily outside
school facilities, and to the duties of school
boards of borough and city school districts and
regional educational attendance areas; and
providing for an effective date.
HB 174 was POSTPONED.
HB 205 An Act relating to service in the peace corps as
an allowable absence from the state for purposes
of eligibility for permanent fund dividends and to
the period for filing an application for a
permanent fund dividend; authorizing the
Department of Revenue to issue administrative
orders imposing sanctions for certain
misrepresentations or other actions concerning
eligibility for a permanent fund dividend and
providing for administrative appeal of those
orders; and providing for an effective date.
HB 205 was POSTPONED.
HB 226 An Act relating to the sale, offer for sale,
representation, and labeling of food or other
agricultural products as organic, and to the state
organic certification program; and providing for
an effective date.
HB 226 was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by
the Department of Natural Resources.
HB 271 An Act levying and providing for the collection
and administration of an excise tax on passenger
vehicle rentals; and providing for an effective
date.
CS HB 271 (FIN) was reported out of Committee with
a "do pass" recommendation and with a new fiscal
note by the Department of Revenue.
SB 109 An Act repealing the statute that sets priorities
for the Department of Health and Social Services
to apply to administration of the medical
assistance program when there are insufficient
funds allocated in the state budget for that
program; authorizing the department to make cost
containment decisions that may include decisions
about eligibility of persons and availability of
services under the medical assistance program; and
providing for an effective date.
SB 109 was POSTPONED.
HOUSE BILL NO. 271
An Act levying and providing for the collection and
administration of an excise tax on passenger vehicle
rentals; and providing for an effective date.
Co-Chair Harris MOVED to ADOPT work draft #23-23-LS0936\X,
Kurtz, 5/6/03, as the version of the legislation before the
Committee. Representative Croft OBJECTED in order to hear
the difference between the two versions.
CHRIS KNAUSS, STAFF, REPRESENTATIVE PETE KOTT, explained
that the Department of Revenue had requested changes from
the Ways and Means Committee version to the House Finance
Committee version of the bill.
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
classified the changes as mostly technical:
· The original draft of the bill referred to
rentals made in the State. The words "made
out" were removed.
· The Department wanted to make it clear that
the tax must be stated separately on the
rental invoice for the consumers and for the
business.
· Any rental of a motor vehicle by a State,
municipal for federal employee for official
business would be exempt from the tax.
· The Finance version clearly spells out that
the tax should not be charged on top of other
taxes.
Mr. Persily noted that the substance of the bill remains the
same and would place a 10% tax on passenger vehicles and
pick-up trucks and a 3% tax on recreational vehicles. The
st
bill would take effect on July 1, 2003. The fiscal note
estimates that in FY04, approximately $4 million dollars
would be generated and in the following fiscal years,
approximately $6 million dollars generated revenue.
Representative Croft WITHDREW his OBJECTION. There being NO
further OBJECTION, the work draft was adopted.
Representative Croft MOVED to ADOPT Amendment #1, #23-
LS0936\U.1, Kurtz, 4/25/01. (Copy on File).
Co-Chair Williams OBJECTED.
Representative Croft explained that essentially the
amendment would not place the State tax "on top" of local
taxes already in place. Adding the proposed tax to already
high taxes makes it prohibitive. Mr. Knauss pointed out
that action would cut the State's projected revenue from 50%
to 75% since the largest use is in Anchorage and they
already have an 8% tax. Co-Chair Williams agreed with the
sponsor that the amendment would not work well.
Co-Chair Harris asked if the intent of the amendment was not
to penalize local communities that already impose the rental
car tax and instead allow them to keep their current fees.
Representative Croft agreed that was the intent.
Discussion followed between Representative Croft and Co-
Chair Harris regarding the maximum that a community
currently can keep. Representative Croft informed members
that there would be a 10% original car tax across the State
that might be shared differently between municipalities
depending upon their tax rates. Co-Chair Harris commented
that under the premise of Amendment #1, it would be to the
advantage of a community to place a 10% local community tax,
keeping it for themselves. Representative Croft agreed.
Co-Chair Harris pointed out that the bill indicates a 10%
rental car tax on every rental car in the State.
Co-Chair Harris asked if there was a "drop dead" date for
imposing the tax. Representative Croft responded that the
State already shares revenue with the municipal governments.
He stressed that an 18% tax is excessive. Co-Chair Williams
disagreed.
