Legislature(2025 - 2026)ADAMS 519
04/29/2025 10:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Governor's Amendments by the Office of Management and Budget | |
| HB14 | |
| HB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 14 | TELECONFERENCED | |
| += | HB 123 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
April 29, 2025
10:06 a.m.
10:06:02 AM
CALL TO ORDER
Co-Chair Josephson called the House Finance Committee
meeting to order at 10:06 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative DeLena Johnson
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Lacey Sanders, Director, Office of Management and Budget,
Office of the Governor; Cori Mills, Deputy Attorney
General, Department of Law; Representative Will Stapp,
Sponsor; Representative Kevin McCabe, Sponsor.
PRESENT VIA TELECONFERENCE
Deb Etheridge, Director, Division of Public Assistance,
Department of Health; Brandon Spanos, Deputy Director, Tax
Division, Department of Revenue.
SUMMARY
HB 14 REPEAL CATASTROPHIC ILLNESS/MED ASSIST
HB 14 was REPORTED out of committee with nine "do
pass" recommendations and two "no recommendation"
recommendations and with one previously published
zero fiscal note: FN1 (DOH).
HB 123 TAXATION: VEHICLE RENTALS, SUBPOENAS
HB 123 was HEARD and HELD in committee for
further consideration.
OVERVIEW: GOVERNOR'S AMENDMENTS BY THE OFFICE OF MANAGEMENT
AND BUDGET
Co-Chair Josephson reviewed the meeting agenda.
^OVERVIEW: GOVERNOR'S AMENDMENTS BY THE OFFICE OF
MANAGEMENT AND BUDGET
10:06:57 AM
Co-Chair Josephson asked Ms. Sanders to provide the
presentation.
LACEY SANDERS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, provided a PowerPoint presentation
titled "FY 2026 Governor Amended Budget," dated April 28,
2025 (copy on file). She began on slide 2 titled "Updated
Fiscal Summary for FY 26. She indicated that the slide
included a chart depicting a fiscal summary incorporating
the recently submitted amendments for the FY 2025
supplemental items and the FY 2026 budget. It reflected the
updated Spring Revenue Forecast that was released in March
2025. She highlighted that with the addition of the
amendments; the Unrestricted General Fund (UGF) total
deficit was $165.1 million for FY 25 and an FY 26 budget
deficit of $1.649 billion.
Co-Chair Josephson asked about the number from regular
debt for FY 25. Ms. Sanders replied that she would follow
up on the question. She recalled that it was around over
$70 million.
Representative Stapp remarked that oil prices had been
dropping every day since the Spring Revenue Forecast was
released. He thought that it would be helpful to know a
ballpark estimate of the deficit on top of its prior
projection.
Ms. Sanders answered that she did not have the specific
number on hand. She recalled that in conversations with the
Department of Revenue (DOR) there were some refunds that
came in higher than anticipated for FY 25, which kept the
forecasted numbers stable. In addition, there were higher
oil prices in the earlier part of the year contributing to
the stability.
10:10:46 AM
Ms. Sanders moved to Slide 3 titled "Operating Governor's
Amend Requests." She reported that there were three labor
negotiations that had reached agreements. The first was
within the Department of Labor and Workforce Development
(DLWD) via a collective bargaining agreement between the
state and the Alaska Vocational Technical Center Teachers
Association (AVTECA). The contract represented a salary
schedule realignment and 5 percent cost of living
adjustment for its members. The second collective
bargaining agreement involved the Department of
Transportation and Public Facilities (DOT) between the
state and the International Organization of Masters, Mates,
and Pilots. Lastly, a collective bargaining agreement for
the University of Alaska between the state and the United
Academics Adjunct Faculty included a 2.75 percent increase
for FY 26. The total of all three agreements was $1.1
million UGF and other funding sources. In addition, there
was an increase of $3 million in Federal Receipt Authority
within the Department of Labor and Workforce Development
(DLWD). She explained that the increase in federal receipt
authority allowed the Alaska Workforce Investment Board
(AWIB) to receive a federal Department of Health and Human
Services, Office of Refugee Resettlement's formula grant
for Refugee Support Services. The grant was previously
administered by Catholic Social Services. A recent change
in federal guidance required the funds to be directed
through a state agency. As a result, the DLWD will
facilitate the grant award.
