Legislature(1995 - 1996)

04/11/1995 08:07 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
             HOUSE STATE AFFAIRS STANDING COMMITTEE                            
                         April 11, 1995                                        
                           8:07 a.m.                                           
 MEMBERS PRESENT                                                               
 Representative Jeannette James, Chair                                         
 Representative Scott Ogan, Vice-Chair                                         
 Representative Joe Green                                                      
 Representative Brian Porter                                                   
 Representative Caren Robinson                                                 
 Representative Ed Willis                                                      
 MEMBERS ABSENT                                                                
 Representative Ivan Ivan                                                      
 COMMITTEE CALENDAR                                                            
 SB 92:      "An Act requiring that, in addition to its operating              
             budget, all activities of the Alaska Housing Finance              
             Corporation are subject to the Executive Budget Act."             
             PASSED OUT OF COMMITTEE                                           
 *HB 241:    "An Act relating to the use of a candidate's campaign             
             HEARD AND HELD                                                    
 HB 232:    "An Act establishing an economic development tax                   
             credit; and providing for an effective date."                     
             PASSED OUT OF COMMITTEE                                           
 (* First public hearing)                                                      
 WITNESS REGISTER                                                              
 JOHN BITNEY, Legislative Assistant                                            
  to Representative Terry Martin                                               
 Alaska State Legislature                                                      
 State Capitol Building, Room 502                                              
 Juneau, AK 99801-1182                                                         
 Telephone: (907) 465-3783                                                     
 POSITION STATEMENT:  Testified on SB 92                                       
 DAN FAUSKE, Corporate Executive Officer                                       
 Alaska Housing Finance Corporation                                            
 P. O. Box 101020                                                              
 Anchorage, AK 99502                                                           
 Telephone: (907) 564-9326                                                     
 POSITION STATEMENT:  Testified on SB 92                                       
 REPRESENTATIVE CON BUNDE                                                      
 Alaska State Legislature                                                      
 State Capitol Building, Room 108                                              
 Juneau, AK 99801                                                              
 Telephone: (907) 465-4843                                                     
 POSITION STATEMENT:  Sponsor Statement for HB 241                             
 BROOKE MILES, Juneau Branch Administrator                                     
 Alaska Public Offices Commission                                              
 240 Main Street, Room 201                                                     
 Juneau, AK 99801                                                              
 Telephone: (907) 465-4864                                                     
 POSITION STATEMENT:  Testified on HB 241                                      
 PREVIOUS ACTION                                                               
 BILL:  SB  92                                                               
 SHORT TITLE: AHFC SUBJECT TO EXEC. BUDGET ACT                                 
 JRN-DATE     JRN-PG               ACTION                                      
 02/21/95       349    (S)   READ THE FIRST TIME - REFERRAL(S)                 
 02/21/95       349    (S)   STA, FIN                                          
 02/28/95              (S)   STA AT 03:30 PM BELTZ ROOM 211                    
 02/28/95              (S)   MINUTE(STA)                                       
 03/01/95       436    (S)   STA RPT  4DP                                      
 03/01/95       436    (S)   ZERO FISCAL NOTE (REV #1)                         
 03/15/95       617    (S)   FIN RPT  6DP 1NR                                  
 03/15/95       617    (S)   PREVIOUS ZERO FN  (REV #1)                        
 03/15/95              (S)   FIN AT 09:00 AM SENATE FINANCE 532                
 03/15/95              (S)   MINUTE(FIN)                                       
 03/16/95              (S)   RLS AT 12:00 PM FAHRENKAMP RM 203                 
 03/16/95              (S)   MINUTE(RLS)                                       
 03/17/95       664    (S)   RULES TO CALENDAR  3/17/95                        
 03/17/95       666    (S)   READ THE SECOND TIME                              
 03/17/95       666    (S)   ADVANCED TO THIRD READING UNAN                    
 03/17/95       666    (S)   READ THE THIRD TIME  SB 92                        
 03/17/95       666    (S)   PASSED Y18 N- E2                                  
 03/17/95       679    (S)   TRANSMITTED TO (H)                                
 03/20/95       802    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/20/95       802    (H)   STATE AFFAIRS, FINANCE                            
 03/30/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 03/30/95              (H)   MINUTE(STA)                                       
 04/04/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 04/04/95              (H)   MINUTE(STA)                                       
 04/04/95              (H)   MINUTE(STA)                                       
 04/06/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 04/11/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 BILL:  HB 241                                                                
 SPONSOR(S): REPRESENTATIVE(S) BUNDE,Rokeberg                                  
 JRN-DATE     JRN-PG               ACTION                                      
 03/08/95       642    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/08/95       642    (H)   STATE AFFAIRS, FINANCE                            
 03/10/95       713    (H)   COSPONSOR(S): ROKEBERG                            
 04/06/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 04/11/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 BILL:  HB 232                                                                
 SHORT TITLE: ECONOMIC DEVELOPMENT TAX CREDIT                                  
 SPONSOR(S): REPRESENTATIVE(S) KOTT                                            
 JRN-DATE     JRN-PG               ACTION                                      
 03/06/95       590    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/06/95       590    (H)   ECD, STA, L&C, FINANCE                            
 03/21/95              (H)   ECD AT 09:00 AM CAPITOL 17                        
 03/21/95              (H)   MINUTE(ECD)                                       
 03/22/95       850    (H)   ECD RPT  CS(ECD) 6DP                              
 03/22/95       850    (H)   DP: KELLY,MOSES,MACLEAN,KOHRING                   
 03/22/95       850    (H)   DP: SANDERS, ROKEBERG                             
 03/22/95       850    (H)   INDETERMINATE FISCAL NOTE (REV)                   
 03/22/95       850    (H)   FISCAL NOTE (DCED)                                
 04/04/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 04/04/95              (H)   MINUTE(STA)                                       
 04/06/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 04/11/95              (H)   STA AT 08:00 AM CAPITOL 102                       
 ACTION NARRATIVE                                                              
 TAPE 95-46, SIDE A                                                            
 Number 000                                                                    
 CHAIR JEANNETTE JAMES brought the meeting to order at 8:05 a.m. and           
 announced that the Anchorage LIO was on teleconference, listening.            