Vice-Chair Meyer voiced his opposition to Amendment #1. He
pointed out that under the amendment, only 2% would be
collected from the Anchorage area noting that nearly 60% of
the rental cars come from that area. Without the Anchorage
revenue, the bill would not generate much assistance for the
State general fund. He pointed out that there are ways in
which local people can avoid paying the airport fees by
renting their cars in town or anywhere away from the
airport.
Representative Stoltze acknowledged that he understood the
intent of the amendment, however, that he would oppose it.
Representative Hawker stated that in other states throughout
the nation, he was accustomed to paying a 25% to 30% tax on
car rentals and maintained that the legislation would bring
Alaska in line with the average national levels. He
stressed that this would be a tax on business corporate
users. "Less is not more" when attempting to balance the
overall budget. He stated that he would oppose Amendment
#1.
Co-Chair Harris clarified that the bill does not allow
charges to State employees. Mr. Persily advised that the
House Finance version exempts State, municipal and federal
employees when on official business.
Representative Croft referenced the charts provided by the
Department of Revenue. He noted that it combines the State
and local taxes with the rental car rates. Without the
amendment in place, Alaska would be ranked #5 for the
highest paying state in the Nation. Right now,
incorporating the tax would raise the tax to a 29% tax fee
at the Anchorage Airport. He noted that at present time,
there is no sales tax but eventually that would also be
added to the tax base.
A roll call vote was taken on the motion to adopt Amendment
#1.
IN FAVOR: Moses, Croft
OPPOSED: Meyer, Stoltze, Whitaker, Chenault, Foster,
Hawker, Harris, Williams
Representative Joule was not present for the vote.
The MOTION FAILED (2-8).
Representative Croft MOVED to ADOPT Amendment #2, #23-
LS0936\U.2, Kurtz, 4/25/03.
Co-Chair Williams OBJECTED.
Representative Croft explained that part of the
justification for the bill was that it is needed for tourism
marketing funding. Amendment #2 stipulates that if the
appropriate level of $10 million dollars has not been met
then the tax could be collected, otherwise it could not be.
Mr. Knauss referenced Page 2, Lines 22-26, noting that the
sponsor's intent was to establish an account in the general
fund for tourism and marketing, but not a dedicated account.
Representative Hawker discussed his concerns regarding
designating funds. He noted that there would be an
arbitrary $10 million dollar general fund money
appropriated. The purpose of the bill results from concerns
regarding Alaska's fiscal issues. To place a provision in
the bill which makes it automatically a net loss to the
general fund "does not fly" with the intent. He stated that
he opposed the amendment.
A roll call vote was taken on the motion.
IN FAVOR: Croft
OPPOSED: Meyer, Moses, Stoltze, Whitaker, Foster,
Hawker, Williams, Harris
Representative Joule was not present for the vote.
The MOTION FAILED (1-9).
Co-Chair Harris MOVED to report CS HB 271 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 271 (FIN) was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by the
Department of Revenue.
HOUSE BILL NO. 226
An Act relating to the sale, offer for sale,
representation, and labeling of food or other
agricultural products as organic, and to the state
organic certification program; and providing for an
effective date.
Representative Stoltze introduced the bill noting that Co-
Chair Harris staff had done a lot of work on this issue
during the past two legislative sessions.
BARBARA BITNEY, STAFF, REPRESENTATIVE BILL STOLTZE, stated
that HB 226 was a measure to bring Alaska in line with the
federal definition of "organic". In 2001, the final rule
for the federal definition of "organic" was adopted; the law
allowed for a transition period from mid-2001 to October,
2002, giving states 14 months to come into line with the
federal definition of organic. HB 432 was introduced in
April 2002 with the language needed to make the change. It
nd
did not pass before the 22 Legislative session adjourned.
HB 226 is back this year, making it a very simple measure to
bring the State of Alaska's definition of organic
agricultural products in line with the federal definition.
It will create an Alaska organic certification program
providing in-state certification for organic agricultural
producers, processors and handlers.
At this time, operators are paying to fly certification
specialists to Alaska whose fees may be as high as $1,500 to
$3,000 dollars to verify Alaskan operations comply with the
federal organic standards. With passage of HB 226,
qualified inspectors would complete the inspection process,
with the final certification process being performed by a
designated State official.
Representative Stoltze voiced concern with the fiscal note.
He was not sure that the amount was justified. He noted
that there is a large presence of United States Drug
Administration (USDA) officials, whom the State should be
able to rely upon for technical assistance. Whatever the
decision of the Committee regarding the note, Representative
Stoltze indicated that he wanted to get the bill through the
House. He added that Senator Green was in support of the
bill on the Senate side and that it was her intent to "trim"
the note.