10:12:55 AM
Representative Tomaszewski asked how many more labor
contract agreements were outstanding. Ms. Sanders answered
that there were four outstanding agreements.
Co-Chair Josephson asked what four contracts were
outstanding. Ms. Sanders deferred the answer.
CORI MILLS, DEPUTY ATTORNEY GENERAL, DEPARTMENT OF LAW,
answered that the four ongoing union negotiations were:
Inlandboatman's Union of the Pacific, Marine Engineers
Beneficial Association, Alaska Public Employees Association
(APEA), and the Confidential Employees Association (CEA).
Ms. Sanders turned to slide 4 titled "Operating
Supplemental Requests." She reviewed the slide. She began
with Fund Capitalizations and reported that on April 18,
2025, the state was notified by the Federal Elections
Assistance Commission of a federal grant award for election
security amounting to $272.8 thousand and required a 20
percent state match of $54,6 thousand from the General Fund
(GF) capitalizing the Election Fund. She added that due to
the requirements that the state agree to the grant's
requirements by April 2025, it was proposed as a
supplemental item. She moved to Special Appropriations that
were comprised of FY 2025 Judgments, Claims, and
Settlements. She listed the four settlements totaling
$364.4 thousand:
• Alaska Quality Care, LLC - $40,000
• Bittner v. State of Alaska, Board of Game and
Commissioner, Department of Fish and Game -
$6,109
• SEACC v. State of Alaska, Department of Natural
Resources - $364 (additional authority; $68,586
included in 2-4-2025 supplemental request)
• State of Alaska, Department of Family & Community
Services v. Z.C. - $300,000
10:17:11 AM
Ms. Sanders advanced to Slide 5 titled "Capital
Supplemental Requests." She noted the item noted on the
previous slide related to the Fund Capitalization and the
Capital Budget item appropriating the grant funding from
the State Election Fund to the Division of Elections as
required by the Help America Vote Act.
Co-Chair Josephson cited the outstanding collective
bargaining agreements. He asked if the numbers would be
known prior to conference committee. Ms. Sanders answered
that the labor relations team continued to work on
outstanding labor contracts to seek agreement to the terms.
As soon as the information was available, the Office of
Management and Budget (OMB) would notify the legislature.
Ms. Sanders could not speak to the timing of the conclusion
of the negotiations.
Representative Galvin thought that the [budget] margins
were slim. She recalled receiving a "placeholder number"
for the agreements and asked for a high, middle, and low
estimate for the outstanding agreements. Ms. Sanders stated
that the conversations were confidential, and she did not
have the information. Representative Galvin suggested the
committee could have an offline conversation with the
director of the Legislative Finance Division (LFD) to
obtain a high number estimate in preparation of finalizing
the budget.
10:20:50 AM
Representative Johnson inquired about adding 50 positions
in DOT with receipt authority. Ms. Sanders asked for
clarification. Representative Johnson recalled that the
committee added 50 positions that would require federal
receipt authority. Ms. Sanders replied that she was unaware
and would follow up.
10:23:01 AM
AT EASE
10:23:34 AM
RECONVENED
Ms. Sanders would follow up on the five positions that were
added.
10:24:01 AM
AT EASE
10:24:19 AM
RECONVENED
HOUSE BILL NO. 14
"An Act repealing programs for catastrophic illness
assistance and medical assistance for chronic and
acute medical conditions."
10:24:23 AM
Co-Chair Foster asked the bill sponsor to introduce the
bill.