 She asked who the person was who would be testifying on SB 92.                
 SB 92 - AHFC SUBJECT TO EXEC. BUDGET ACT                                    
 Number 019                                                                    
 JOHN BITNEY, Legislative Assistant to Representative Terry Martin,            
 introduced himself as the staff to the Chairman of the Legislative            
 Budget and Audit Committee.  As he stated, at their last LBAC                 
 meeting a testifier from the Department of Revenue raised some                
 concerns about SB 91.  They had some proposed language to submit to           
 the House State Affairs Committee that would address their concerns           
 about exemptions, procedures and financing, and mechanisms that               
 would allow them to take advantage of bonding opportunities in the            
 market, for one.                                                              
 CHAIR JAMES said this bill had a blank committee substitute (CS),             
 and asked if everyone had a copy of it.                                       
 Number 059                                                                    
 REPRESENTATIVE SCOTT OGAN asked if Mr. Bitney could give an                   
 analysis of the CS, and the changes.                                          
 MR. BITNEY explained that the language of the CS was prepared by              
 the Administration, or a representative of the Governor's office.             
 He said he was not involved in drafting the language, so he                   
 encouraged the committee to let the drafters speak on that; they              
 could explain it better.                                                      
 Number 070                                                                    
 CHAIR JAMES noted that she had requested the work draft.  The                 
 changes to the work draft on page 2, came from the Administration.            
 This was to give an exemption to normal business routines.                    
 MR. BITNEY said there are exemptions that begin on line 5, page 2.            
 They defined what is on the outside of the procedures of the                  
 Executive Budget Act for the corporation.  Line 7 signifies the               
 things the representative from the Department of Revenue had                  
 pointed out that would allow them to take advantage of various                
 bonding opportunities in the bond market.  The corporation's                  
 borrowing of money is exempted from the review procedures of the              
 Executive Budget Act.  Line 11 asks basically that the loan                   
 programs available for long programs, where no subsidy is provided,           
 be on the outside.  Section C is exempted from multi-family                   
 projects, where they take advantage of various tax credit                     
 opportunities, or arbitrage earnings.  Arbitrage earnings are                 
 purchases of securities on one market for immediate resale on                 
 another market in order to profit from a price discrepancy.                   
 REPRESENTATIVE OGAN asked if the sponsor agreed with the                      
 MR. BITNEY answered that the sponsor was there at the pleasure of             
 the Labor and Audit Committee.  The concerns brought up there were            
 the concerns that the committee brought up at the last hearing.               
 CHAIR JAMES said for the record, that Representative Caren Robinson           
 arrived at 8:10 a.m.                                                          
 REPRESENTATIVE JOE GREEN said that he moved they adopt the unmarked           
 House CS for SB 92 as the working copy.  There being no objections,           
 the unnumbered CS was adopted.                                                
 Number 160                                                                    
 DAN FAUSKE, Chief Executive Officer, Alaska Housing Finance                   
 Corporation, testified in support of SB 92.  He said it represented           
 a workable solution for them.  The bill considers issues, such as             
 subsidized mortgage programs, that raised such concern.  It does              
 not tie their hands in reference to entering the capital market, to           
 continue the bond portfolio in the loan programs.  He saw the                 
 language as healthy, and said it was a situation that the AHFC                
 could live with.  It also met requirements and needs that the                 
 legislature stated.                                                           
 REPRESENTATIVE GREEN said when they last met they discussed item              
 "C," which was the $10 million, and his recollection was that Mr.             
 Fauske did not have any problem with that either.                             
 MR. FAUSKE concurred that it was not something they couldn't live             
 with.  He said the original statement applied to bonded                       
 indebtedness.  In a bond portfolio $10 million would be rather                
 restrictive.  The new language is fine.                                       
 Number 180                                                                    
 CHAIR JAMES recalled that a resolution was drafted for a title                
 change, but it was not in her folder.  Her committee aide                     
 questioned if a title change was necessary, and the consensus of              
 the committee was that it was necessary.  She asked her aide to               
 check that out.                                                               
 REPRESENTATIVE CAREN ROBINSON wondered if AHFC would prefer that              
 things stay as they are.  She asked if operations would be better             
 if things remained as they were, or if this legislation would help            
 their operation.  She said Juneau builders were unhappy with this             
 bill originally.                                                              
 MR. FAUSKE said his personal assessment was that the legislation              
 would help to enhance relations with the legislature.  It would               
 make his job easier, so he viewed it as a win-win situation.  It              
 puts everyone in a situation where healthier dialogue can happen,             
 so that will be good.                                                         
 REPRESENTATIVE ROBINSON brought up that the local Juneau Home                 
 Builders Association did not like this bill originally, and                   
 wondered if Mr. Fauske would think they would be happy with the               
 MR. FAUSKE said he thought they should like the changes.  He felt             
 this legislation allowed a great deal of flexibility.  When they              
 get into projects of over $10 million, which are few, so they do              
 not come before them very often.  There is a long lead time to give           
 them adequate time to get before their constituency and the                   
 legislature for dialogue.  It changes the operation style somewhat,           
 but not enough to impede the organization's ability to carry out              
 its missions.  Mr. Fauske said it would be all inclusive in the               
 sense that many of the programs fall under the capital budget as              
 representative of the Family Home Loan Program.  He thought it                
 would increase the oversight, and also, it would not lead to                  
 situations as in the past, such as the 5 percent on the subsidies.            
 It removes the subsidized loan programs.  That program created                
 confusion and concern.  It strengthens the legislature's oversight            
 activity, or review of projects, so the changes are good.  Big bond           
 issues are reviewed and those are not impaired by this.                       