Co-Chair Williams asked the responsibilities associated with
the requested position. Ms. Bitney explained that the State
would continue to bring outside inspectors to Alaska. The
State will need to review all documentation and sign off on
the certification for it. It would be a ½ time position.
She believed that the fiscal note was minimal.
Co-Chair Harris noted that he would like to zero out the
note. He asked if a part time person would be hired or
would they be using someone already in the Department. Ms.
Bitney responded that it would be someone within the
Department.
Co-Chair Harris asked if there was a program within the
Department where a fee could be associated with the costs to
pay that amount. Ms. Bitney responded that was a
possibility that had not yet been explored.
Co-Chair Harris interjected that through regulations, the
Department could impose a fee for the users. He proposed
that the Committee modify the fiscal note, taking the $37
thousand dollars from general funds and put it under $37
thousand dollars from program receipts, which would zero out
the general fund draw.
Representative Stoltze commented that it had been difficult
to get a "straight answer" from the federal bureaucracy.
Co-Chair Williams encouraged that Co-Chair Harris work with
Representative Stoltze and the Department on the fiscal
note. Co-Chair Harris advised that it would be appropriate
to move the bill out with the fiscal note changed and
placing the $37 thousand dollars under general fund program
receipts.
Co-Chair Harris MOVED that MOTION. There being NO
OBJECTION, the fiscal note was revised.
Representative Hawker inquired if that change would need to
be reflected in the bill.
RIVER BEAN, (TESTIFIED VIA TELECONFERENCE), PRESIDENT,
ALASKA ORGANIC ASSOCIATION, PALMER, commented that in the
past, his company had been certifying organic farms in the
State of Alaska. Under the organic program rule, they could
no longer do that. The federal government took that over as
of October 22, 2002. The State can no longer use the word
"organic" without certification, which affects a large
number of farmers in the State. These farmers cannot afford
to go to the State of Washington to certify. On behalf of
all the organic farmers in the State, Mr. Bean requested
support for coming in line with the federal government
standards so that Alaska can call their produce "organic".
Mr. Bean agreed to pay a user fee to maintain the organic
status.
Representative Croft asked about the federal criteria and if
each state had to separately meet the criteria. Mr. Bean
replied that anyone that applies for accreditation can
certify. The Alaska Organic Association cannot afford to be
accredited with the federal government. There are over 30
states that have state programs and a number of private
companies that are accredited with the federal government.
The federal government does not provide the certification
but rather the accreditation.
Representative Croft asked if that needed to be done either
through private industry or through the government. Mr.
Bean stated that was correct. He reiterated that their
association couldn't afford to do it on their own.
GERALD DEVILBISS, (TESTIFIED VIA TELECONFERENCE), ALASKA
ORGANIC ASSOCIATION, WOLVERINE FARMS, PALMER, encouraged
Committee members to pass the bill. He supported
implementing a user fee to help cover costs. He mentioned
that there is a big part of Alaska agriculture that is
getting "swept under the rug". He voiced his appreciation
to Representative Stoltze for bringing this issue to the
State Legislature's awareness.
SHANE HERR, (TESTIFIED VIA TELECONFERENCE), ALASKA ORGANIC
ASSOCIATION, ORGANIC FARMER, WOLVERINE FARMS, PALMER,
encouraged passage of the bill. He stressed it would be
advantageous to the State of Alaska. Mr. Herr commented
that tourism capitalizes on Alaskan grown products. He
believed that there could be federal funding available to
help the State with the receipts. The farmers cannot
support the entire tab but would be supportive of a user
fee.
Representative Stoltze voiced his appreciation for those
people that testified. He recognized how labor intensive
the work they do is.
Representative Stoltze MOVED to report HB 226 out of
Committee with individual recommendations and with the new
adjusted fiscal note. There being NO OBJECTION, it was so
ordered.
HB 226 was reported out of Committee with "do pass"
recommendation and with a revised fiscal note by the
Department of Natural Resources.
AT EASE: 9:40 A.M.
RECONVENE: 9:45 A.M.
Co-Chair Harris noted that the Committee would adjourn until
the scheduled afternoon meeting. He voiced his concern for
House Finance Committee member Representative Joule for a
quick and safe recovery.
ADJOURNMENT
The meeting was adjourned at 9:47 A.M.
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