Legislature(1997 - 1998)
03/22/1997 10:05 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE March 22, 1997 10:05 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Ethan Berkowitz Representative Fred Dyson Representative Kim Elton Representative Ivan Ivan Representative Al Vezey MEMBERS ABSENT Representative Mark Hodgins COMMITTEE CALENDAR *HOUSE BILL NO. 78 "An Act relating to the definition of certain state receipts; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 84 "An Act limiting the authority to conduct pull-tab charitable gaming to qualified organizations that are exempt from taxation under 26 U.S.C. 501(c)(3) or (19); and providing for an effective date." - FAILED TO MOVE HB 84 OUT OF COMMITTEE *HOUSE BILL NO. 155 "An Act relating to hearings before and authorizing fees for the State Commission for Human Rights; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 143 "An Act relating to the art in public places requirements for state-owned and state-leased buildings and facilities." - SCHEDULED BUT NOT HEARD HOUSE BILL NO. 83 "An Act relating to commercial motor vehicle inspections; and providing for an effective date." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 78 SHORT TITLE: AMEND DEFINITION OF "PROGRAM RECEIPTS" SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/16/97 88 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/97 88 (H) STA, L&C, FINANCE 01/16/97 88 (H) ZERO FISCAL NOTE (GOV\VARIOUS DEPTS) 01/16/97 88 (H) GOVERNOR'S TRANSMITTAL LETTER 03/11/97 (H) STA AT 8:00 AM CAPITOL 102 03/11/97 (H) MINUTE(STA) 03/13/97 (H) STA AT 8:00 AM CAPITOL 102 03/13/97 (H) MINUTE(STA) 03/20/97 (H) STA AT 8:00 AM CAPITOL 102 03/20/97 (H) MINUTE(STA) 03/22/97 (H) STA AT 10:00 AM CAPITOL 102 BILL: HB 84 SHORT TITLE: PULL-TABS LIMITED TO 501(C)(3) OR (19) SPONSOR(S): REPRESENTATIVE(S) MARTIN JRN-DATE JRN-PG ACTION 01/22/97 122 (H) READ THE FIRST TIME - REFERRAL(S) 01/22/97 122 (H) STATE AFFAIRS, L&C, FINANCE 03/11/97 (H) STA AT 8:00 AM CAPITOL 102 03/11/97 (H) MINUTE(STA) 03/13/97 (H) STA AT 8:00 AM CAPITOL 102 03/13/97 (H) MINUTE(STA) 03/15/97 (H) STA AT 11:00 AM CAPITOL 102 03/15/97 (H) MINUTE(STA) 03/22/97 (H) STA AT 10:00 AM CAPITOL 102 BILL: HB 155 SHORT TITLE: HUMAN RIGHTS COMMISSION FEES & HEARINGS SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 02/24/97 443 (H) READ THE FIRST TIME - REFERRAL(S) 02/24/97 443 (H) STATES AFFAIRS, HES, FINANCE 02/24/97 444 (H) ZERO FISCAL NOTE (GOV) 02/24/97 444 (H) GOVERNOR'S TRANSMITTAL LETTER 03/11/97 (H) STA AT 8:00 AM CAPITOL 102 03/11/97 (H) MINUTE(STA) 03/13/97 (H) STA AT 8:00 AM CAPITOL 102 03/13/97 (H) MINUTE(STA) 03/20/97 (H) STA AT 8:00 AM CAPITOL 102 03/20/97 (H) MINUTE(STA) 03/22/97 (H) STA AT 10:00 AM CAPITOL 102 WITNESS REGISTER ROYCE WELLER, Budget Analyst Office of Management and Budget Office of the Governor P.O. Box 110020 Juneau, Alaska 99811-0020 Telephone: (907) 465-4694 POSITION STATEMENT: Provided testimony on behalf of the Governor on HB 78. ARNOLD BROWER, JR., President Arctic Slope Region Native Village of Barrow P.O. Box 1139 Barrow, Alaska 99723 Telephone: (907) 852-4411 POSITION STATEMENT: Provided testimony on HB 84. REPRESENTATIVE TERRY MARTIN Alaska State Legislature State Capitol, Room 502 Juneau, Alaska 99801-1182 Telephone: (907) 465-3793 POSITION STATEMENT: Sponsor of HB 84. ALFREDA LORD Address not provided Barrow, Alaska 99723 Telephone: Not provided POSITION STATEMENT: Provided testimony on HB 84. DENNIS POSHARD, Director Charitable Gaming Division Department of Revenue P.O. Box 110440 Juneau, Alaska 99811-0440 Telephone: (907) 465-2229 POSITION STATEMENT: Provided testimony on HB 84. PAULA HALEY, Executive Director Alaska State Commission for Human Rights 800 "A" Street, Suite 204 Anchorage, Alaska 99501-3669 Telephone: (907) 274-4692 POSITION STATEMENT: Provided testimony in support of HB 155. ACTION NARRATIVE TAPE 97-31, SIDE A Number 0001 The House State Affairs Standing Committee was called to order by Chair Jeannette James at 10:05 a.m. Members present at the call to order were Representatives James, Berkowitz, Dyson, Elton and Vezey. Members absent were Hodgins and Ivan. Representative Ivan arrived at 10:08 a.m. HB 78 - AMEND DEFINITION OF "PROGRAM RECEIPTS" The first order of business to come before the House State Affairs Standing Committee was HB 78, "An Act relating to the definition of certain state receipts; and providing for an effective date." CHAIR JEANNETTE JAMES called on Royce Weller, Office of the Governor, to present the bill. Number 0060 ROYCE WELLER, Budget Analyst, Office of Management and Budget (OMB), Office of the Governor, explained HB 78 related to the definition of certain state receipts. State receipts essentially came in as general funds or something other than general funds. The statute that the bill proposed to amend, AS 