10:25:16 AM
REPRESENTATIVE WILL STAPP, SPONSOR, noted that a similar
bill had passed out of the committee and had passed the
house nearly unanimously in the previous year. He reminded
the committee that in the prior year the legislature
defunded the Catastrophic Illness and Chronic or Acute
Medical Conditions (CAMA) program because no Alaskans had
applied for the program for many years. He cited the FY
2025 Midyear Status Report by the Legislative Finance
Division for the Department of Health (DOH) that assessed
how the departments were executing the current year's
budget directives. He delineated that the question directed
to the department was whether DOH had encountered any
issues related to defunding the program. The agency
responded that it had not encountered issues nor received
any applications for assistance. He related that the
program began in 1986 and was designed to bridge a gap for
individuals who experienced a catastrophic event and were
too young or could not qualify for Medicare and Medicaid.
Medicaid expansion and other public assistance program
changes since 1986 rendered CAMA null and void. Currently,
Alaskans would likely "have better options on the federally
facilitated marketplace" than under the CAMA program, thus
the reason no Alaskans qualified for the program in the
prior 3 years.
10:27:30 AM
Co-Chair Foster asked for a review of the fiscal note.
DEB ETHERIDGE, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE,
DEPARTMENT OF HEALTH (via teleconference), reviewed the
published zero fiscal note for DOH (FN1(DOH) allocated to
Public Assistance Field Services. She read the analysis on
page 2 of the fiscal note as follows:
Since the implementation of the Medicaid Expansion
Group in 2015, most individuals now qualify for
Modified Adjusted Gross Income (MAGI) Medicaid,
eliminating the need for the Chronic and Acute Medical
Assistance (CAMA) program. Currently, no one is using
the service, as its only eligible populationlegal
immigrants who do not meet the five-year residency
requirement for Medicaidcan access alternative
options through the federally facilitated marketplace.
The Division can integrate the regulatory repeal of
CAMA into regular updates with minimal impact on
public assistance field services.
Co-Chair Foster asked what happened to the bill in the
prior year. Representative Stapp answered that the bill had
made it to the Senate Finance Committee in the previous
year and ran out of time. The committee had not heard the
bill. However, the deletion of the program's funding was
maintained in the budget. He thought the legislature
should pass the bill and carry on.
Representative Hannan stated the fiscal note showed that it
cost nothing to cut the program. She asked if it saved any
funding to cut the program. Ms. Etheridge responded that
there had been a limited number of individuals who
inadvertently applied for the program; nine had applied and
were ineligible. The fiscal note reflected the very little
change in the division's work. The program's elimination
did not save or cost any money.
Co-Chair Foster asked for the will of the committee
regarding moving the bill out of committee.
Representative Jimmie MOVED to REPORT HB 14 out of
committee with individual recommendations and the
accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
HB 14 was REPORTED out of committee with nine "do pass"
recommendations and two "no recommendation" recommendations
and with one previously published zero fiscal note: FN1
(DOH).
Representative Stapp thanked the committee.
HOUSE BILL NO. 123
"An Act relating to vehicle rental taxes; relating to
the issuance of subpoenas related to tax records; and
providing for an effective date."
10:32:15 AM
Co-Chair Foster invited the bill sponsor to provide an
explanation of the bill.
REPRESENTATIVE KEVIN MCCABE, SPONSOR, introduced the
legislation. He thanked the committee for hearing the bill.
He explained that HB 123 was about "fairness, clarity, and
relief." The bill cut the rental tax for traditional
vehicle rental companies and peer to peer rentals. The bill
cuts the tax from 10 percent to 9 percent for all passenger
vehicle rentals and cuts it even further to 7 percent for
other vehicle rental platform companies such as Turo. He
believed that it leveled the playing field for local
entrepreneurs who rented out their vehicles. The
legislation ended the tax collection by individuals and
shifted it to vehicle rental platforms who must now collect
and remit the tax. It protected vehicle rental platform
company hosts by prohibiting collection of back taxes on
pre-bill rentals, ending collection efforts from a time
when the rules were "unclear." He believed that HB 123
supported small businesses, encouraged competition, lowered
costs and fostered growth without raising new taxes. In
addition, it "cleaned up a legal mess" that existed since
2018 and would replace confusion with clear rules that
aligned with systems that were already working in places
like Anchorage. He concluded that the bill ensured steady
revenue and fairer rates and ended the current tax non-
compliance. He characterized it as a win for all Alaskans.