 CHAIR JAMES said she would like to move the bill out of committee             
 and asked for a motion.                                                       
 Number 252                                                                    
 REPRESENTATIVE JOE GREEN moved that they pass the House CS for SB
 92 as amended out of committee, with individual recommendations and           
 attached fiscal note.  He was referring to the CS they adopted as             
 the working draft.  Hearing no objections, the motion passed.                 
 REPRESENTATIVE PORTER moved to pass HCR unnumbered, 9-LS1029/A,               
 dated 4/3/95.  There being no objections, the motion passed.                  
 CHAIR JAMES said that the resolution for the title change would               
 also be passed out.                                                           
 HB 241 - NO PERSONAL USE OF CAMPAIGN ACCOUNT                                
 Number 275                                                                    
 REPRESENTATIVE CON BUNDE, sponsor of HB 241, provided his sponsor             
 statement to the committee.  He said his least favorite part of               
 public service is having to raise money for campaigning.  Another             
 concern he had was how people have reacted to fund raising.  Many             
 will gladly support their candidates, yet they resent the idea                
 that, at some point, the surplus funds could be taken as personal             
 income. Citizens who contribute to campaigns or to nonprofit                  
 organizations usually want to know where their money is expended.             
 So, HB 241 will increase the accountability of candidates funds,              
 and this will facilitate and increase the publics trust.                      
 REPRESENTATIVE BUNDE explained that this bill provides new choices            
 for the disposal of surplus campaign funds after a candidate elects           
 not to run for office again.  These choices are not currently                 
 available to them.  Contributions given to candidates, whether                
 before, during or after campaigns, are given by people who want               
 that candidates representation; also, they wish to participate in             
 representative government.  Campaign funds are raised annually from           
 the same supporters, and it can result in a surplus of funds that             
 can be used in future campaigns, or taken as personal income if the           
 candidate elects not to run again.  HB 241 provides for surplus               
 funds to be given to charities, repaid to contributors, contributed           
 to other candidates, political parties or groups supporting ballot            
 propositions, or given to the general fund.  It cannot be taken as            
 personal income.  This legislation would change what has been                 
 formerly allowed in regard to surplus funds.  The use of campaign             
 funds as personal income or as office allowance funds will not be             
 an available choice for the disposal of surplus funds.  He added              
 that he doubted anyone in the room has surplus campaign funds, but            
 it has been known to happen.                                                  
 REPRESENTATIVE GREEN brought out, first, that this may not hold for           
 candidates who ran unopposed in the last election.  Representative            
 Green added that it could be a campaign strategy.  He pointed to              
 Item four, where it said the interest must be left in the account,            
 which, in most cases, is reportable as taxable income.  He asked if           
 Representative Bunde was saying to leave the money in, but pay the            
 tax on the interest.                                                          
 REPRESENTATIVE BUNDE said if a candidate chose to end his campaign            
 there is no provision against repaying loans to your campaign.  As            
 for the interest he did not think it was reportable for tax                   
 purposes.  As long as the money remained in the account and was not           
 used as personal income the candidate did not have to pay tax on              
 CHAIR JAMES said that somebody has to pay.  A social security                 
 number is on the account, and whomever the social security number             
 belongs to is responsible to pay taxes on the interest.                       
 REPRESENTATIVE BUNDE thought that as long as the accrued interest             
 is left in the campaign account, and it is used exclusively for               
 campaign activity, it is not taxable.                                         
 REPRESENTATIVE PORTER agreed. If portions of the total are                    
 withdrawn for personal use it would then be taxable.  He believed             
 the interest is treated as a campaign contribution.                           
 REPRESENTATIVE BUNDE pointed out that this legislation does not               
 change the existing law; candidates are required to leave the                 
 interest in the account now.                                                  
 CHAIR JAMES stated that the interest on that account will be                  
 reported to the candidate on a 1099 tax form.                                 
 REPRESENTATIVE GREEN concurred, and stated that the interest on the           
 account, wherever they have the funds, is reported as income.                 
 CHAIR JAMES asserted that they would have to report the amount of             
 interest with an explanation of why it is not taxable.                        
 REPRESENTATIVE PORTER agreed that was true; however, he would have            
 to check it out.  His recollection was that interest is treated as            
 a campaign contribution and is not taxable.                                   
 Number 385                                                                    
 REPRESENTATIVE BUNDE told the Chair he just had his taxes done, and           
 he was told by the CPA who does the taxes, that they wanted to know           
 what the funds are.   It is reported as income kept in a campaign             
 account, but there is no tax liability to the candidate.  He                  
 stressed that HB 241 does not change the existing regulation on tax           
 Number 397                                                                    
 REPRESENTATIVE PORTER had a question about the language on the                
 first page of the bill where it says that the candidate can give              
 the surplus funds to charity.  He recommended they define                     
 charity. It would eliminate candidates from naming family members             
 and friends as charity cases.                                                 
 REPRESENTATIVE BUNDE agreed he had a good point.                              
 CHAIR JAMES mentioned a 501C3 definition of qualifying charity.               
 REPRESENTATIVE PORTER asked about last section of the bill,                   
 beginning at the end of line 22.  It says:  The Campaign shall                
 report the disposal of any item worth at least $1000 at the time of           
 acquisition.  Representative Porter also asked to whom this item              
 must be reported.                                                             
 Number 420                                                                    
 REPRESENTATIVE BUNDE said it was referring to a purchase costing              
 more than $1000, then disposing of it later.  It was brought out              
 that the reports before them were referring to APOC.  He added that           
 building public confidence and filling loop holes to reduce                   
 opportunities to pocket money when reselling of high ticket items             
 after going out of office, is what they are talking about.                    