37.05.146, defined what was a general fund and what was not a general fund receipt. MR. WELLER explained the first concern was the constitutional prohibition against dedicated funds under Article IV, Section 7. The second concern was that the bill did not take any revenues off of the book. The third concern was that the receipts did not impact the fiscal gap. MR. WELLER explained the bill did not in any way circumvent the constitutional dedication. In fact, it made it clear that the revenues would be available and subject to appropriation. In no way were the revenues off of the book from legislative monitoring and reviewing. The receipts were collected and restricted by a gift, grant, request, federal or state law and appropriated for a specific purpose. Therefore, if the budget was cut, the receipts coming in would also be cut. It was not like a normal general fund program receipt where the revenues could be used some other place. For instance, if the Division of Occupational Licensing's budget was cut, the division was obligated under statute to reduce its fees to reduce the revenues coming in. Number 0284 MR. WELLER further explained that there were three technical and three substantive changes in the bill. MR. WELLER explained the first technical change was on page 2, line 11, "(E) corporate receipts earned or managed by a public corporation or enterprise of the state authorized by law including." Corporate receipts had been around for some time - Alaska Housing Finance Corporation, Municipal Bond Bank Authority and the Alaska Industrial Development and Export Authority - but they had never been put in statute. There was a reference only; not a lead-in statement that indicated they were corporate receipts. MR. WELLER explained the second technical change was on page 2, line 24, "(K) public school trust fund." The word "trust" was being added to make it clear that it was a trust fund. MR. WELLER explained the third technical change was on page 3, line 5, "(T) Alaska children's trust (AS 37.14.200):" The trust was identified because for the first time the state was going to have receipts coming in. MR. WELLER explained the first substantive change was on page 2, lines 3-5, "(3) designated program receipts (INDIVIDUAL, FOUNDATION, OR CORPORATION GIFTS, GRANTS, OR BEQUESTS THAT BY THEIR TERMS ARE RESTRICTED TO A SPECIFIC PURPOSE);" The deleted language was being rolled into the definition of a designated program receipt because there was no reason to have two similar definitions on the books. MR. WELLER explained the second substantive change was on page 2, line 3, "(3) designated program receipts". The definition was on page 3, line 10-11, "(c) For purposes of this section, `designated program receipts' means money that is received from a source other than the state and that is (1) restricted to a specific use under the terms of a gift, grant, bequest, contract, or federal law; or (2) subject to appropriation for another purpose, but is designated by state law as available for a specific use." MR. WELLER explained the third substantive change was on page 3, line 8-9, "(6) receipts of commercial fisheries test fishing operations (AS 16.05.050(15)." It was a specific and unique receipt established by the legislature so it needed to be included in the bill. MR. WELLER further stated that attached to the fiscal note was a spreadsheet which identified the receipts and their associated revenues for Fiscal Year (FY) 96 and 98. Number 0647 CHAIR JAMES stated she had a lot of problems with the bill and a lot of questions. She understood the definition of program receipts, but she wanted to know what kind, and where the receipts would come from. She understood that this was a good tool when it came to "cutting the budget without cutting the budget." She was not happy with the way the state measured how it cut the budget. The general public really wanted the state to downsize government. The public did not care if the money came from the federal government, the state general fund, or the program receipts. The state had been measuring its budget reduction by the general funds. "This has been an argumentative issue as to what the total state spending is. We don't tell the people that. We only tell them that we're trying to keep it down to 2.4." Therefore, this would be a bigger subterfuge by not including the program receipts in the column of general funds when they could not be anything except general funds according to the constitution. It appeared that the state was trying to take program receipts as another source so that they would not be counted as general funds. She suggested adding another column titled "general funds-program receipts" to the budget process to identify them. CHAIR JAMES further stated she was concerned about the departments making applications for