He thought that the bill provided a practical fix and
welcomed the committee's support.
10:35:21 AM
Co-Chair Foster asked for a review of the two fiscal notes.
BRANDON SPANOS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE (via teleconference), reviewed the published
indeterminate fiscal note for the Department of Revenue
(DOR) (FN1(REV) allocated to the Tax Division. He indicated
that the division lacked the data from platform rentals to
know how much a 7 percent tax would generate. However, the
historic tax for traditional rentals was known and the
revenue loss from 10 percent to 9 percent was displayed on
page 2 of the fiscal note. He deduced that in order for the
tax changes to be revenue neutral, vehicle rental platforms
would need to have a market share of 12.5 percent but if
the share was greater than 12.5 percent, then the total
change would generate revenue. He added that there were no
implementation costs.
Co-Chair Foster alerted the committee that there was only
one fiscal note.
Co-Chair Josephson asked for verification that DOR did not
know how many vehicles were in operation under Turo. Mr.
Spanos confirmed that the department did not know how many
vehicles were rented through an online platform. Co-Chair
Josephson asked if it was because Turo refused to provide
the information. Mr. Spanos answered in the affirmative. He
added that in a prior year DOR subpoenaed Turo for the
information and they did not comply. The judge determined
that DOR had the authority to subpoena the information but
not to enforce it outside of Alaska. The language in the
bill allowed the department to do so.
10:38:23 AM
Representative Stapp assumed that the department had to
have some type of ballpark tracking by business licenses at
the state level. Mr. Spanos replied that the department had
looked at business licenses and had its criminal
investigation unit try to determine who used the platform
and had identified about a handful, but there were more
than a handful of taxpayers renting their vehicles and the
attempt was unsuccessful. Representative Stapp knew there
were municipal governments in the state that had already
implemented a similar tax and had a clear understanding of
their revenues collected. He wondered whether they could
base revenue off of municipal records. Mr. Spanos answered
that the division had contacted the Municipality of
Anchorage, who had testified that the information was
confidential and could not share it. Representative Stapp
clarified that he was asking for an analysis only of the
amount of revenue collected. He thought that information
was accessible and asked whether DOR used it.
10:41:16 AM
Mr. Spanos responded in the affirmative. He relayed that
the department's economic research group had tried to
extrapolate the information but did not feel comfortable
using it, based only on the number and not the number of
vehicles.
Representative Galvin asked if Alaska stood to lose $1.74
million UGF if the bill passed and whether there was no
idea of how much revenue Turo would bring to the state. She
noted that Anchorage had an 8 percent vehicle rental tax.
She asked if the 9 percent tax would apply on top of the
municipal tax or replace the amount. Mr. Spanos asked for
clarification. Representative Galvin believed the bill
changed the 10 percent tax to 9 percent tax for a statewide
vehicle rental. She asked if by adding Anchorage's 8
percent tax it would decrease from 18 percent to 17
percent. Mr. Spanos answered that currently there was an 18
percent rental tax in Anchorage; 10 percent was allocated
to the state and 8 percent to the municipality, and the
bill would decrease the total to 17 percent. Representative
Galvin believed that the uncertainty was real and
established that the state would lose $1.74 million if the
bill passed. They did not know if it would be replaced with
the 7 percent tax on Turo. Mr. Spanos answered in the
affirmative. They did not know how much the online 7
percent tax would generate.
10:44:43 AM
Representative Hannan cited the 12.5 percent market share
estimate that would make the bill revenue neutral. She
inquired whether Representative McCabe had any sense of the
scale of peer to peer rentals in the state. Representative
McCabe answered in the affirmative. He expounded that Turo
was a private company and did not have to report the same
information as a company listed on the stock exchange. The
platforms were different than a regular rental car company.