 REPRESENTATIVE ROBINSON wondered if there had been a major problem            
 with candidates pocketing money.  She was not fighting this bill,             
 but she wanted to stress that not everyone could afford to take six           
 months off work to campaign for office.  Some people are less                 
 privileged and do not have political money to finance them.  She              
 urged the committee to be careful about what they are saying, and             
 to be sure they really wanted such tight restrictions for                     
 candidates leaving office.  She would not like to see candidates              
 taking political money illegally, but she thought it should be up             
 to the people contributing their money.  Some people need more help           
 than others during an election.                                               
 Number 477                                                                    
 REPRESENTATIVE BUNDE said they seemed to be talking about two                 
 different kinds of people.  Nothing in this legislation would                 
 prevent a new person running from paying for lunches and so forth.            
 This bill aimed at a different kind of person, namely persons who             
 have achieved power and influence.  Contributors often do not feel            
 they have the flexibility to contribute or not. If they do not                
 there might be retribution.  Even if there is not, the concern is             
 there.  He pointed out that ongoing campaign expenses are not                 
 addressed.  Also, when someone decides not to run for office again,           
 there is a question about how to dispose of that money, such as a             
 surplus of $60 or $70 thousand. Contributors normally do not intend           
 for their contributions to be used as income.                                 
 Number 524                                                                    
 REPRESENTATIVE ROBINSON spoke of herself when she was a new                   
 candidate, and at the end of the campaign she had a surplus of $2             
 thousand.  She lost the campaign and was struggling to find a job.            
 As she understood it, she could not use that surplus of $2 thousand           
 to live on until she found work.                                              
 REPRESENTATIVE BUNDE stated that she was correct in her assumption            
 that she could not use the money.                                             
 REPRESENTATIVE ROBINSON did not have a problem with saying a                  
 candidate whos been in office for five, ten or twelve years, with             
 a surplus of $60 thousand, cannot take all of that as personal                
 income.  It could go back to a political party of their choice, a             
 particular charity of their choice, or back to the contributors.              
 Her concerns were the first time people who are just getting                  
 started.  Running for office is an incredible strain on the family,           
 even for families with two incomes.                                           
 Number 550                                                                    
 REPRESENTATIVE BUNDE concurred.  He realized that campaigning is a            
 strain and he understood Representative Robinsons concern.  To                
 open the door, however, to personal income, and to those people who           
 are accustomed to a life style that is several hundred thousand a             
 year, might say they should be allowed to take extra $60 thousand             
 just as the less privileged person would about taking $2 thousand.            
 REPRESENTATIVE ROBINSON wondered what would stop anyone from                  
 pocketing surplus funds.  She did not believe this bill would stop            
 REPRESENTATIVE BUNDE said this legislation will not stop this, yet            
 if candidates continue to raise funds and have surplus funds it               
 will go into the political process somewhere and not into their               
 pocket.  He thought they might become less ambitious, perhaps,                
 about fund raisers.                                                           
 Number 610                                                                    
 REPRESENTATIVE OGAN said he was supportive of this bill.  He said             
 he knew some long time legislators who retired with significant               
 amounts of money in their campaign accounts.  He is interested to             
 see the next APOC report.  He said they would spend what they had             
 last year, then what they raised this year kept building up for               
 retirement.  This is a good bill, since it will end that activity.            
 REPRESENTATIVE PORTER said, for the record, if the bill passed it             
 would capture existing campaign accounts.  It would not start with            
 campaign contributions after the effective date.                              
 Number 661                                                                    
 CHAIR JAMES said she is one who has worked on reduced government.             
 What we do in this country is make laws to fit the few and inhibit            
 the many.  We do it consistently.  She said we also have the                  
 attitude that candidates and legislators are cleaning up.  People             
 complain about the per diem and say legislators should not take it.           
 Some people probably do not need the higher per diem rate, while              
 others do.  The solution they think is to put everyone at the same            
 level, and in the process they could squeeze people out from the              
 bottom.  She had concerns about that.  She would like to see how              
 big of an infraction it is, and if it inhibits the political                  
 process or makes it dirtier.  Chair James reflected on what                   
 Representative Robinson said, and she would visualize a political             
 process opened to everyone, whether or not they are financially               
 able.  A campaign takes its toll, whether the candidate wins or               
 loses, and her belief was that after a person has been in the                 
 process for a while, and they have accumulated a war chest, that it           
 should be treated differently.                                                
 CHAIR JAMES noted on the 1994 APOC report that only one was very              
 large.  However, she said she could see a person with a family                
 being down and out by the end of the campaign.  She did not feel              
 comfortable with that, and could not take a position one way or               
 another on the bill.  She said she was happy to move the bill out,            
 but she had concern about it.  It is the same old practice of                 
 getting to a few and then inhibiting the many.                                
 REPRESENTATIVE OGAN shared Chair James concerns.  He ran one of               
 the most frugal campaigns, maybe in history.  He spent a total of             
 $5 thousand to get elected.  He is not a rich man; he is a working            
 man with a small business.  If he had not won, he would probably              
 still be working to catch up.  So, he was wondering if setting some           
 limits would be workable.  There are long-time political types that           
 run year after year; they hold fund raisers and take in huge                  
 donations and build up a retirement account.  Representative Ogan             
 wondered if they should consider some kind of amendment to set a              
 dollar amount.  It could allow people on the lower end who run for            
 office the ability to recover some expenses for time out of work.             
 Number 633                                                                    
 REPRESENTATIVE BUNDE spoke about the necessity for restrictions.              
 He knew of people who bought tires and other things that he might             
 not consider a normal campaign expense, but this would defray the             
 impact the actual campaign makes.  As for reimbursements, it is a             
 more difficult situation.  To get to that we need the Federally               
 Financed Campaign where everyone gets the same amount, and it comes           
 through taxes.  Most people will not be impacted by this                      
 legislation.  Some people might even be negatively impacted.  The             
 goal is to re-establish public confidence in the process, and to              
 change the perception some have that we are all getting rich here.            
 CHAIR JAMES wished to add that although she has been here only                
 three years, she could personally say that you give up a lot to be            
 in this position.  It is hard to say if a balance in a campaign               
 account is not worth it for what you give up.  She is cautious                
 about this, because she doesnt want anyone to be hurt.                        