permits; such as, the oil companies trying to get their permits run through at a faster pace when staff was not available. A designated receipt was taken in allowing for the hiring of a person in order for the oil company to get its permits. She was concerned about the little guy who did not have the money to pay extra to get a permit. She did not see it as fair and equitable. She had heard stories that the extra money was not on a list of schedule and fees; it was arbitrary. The state should not be arbitrarily collecting money from anyone to get a service that the state was supposed to be providing anyway. She understood that the Division of Occupational Licensing was supposed to charge the cost of doing business; so, if the legislature cut its budget, then the division would have to cut its fees because it was suppose to be a wash. Number 0973 REPRESENTATIVE ETHAN BERKOWITZ stated that the legislature did cut its budget. CHAIR JAMES replied she did not cut its budget. Nevertheless, the public did not want to pay any taxes until the legislature reduced governmental spending and every time a charge or fee was added "you're taxing the people." The issue should be black and white so that the ordinary person could understand it. Right now, the ordinary person could not understand this because it was a subterfuge. Number 1024 REPRESENTATIVE KIM ELTON stated that the bill would help the public understand because it would establish categories and identify different funding sources. For example, a bill was introduced that would allow dive fishermen to assess themselves a tax and the proceeds would be given by statute to the Division of Fish and Game for the purpose of hiring the management and enforcement of that fishery. The dive fishermen were doing that because the department did not have the money to manage the fishery. According to HB 78, the funds would not be identified as general fund dollars, but as dollars collected for a specific purpose. REPRESENTATIVE ELTON further stated that there was a public that needed governmental services. Thus, it was important to distinguish between voluntary funds for a specific purpose and general funds. In addition, an advantage to the little guy - big guy permitting process would be that the money would not go into the pot causing the little guy to wait longer. The new money was incremented for the purpose of permitting for the big guy only which would include the staff. Number 1217 CHAIR JAMES replied she now understood what the Governor meant by "open for business." "We have a store front and if you can come in and pay for our services you can have some. If you don't have any money you don't get any." It was a question of what the private and public sectors should do. She wondered why the dive fishermen did not put their money into a pot and hire somebody from the private sector. The expertise was out there and they could even get it for less. "By doing it this way, we're totally changing the face of government and what's it here for. It's here to provide services that the public needs and not those that it doesn't need." Therefore, she saw the bill as a crossing of the lines and a blurring of the edges between what the people should be doing and what the government should be doing. Number 1300 REPRESENTATIVE ELTON replied the difference was that the state was constitutionally mandated to manage its natural resources for the benefit of all the people. Furthermore, the legislature had - collectively - created the store front Chair James mentioned. The Department of Fish and Game, for example, had fewer scientists and managers now than in 1979 before the oil money when now there were more complex fisheries and user groups. Thus, the bill allowed for the opportunity of the industry to help itself and the state entities as well. Number 1356 CHAIR JAMES replied the state entity, Department of Fish and Game, was not mandated to do research which was what the money for the dive fishermen would be used for; not management. Number 1367 REPRESENTATIVE ELTON replied research was necessary to determine the size of the bio-mass to determine the limits of the harvest, for example. Number 1380 CHAIR JAMES replied she understood but it could be done by a private individual as well. Number 1392 REPRESENTATIVE FRED DYSON stated he agreed with the limits of what Representative Elton and Chair James were saying. There was reason to be concerned about losing control of the cost. In addition, there was a difference between a tax and a fee for service. He was in favor of the bill, but the list of designated program receipts was long and he felt intimidated that he would not get enough information about each program. The principle argument - historically - was to keep police officers from pinching tourists to raise the local police budget. Thus, it was