He shared that Turo informed him that the tax collected on
cars rented in Anchorage would cover the loss of one
percent state tax and everything outside of Anchorage would
increase revenue. His idea with the bill was twofold; he
wanted the subpoena powers provision and the provisions
protecting Alaskans from tax collection on retroactively
renting cars on Turo from the past ten years. The bill
would protect those Alaskans. He felt that the situation
was currently a mess. The bill was his intent to solve
the problem. He relayed that the bill had been vetoed the
past year by the governor because he believed that it
increased taxes on TURO. He clarified that the Turo owners
already owed the tax. He viewed the bill as a revenue
neutral tax cut.
10:48:23 AM
Representative Allard asked if the bill would promote more
individuals wanting to be on the Turo platform because the
state law would be clear. Representative McCabe answered in
the affirmative. He believed that everything being done on
the platform streamlined the process and encouraged more
people to rent through it.
Representative Bynum noted that the bill encompassed any
online rental platform. Representative McCabe responded in
the affirmative. Representative Bynum indicated that
currently the platforms had the ability to collect the tax,
but the bill was necessary to provide the statute in order
for them to collect it. Representative McCabe responded
affirmatively. He stressed that the measure was necessary
to solidify tax collection.
10:51:09 AM
Co-Chair Josephson referenced a statement by the bill
sponsor that there was an agreement between various sectors
of the car rental industry. Representative McCabe answered
in the affirmative and elaborated that the parties had
reached a gentleman's agreement". He added that the major
traditional rental car companies would not sue for equal
protection. He reiterated that his sole purpose for
sponsoring the bill was to protect Alaskans that had been
renting through platforms and would not be subject to 10
years of back taxes. Co-Chair Josephson recalled that the
previous bill was a 10 percent and 8 percent tax, and the
current bill was 9 percent and 7 percent. Representative
McCabe replied in the affirmative.
Representative Stapp thanked the sponsor for bringing the
bill forward. He shared that he had examined the financial
information from Anchorage's vehicle rental tax and
discerned that a one percent reduction in the vehicle
rental tax would be offset by the tax on rental platforms.
He thought if they were going to have a tax structure it
was necessary to think about how to treat different
entities equally and having one similar entity not subject
to a tax created an "artificial structure." He appreciated
the bill.
10:53:38 AM
Representative Johnson had done some similar research. She
strongly supported the bill. She felt it was fair, ending
the confusion regarding taxes, and offered tax forgiveness.
She cited a 2020 newspaper article about a 5 percent
increase in vehicle rentals including platforms in
Anchorage, which brought in $760 thousand. She spoke to
other municipal governments' experience collecting the
vehicle rental tax. She deduced that the bill would create
revenue and thanked the sponsor.
Representative Hannan agreed with Representative Stapp that
the same tax should be equal for all entities in a sector.
She thought perhaps they should extend it to the area of
nicotine. She declared that she had been an advocate for a
vehicle rental platform tax for years. She pointed to page
2 line 16 of the bill:
(c) A vehicle rental platform that arranged or
executed more than 200 transactions in the state
Representative Hannan requested confirmation on the record
that the provision pertained to the platform having 200
transactions and not an individual vehicle.
10:56:41 AM
Representative McCabe answered in the affirmative.
Representative Hannan inquired that the same tax applied to
one or many vehicles being rented on a platform.
Representative McCabe answered in the affirmative.
Representative Hannan appreciated that Representative
McCabe was taking another stab at the bill. She wished
there was not a decrease in the tax and noted that the
prior bill was vetoed. She hoped that HB 123 would pass.
Representative Bynum referenced statements concerning those
not paying the vehicle rental taxes. He thought that there
were some who intentionally did not pay, however, he
believed that many were not aware of the state tax. He
clarified that he did not think all of the individuals
using the platform were trying to cheat the system.