 Number 678                                                                    
 REPRESENTATIVE PORTER said he recently got a sheet with transfers             
 to legislative office account.  He asked if this bill would                   
 preclude that.                                                                
 REPRESENTATIVE BUNDE answered Yes.   The reason is that                       
 legislative office accounts can be personal income.  There are two            
 ways they can take their office account money: take it and verify             
 it with receipts, or take it in a lump and pay taxes on it.  That             
 way it is personal income.                                                    
 TAPE 95-46, SIDE B                                                            
 Number 000                                                                    
 REPRESENTATIVE BUNDE said that only when you stop running are you             
 required to define the money in a campaign account as personal                
 REPRESENTATIVE ROBINSON did not see that they had a definition for            
 personal income.  During the campaign she used a very small                   
 percentage of her office for her business.  So, she took a                    
 percentage of that and used the money from the campaign to pay for            
 it.  The office, at that time, was 100 percent campaign.  She                 
 wondered if that would be perceived as personal.                              
 REPRESENTATIVE BUNDE said that it would not.  This would apply when           
 a candidate stopped running.                                                  
 Number 042                                                                    
 REPRESENTATIVE ROBINSON still thought they should define personal             
 income.  Also, pertaining to what Representative Porter had said,             
 she was trying to spend as little as possible of her $6 thousand              
 and it is disappearing very quickly.  She is only responding to               
 constituents who write, who want information on different bills.              
 REPRESENTATIVE PORTER thought they decided that charities should be           
 defined, and he asked the sponsor to consider adding a definition             
 of personal income that would perhaps exclude money spent for                 
 legitimate campaign or legislative activities.                                
 REPRESENTATIVE BUNDE asked if they could defer to APOC.                       
 Number 071                                                                    
 BROOKE MILES, Juneau Branch Administrator, Alaska Public Offices              
 Commission, said the Commission had the opportunity to review HB
 241, and thanked the Chair for the opportunity to participate.  The           
 Commission had recommendations concerning the original draft,                 
 having worked with the sponsors staff, and they came forward with             
 the CS that is in the packets.  One idea the commission had that              
 the sponsor did not embrace was to permit transfers to an office              
 account, but to require reporting expenditures from the transfers             
 on their Campaign Disclosure Report.  Currently, a candidate only             
 reports the transfer on their expenditure schedule to an office               
 account.  There is no follow up reporting on how the funds were               
 expended.  That would tighten up that issue if the committee would            
 prefer that recommendation be put back in.  Ms. Miles said the                
 commission supports this legislation.  Nationwide, in all of the              
 states and at the federal level, there have been reform acts                  
 regarding the personal use of campaign funds.  This legislation               
 simply prohibits taking surplus funds as personal income when a               
 candidate is no longer going to be an active candidate.                       
 REPRESENTATIVE PORTER asked if his impression was correct, that a             
 candidate could take funds as personal income.                                
 Number 134                                                                    
 MS. MILES answered that the campaign disclosure law would not                 
 prohibit making expenditures from the campaign account, which may             
 be construed as personal use.  Each expenditure must be listed with           
 an explanation on the campaign disclosure, however.  Candidates               
 must list expenditures by date, check number and payee.  This bill            
 would not prohibit a single mother from paying rent or buying                 
 groceries, for instance during the course of her campaign, though             
 she would be required to disclose this on her report (i.e.,                   
 Foodland, for groceries).                                                     
 REPRESENTATIVE PORTER asked if Ms. Miles knew what other states               
 provide in this area of law.                                                  
 MS. MILES said she was not familiar with what each state provides             
 in this area.  She directed Representative Porter to the sponsors             
 staff, saying they could probably supply him with summaries.                  
 Number 146                                                                    
 REPRESENTATIVE OGAN asked if Ms. Miles was aware of anyone who                
 retired and where there were major withdrawals from campaign                  
 accounts used as personal income.                                             
 MS. MILES answered, Yes.  Candidates have retired with over $100              
 thousand in their campaign accounts, which they took as personal              
 Number 175                                                                    
 REPRESENTATIVE ROBINSON asked about the report Ms. Miles gave them,           
 which Ms. Miles said was a jumbled list, and it listed the balances           
 in campaign accounts of 60 unidentified legislators.  She also                
 reiterated her suggestion that they add a definition of personal              
 MS. MILES said in statute there are existing definitions of                   
 personal income that could be incorporated.                                   
 REPRESENTATIVE ROBINSON wondered if the Commission discussed the              
 person who loses a campaign and has to use some of the finances               
 while running to live, then had a $2 thousand surplus at the end of           
 the campaign and needed to use that to get going again.  She                  
 wondered if it was discussed or if it was more on the large left-             
 over amounts after a person has been around for a long time.                  
 MS. MILES said this was not discussed.  Many issues were discussed            
 in past times, including the personal use of campaign funds, which            
 is much more complex and controversial.  Usually, there is not a              
 significant surplus left in a campaign account.                               
 CHAIR JAMES asked what the committee wished to do with the bill.              
 REPRESENTATIVE PORTER wanted to ask a question of the sponsor                 
 before making any decision.  He said it appears, even though it               
 must be reported, that there is unlimited opportunity for                     
 conversion while a person is an active candidate or active                    
 legislator.  It is only that you cannot convert it if you quit. He            
 asked what the rationale for making that distinction is.                      
 REPRESENTATIVE BUNDE said there is plenty of sunlight on campaign             
 funds while a person is actively campaigning; the active candidate            
 is personally responsible.  When a person is no longer running the            
 public has no more influence on them.                                         
 CHAIR JAMES said, with her background in accounting, that she                 
 understands how people get around things.  Her impression was that            
 when a person is an active legislator they can take money out, and            
 it is reportable.  There is nothing stopping a person from                    
 transferring that money, but, of course, they tell the world they             
 are doing it.  If they decide not to run again and they have a                
 large surplus of funds, say $100 thousand, they cannot take it.               
 She wondered what would stop a person from splitting the amount,              
 and putting some in their own savings account somewhere and leaving           
 the rest in the campaign account.                                             
 Number 272                                                                    
 REPRESENTATIVE PORTER thought he understood the intent of the bill,           
 but he questioned the operative line, page 1, line 6, where it                
 says, A candidate may not take money from the surplus balance of              
 the candidates campaign account as personal income.  He asked                 
 where the bill says this only means after he or she decides never             
 to run again.                                                                 
 CHAIR JAMES said the candidates report a surplus every month if               
 they do an APOC report.                                                       
 REPRESENTATIVE BUNDE explained that any expenses a candidate feels            
 they can justify to APOC, and to the public, they can reasonably              
 pay for out of the campaign account.  They cannot just take the               
 money and put it in their pocket.                                             
 REPRESENTATIVE PORTER did not see how their description of paying             
 rent could not be personal income.                                            
 MS. MILES said this issue would be different if this law goes into            
 effect.  It would be different as to making expenditures from your            
 campaign account, which could be construed as personal use, or                
 taking a lump sum as personal income.  Taking a lump sum as                   
 personal income would be prohibited.  She said writing amounts that           
 could be construed as personal use would not be prohibited under              
 this bill.  The IRS may see it differently, however.                          
 Number 325                                                                    
 CHAIR JAMES said they are defining surplus balance.   All the money           
 in a campaign account that the candidate has not used is the                  
 surplus balance.  Any time a person writes something, and it                  
 could be construed as personal income, they are taking it out of              
 the surplus.  She believes that is prohibited in this bill, so what           
 this bill would do is make everything on everyones campaign report            
 suspect as personal.  In Chair James opinion, ethics violations               
 would skyrocket.                                                              
 REPRESENTATIVE PORTER noted that he did not oppose this                       
 legislation; he was just trying to make it work.  He thought the              
 first sentence needed changing.                                               
 Number 352                                                                    
 CHAIR JAMES thought the net was too big.  It is not doing what the            
 sponsor intends.                                                              
 MS. MILES said that when the commission considered this bill, they            
 were limiting the scope as to an actual surplus.  The first                   
 sentence could be amended to say something like: "When a candidate            
 elects not to run for office and is ready to disperse the surplus             
 balance in a campaign account," and it would probably remove the              
 REPRESENTATIVE BUNDE said they should look at Section 15.13.105.              
 He would not be opposed to adding that language, but he would speak           
 with his staff about it.                                                      
 REPRESENTATIVE ROBINSON commented that they are trying to get at              
 the person who has the $100 thousand, who is no longer going to run           
 and takes the money to live on.  They are not trying to get after             
 the other candidates who lose the election and have a small surplus           
 balance and who might need to use it to get their lives back in               
 order.  She suggested putting a dollar amount on this also.                   
 REPRESENTATIVE PORTER said the only thing that will do is set the             
 level from which someone will be influenced.  Some people would be            
 influenced by $1000; others would not.  If you set into statute               
 that you can give someone a $1000, you could have a problem.                  
 REPRESENTATIVE OGAN had a question for Ms. Miles about a candidate            
 who decided not to run for a few years, then decided to run again.            
 MS. MILES said this would apply to people who are stopping their              
 campaign and closing their campaign account.                                  
 REPRESENTATIVE BUNDE concurred that they were not focusing on                 
 people who might decide to run again later.  All they want to do is           
 determine that people dont pocket the money.                                  
 REPRESENTATIVE ROBINSON said the majority of people who are                   
 candidates continue to do that.  People who lose are included,                
 because they probably intend to run again.                                    
 Number 431                                                                    
 REPRESENTATIVE GREEN spoke hypothetically about a candidate who had           
 a good bank account and planned to run again.  He built his                   
 campaign fund for several years, then he decided to siphon off the            
 money and leave the country.  He wondered if this bill would                  
 inhibit that type of thing.                                                   
 REPRESENTATIVE BUNDES response was only that you cannot take this             
 money as personal income at any time.  The other is a gray area and           
 a candidates personal integrity keeps them out of it.                         
 REPRESENTATIVE ROBINSON asked about one change, to add definitions            
 for charity and personal income.  She would also like to see that             
 the bill would permit transfers of money from the campaign account            
 to the legislative account to use for public purposes.  There is a            
 running count because in the legislative account they keep an                 
 ongoing record of everything spent, so it would be public record.             
 Number 481                                                                    
 REPRESENTATIVE PORTER said that was not true.  The way it is now,             
 a person can take campaign money and put it into the legislative              
 account and transfer it as personal income; then they do not have             
 to account for it.                                                            
 MS. MILES stated under current law an office holder can transfer              
 money in one of two ways:  They can transfer a lump sum to an                 
 office account, and that is all the reporting that the public gets            
 on it;  or they can write checks on their campaign account that               
 deal directly with expenses arising from legislative offices.  The            
 public sees that they used the money for stamps, newsletters, etc.,           
 so the Commissions suggestion was if they continue to permit bulk             
 transfers, such as $5000 to an office account, they will also                 
 request the disclosure.                                                       
 After speaking with Representative Bunde about what how he wished             
 to deal with the necessary changes, Chair James said they would               
 hold the bill over until the next meeting.  Representative Bunde              
 said he would come back with a CS.                                            
 REPRESENTATIVE PORTER said his concerns about the office account              
 and so forth would be fixed with a definition of personal income              
 that excludes campaign or legislative expenses.  One thing that               
 bothered him was defining what some activities are.  For instance,            
 if they send out a newsletter, is it a campaign item or is it a               
 legislative item?  It probably depends on the timing.  He supposed            
 that during an election year it would be a campaign item, and other           
 times it would be a legislative item.  He would prefer campaign and           
 legislative were defined the same.                                            
 REPRESENTATIVE BUNDE agreed.  Whatever they do as legislators can             
 be considered as campaigning, and he was not concerned about using            
 campaign expenses to pay for legislative mail-outs, nor did he feel           
 the legislation would preclude that.  Whatever they do pertaining             
 to personal income would not countermand IRS regulations.  They               
 could use IRS regulations to define personal income.                          