Representative McCabe agreed with Representative Bynum's
deduction. He believed the majority of the people using
Turo called a "host" were unaware they needed to collect a
state tax. The bill tried to protect them and correct the
issue.
Representative Galvin informed the committee that Turo had
a complicated system in terms of how it charged for car
rentals. She elucidated that they charged a trip fee
ranging between 2.5 percent and 100 percent. Other fees
were based on vehicle value, advanced booking time, trip
duration, etc. and were "regionally" specific. Alaska
offered Turo a lot of different ways to twist and turn
fees. She asked whether it was the sponsor's intention to
collect a flat tax and none of the extra levers would be
pulled Representative McCabe responded in the
affirmative.
11:00:37 AM
Representative Galvin asked given the lack of uncertainty
regarding recovering lost tax revenue, whether a sunset
date should be included. She deemed that it would enable a
reevaluation of the tax structure if there was a loss to
the state. Representative McCabe answered that he had
thought about reevaluating the tax in two to three years.
He noted that there were other tax percentage disparities
in the vehicle rental system such as for motor home rentals
that was 3.5 percent. However, he did not believe the bill
needed a sunset to accomplish changes. Representative
Galvin emphasized that it was difficult to change taxes in
the state. She understood Representative McCabe's point of
view but wanted to proceed with caution due to the tight
budget circumstances. She recounted that mining taxes had
not changed in 50 years.
11:03:50 AM
Representative Stapp pointed to the reduction in the
overall tax. He determined that the legislation granted
more flexibility to municipalities. Representative McCabe
answered that the result was an unintended consequence and
not planned.
Co-Chair Foster set an amendment deadline for Friday May 2,
5:00 p.m.
11:06:06 AM
Representative Johnson noted that the bill would become
effective immediately. She guessed that it might take time
for the department to implement the tax. She wondered about
the timing of the current effective dates.
Representative McCabe was unsure about changing dates. He
remarked that the division already collected legacy rental
taxes and Turo was set up for the Anchorage tax. He
believed tax collection was already in place.
Representative Johnson offered that she was referring to
statements in the fiscal note and wanted to bring it to the
sponsor's attention.
Representative Galvin wondered if someone who rented
vehicles on an online platform opened a brick and mortar
business with many vehicles what percent tax would it be
subject to. Representative McCabe could not answer the
question. He thought that the bill was not designed for
that type of business. It was more for individual car
owners who wanted to rent their vehicles on a platform.
Representative Galvin knew there were individuals who
rented five vehicles on platforms and thought it was
unfair. She suggested that the members consider lowering
the number for traditional rentals paying a larger
percentage. She thought it could become more complex, and
definitions were necessary.
11:10:34 AM
Representative Bynum shared that he pondered the same
question as Representative Galvin. He informed the
committee that larger brick and mortar companies had a
different insurance structure than platforms where
insurance was more costly. He noted that there was
different cost models associated with using the platforms.
He cited page 2, line 29 of the bill that stated:
(2) "vehicle rental platform" means an application,
website, offline 30 booking service, or other system,
whether online or offline, offered or used by a 31
vehicle rental platform company that enables the
prearrangement of motor vehicle rentals with motor
vehicle owners that are not related by common
ownership or control with the vehicle rental platform;
Representative Bynum pointed out that the vehicle owner was
separate from the platform owner.
Representative Galvin appreciated the nuance that was
pointed out.
Representative Jimmie requested clarification that Turo
already paid sales tax to Anchorage. Representative McCabe
answered in the affirmative. Representative Jimmie inquired
whether other communities would have to set up a sales tax
collection to receive payment of the tax. Representative
McCabe replied in the affirmative and added that the bill
offered municipalities the flexibility to do so if they had
the tax structure.
Representative McCabe thanked the committee.
Representative Bynum asked several procedural questions.
Co-Chair Foster discussed future meeting agendas.
HB 123 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the following
meeting.
ADJOURNMENT
11:15:30 AM
The meeting was adjourned at 11:15 a.m.
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