 REPRESENTATIVE PORTER said he does that and he pays the tax.  He              
 would rather pay the tax and avoid the hassle.  The wording about             
 expenditures concerned him.  He thought it should be reworked.                
 Number 557                                                                    
 REPRESENTATIVE ROBINSON said would like the charity concept to be             
 broader.  She brought up a donation to the Police Department for              
 the teddy bear program.  What she was concerned about was the                 
 definition of charitable organization.  She would like to give                
 money to the school district for student activities, but she                  
 wondered if that would fit.                                                   
 REPRESENTATIVE BUNDE brought up that if you give money to an                  
 individual, or to a relative, it is not a charity.                            
 CHAIR JAMES added that you can give donations to an organization,             
 but not directly to a person and consider it as a charitable                  
 REPRESENTATIVE OGAN wondered if they should consider giving a                 
 minimal amount that a person can use after a campaign to get                  
 started again.  It might be worth helping the people who are not so           
 privileged but want to run for office, as compensation.                       
 REPRESENTATIVE BUNDE sympathized with the goal, but he saw                    
 problems.  He wondered how many first time people who run and lose            
 will have a positive balance.  He said they might encourage some              
 people to win an election just for the money.                                 
 CHAIR JAMES thought Representative Bunde had plenty of                        
 instructions, so she suggested that he return to the next meeting             
 with a new CS.                                                                
 HB 232 - ECONOMIC DEVELOPMENT TAX CREDIT                                  
 ROD MOURANT, Administrative Assistant to Pete Kott, presented a               
 proposed CS for HB 232.  It was titled 9LS0323/0.  He said the                
 difference between this version and the other version, which had              
 passed through the Economic Development Committee, was the result             
 of conversations their office had with the Department of Revenue,             
 the Department of Commerce, and the Alaska Industrial Development             
 and Export Authority.  Mr. Mourant confirmed that the original                
 concept still pertains to a tax credit for economic development               
 that results in real business expansion; real increase in the                 
 states economy; and a real increase in jobs in the state.  Those              
 themes remained intact throughout that draft legislation.                     
 MR. MOURANT informed the committee what had changed in the new                
 version of the bill.  The change was who the authority is who would           
 be responsible for reviewing the proposals for an economic tax                
 credit.  Also, there was language in the original HB 232 about                
 creating a new Board.  Version O states, instead, that the Alaska             
 Industrial Development and Export Authority had the expertise and             
 ability, and capability, to review proposals of this type for                 
 economic development.                                                         
 MR. MOURANT said he spoke with Department of Commerce, and                    
 Department of Revenue, and both support the concepts of this                  
 legislation.  They would work together to decide what would be in             
 regulation and in statute, and also what would be in the actual               
 conduct of the tax credit and how it would be administered. Section           
 1 of the legislation of Version O defines the program.  It also               
 limits the tax credit that could be granted under this program to             
 no more than 10 consecutive tax years.  In addition, it could not             
 be used in conjunction with any other tax credit program on the               
 books.  So, if a corporation availed themselves with this economic            
 development tax credit they could not use it with another tax                 
 program in statute.  This legislation calls for an annual review by           
 the Commissioner of Revenue, to assess the companies that receive             
 this tax credit, and to see how well they have done to meet their             
 expectation, and also comparing the effectiveness of the program.             
 The determination of compliance comes about when the entity files             
 their annual corporate tax returns with the state.                            
 MR. MOURANT continued to say there are criteria to determine which            
 programs qualify, and it includes that the authority must verify              
 that at least one other state is considering this project.  For               
 example, if Tyson Seafood decided to put in a value added                     
 processing plant, shore based instead of offshore, they could show            
 that Washington State was considering the same project and that it            
 would cost more for the company to put it in Alaska.  That would              
 meet the criteria of an eligible tax credit.  This would create a             
 new business, expand a business, and expand employment in the                 
 state.  It is that kind of value added manufacturing and processing           
 that this bill hopes to motivate in the state.  They dont believe             
 there will be a huge growth with people applying.  This bill lays             
 out criteria for the number of employees also.  It will have to be            
 at least an increase of 25 percent in an existing business.  It               
 does not preclude the Mom and Pop operations with only a few                  
 employees from being eligible. The proposal has to include the                
 potential effect on the economy, the potential investment, the                
 magnitude of cost differential between here and another that is               
 considering the project.  Mr. Mourant explained that the credit is            
 limited to the lesser of 5 percent of the gross wages payable to              
 new employees, or 25 percent of the tax due, and payable by the               
 taxpayer under the state tax codes.  They would have 10 years to              
 take that credit, and, again, they could not take it in conjunction           
 with any other program.  Their certificate of verification will               
 have to be filed annually with their tax returns, so the program              
 can be monitored.                                                             
 TAPE 95-47, SIDE A                                                            
 Number 000                                                                    
 MR. MOURANT explained that the department would be more comfortable           
 with the bill if it said Membership of the Authority, AIDEA," so              
 it was clear whom they were addressing. Also, for the record, the             
 AIDEA Board is comprised of the Commissioner of Revenue, the                  
 Commissioner of Commerce, and a commissioner appointed by the                 
 Governor, and two public members.  They would be the controlling              
 authority using the staff expertise within AIDEA.                             
 Number 017                                                                    
 CHAIR JAMES asked if people must apply for this before they begin             
 development, or after the development is established.                         
 MR. MOURANT said the program is designed to encourage development,            
 so the legislation speaks of applying before development begins.              
 One of the criteria for receiving the tax credit is evidence that             
 the development would not be economically sound without a tax                 
 credit of this type to help it through the financial struggles of             
 the first five years.                                                         
 CHAIR JAMES inquired about the possibility of acquiring tax relief            
 for the Danish Pork Project they are currently working on.  This is           
 a $210 million investment and it involves approximately 1000                  
 employees.  The Danish people had asked for some sort of tax relief           
 to get that moving, but whether or not they could get moving                  
 without the tax credit, she did not know.  She wondered if they               
 would fit under the criteria.                                                 
 MR. MOURANT answered that they could apply, but he could not answer           
 for the AIDEA board about whether or not it would meet the                    
 criteria.  He thought it might have potential for meeting the                 
 required criteria.                                                            
 Number 053                                                                    
 REPRESENTATIVE PORTER had two questions.  In reference to the                 
 prohibition against applying this to a program that was already               
 receiving tax credits, he wondered if they meant state tax credits.           
 MR. MOURANT answered, Yes.  He said the legislation spells that               
 out.  It says: unto this chapter.                                             
 REPRESENTATIVE PORTER verified that if they were getting federal              
 tax credits it would not affect them.                                         
 MR. MOURANT said that was correct.                                            
 REPRESENTATIVE PORTER went to page 4 of the bill.  He asked,                  
 referring to the criteria for establishing the amount of credit--25           
 percent of the tax due and payable by the tax payer under this                
 chapter, or 5 percent of the wages--if he could assume that was a             
 years worth of taxes.  He noted that it did not say annual                    
 taxes, so that should be looked into.                                         
 MR. MOURANT confirmed that it was a years worth of taxes.  It                 
 refers to AS 43.20, which is the chapter they are speaking of, on             
 annual state filings.  He confirmed that he would make certain of             
 Number 081                                                                    
 REPRESENTATIVE GREEN spoke on the restrictions of requiring that at           
 least one other state be considered, and further, that the project            
 would be cheaper to develop in the other state than in Alaska.  He            
 wondered, if the company needed a tax credit in order to justify              
 its existence in Alaska, if it would cause such a burden that they            
 wont go to the other state.  To say it will cost more here, like              
 the Pork Project, they will need a tax credit, but they probably              
 look at Alaska because it fits into a scheme that makes it more               
 advantageous to work here.  He wondered if this bill would work               
 against the Pork Project because of those restrictions.                       
 MR. MOURANT reflected back to the criteria at the bottom on page 2.           
 (See Sec.2.) An applicants project satisfies at least one of the              
 following:  They verify that at least one other state is being                
 considered for the project, and they determine that the projected             
 costs for the applicants project in this state would exceed the               
 costs of the project in the competing state, and, third, that the             
 tax credit is a major factor.  That is one possibility for                    
 eligibility of a tax credit.  The second possibility is that it               
 increases 25 percent of the number of new employees.                          
 Number 135                                                                    
 CHAIR JAMES said there are other options they could meet, so for              
 the Danish Pork Project the restrictions probably were not a                  
 concern.  She agreed with Representative Green, that this was                 
 skimming it pretty slim concerning people looking to put anything             
 here in Alaska who are also looking at another state.  They would             
 be looking for the resource or whatever it is that we have.  She              
 asked about when the numbers of years of credit are established for           
 the development, so they know when the credit expires.                        
 MR. MOURANT said this legislation merely sets a limit of no more              
 than 10 years.  In working out the details for a company awarded              
 $10 thousand worth of credit, he did not know what fashion the                
 state would use to set a time limit, but it would have to use it              
 within 10 years.  He said it would be hard to predict a year to               
 year businesss needs for credits.                                             
 Number 161                                                                    
 CHAIR JAMES had an experience to share that was applicable to the             
 subject.  She was involved in the city planning department in her             
 area before moving to Alaska.  The city had a saw mill, which had             
 been in the area for 20 years.  In order to get that saw mill into            
 town they gave them free water.  They used large amounts of water.            
 So, for 20 years they grew and became very successful, and after 20           
 years things changed.  There were new people, and new city                    
 planners, and people were begrudging about the mill getting free              
 water; so, the city fathers decided they would no longer provide              
 the saw mill with water without charge.  Six months later the saw             
 mill closed down and put 500 people out of work.  There is a                  
 benefit to having some decision making down the road.  So, a point            
 Representative James wished to make was that there should be some             
 closure, and boundaries, and something these companies can depend             
 on in the future, so they know what the rules are from the                    
 MR. MOURANT said that the established agreement would hold for the            
 duration of the terms of the agreement, unless the taxpayer                   
 violated the agreement, or failed to comply.                                  
 CHAIR JAMES asked if there were any more questions on this bill.              
 There were no problems, so they could move it out.                            
 Number 207                                                                    
 REPRESENTATIVE PORTER moved to adopt CS for HB 232, Version /O, as            
 their working draft, dated 4/6/95.  Hearing no objections, the                
 motion passed and CS for HB 232, Version /O, became their working             
 CHAIR JAMES said the CS was before the committee, and they had an             
 REPRESENTATIVE PORTER moved they adopt the amendment, which they              
 would mark as number 1.   It was HB 232 9LS0323/O.  There being no            
 objections, the amendment was approved.                                       
 Number 225                                                                    
 REPRESENTATIVE PORTER moved to pass from committee CS for HB 232 as           
 amended, with individual recommendations and a zero fiscal note.              
 There being no objections, the motion was passed out of committee.            
 REPRESENTATIVE ROBINSON asked if they should add that it is a zero            
 fiscal note with the changes, since they do not have a fiscal note            
 on it yet.                                                                    
 CHAIR JAMES wanted to put on the record that a zero fiscal note is            
 anticipated on this bill.  It is not attached, but it is                      
 anticipated, and should be attached before reaching the next                  
 MR. MOURANT said he would provide the Chair copies of the fiscal              
 note when he received it.                                                     
 CHAIR JAMES said the motion before them was to move out HB 232,               
 Version O, as amended, and with a presumed zero fiscal note.  There           
 were no objections, so the motion to pass CS for HB 232, Version O,           
 CHAIR JAMES adjourned the meeting at 9:50 a.m.                                

Document Name Date/Time Subjects