important to ensure that there was a mechanism to prohibit misuse. REPRESENTATIVE DYSON declared a conflict of interest with the test fisheries because he had tried for several years to bid for that project. He was concerned that the Department of Fish and Game would shut down the entire fishery and contract with just fishermen and put half of the catch or all of it into the budget. "I don't foresee that happening but that's the kind of thing we worry about that is possible." REPRESENTATIVE DYSON further stated that the next bill - HB 155 - was his idea three or four years ago. It was the other side that was very valuable and needed to be done. Number 1554 CHAIR JAMES asked Mr. Weller if the figures in the spreadsheet would not be measured as general funds in the budget process? Number 1584 MR. WELLER replied, "That's correct." The figures in the spreadsheet would be defined as designated program receipts and they would not roll up as general funds. Number 1600 CHAIR JAMES asked Mr. Weller if the bill was passed would there be a $53 million budget cut in general funds - automatically? Number 1611 MR. WELLER replied the Governor did not intent to portray it in that way. The budget plan as submitted by the Governor showed three columns: general funds, general funds with designated program receipts and other funds. Representative Terry Martin wanted all revenues appropriated by the legislature to be shown and we intend to do that. The programs in the spreadsheet would not roll up as a general fund appropriation but, they would roll up as a designated program receipt appropriation. Number 1657 CHAIR JAMES replied they were already being designated. Generally, the legislature authorized money to be spent according to the fees. For example, the marine highway revenues went into an account that was used for its budget. It was considered part of the "sweep" at the end of the budget process. Number 1693 MR. WELLER replied the issue she was addressing was the self- sufficiency requirement where the programs were required to cover their full cost of operation in statute, such as, the Division of Insurance. Every year the legislature appropriated the balance of funds for those programs into the carry-forward so that there was no leakage into the General Fund. In other words, it was swept and put back into the programs because they were funded by the users. MR. WELLER further stated that the legislature required in statute that OMB submit a fee report every year in January that showed any regulatory changes to the program receipts. In addition, general fund program receipts were not included in HB 78. The bill only addressed designated program receipts and there was a big difference between them. For example, the parks levied a fee, but it only covered a small portion of the cost of managing and operating them. The rest of their budget was funded through the General Fund; there was not a one-to-one relationship. Number 1779 CHAIR JAMES replied the Salcha River property owners in her area organized to take care of its park because it was going to be closed. "So don't tell me it's not out there. It is being done." Number 1800 MR. WELLER replied - generically - park fees funded only a small portion of its total cost, therefore, they were not included in the bill. The Division of Motor Vehicles was another example. It was not in statute that the collected revenues would be appropriated back to the program, yet it raised some $31 million. The examples in the spreadsheet were programs with a one-to-one relationship. He cited the Alaska Tourism Marketing Council whereby the legislature appropriated a certain amount of general funds and the industry was mandated to raise at least 25 percent. Therefore, if the budget was cut in this area, the receipts that were being matched would also be cut from the industry. There were no receipts that were deposited into the General Fund that could be used for something else or to close the fiscal gap. Some programs received funds from the federal government that could only be used for that particular program, and if the receipts were cut, it would violate the federal law. Number 1882 CHAIR JAMES replied the state did not cut those programs because there were other funds. MR. WELLER responded because - currently - they were general fund program receipts. He reiterated they were unique receipts, they were not the same as general fund program receipts and should be treated differently. The intent was not to let those with money "go to the head of the line" per se. The intent was to separate the line and treat all those involved the same, except for the private parties that were willing to pay for their programs. Number 1986 CHAIR JAMES replied it did not seem like the way government should be doing business. The government was here to provide a service. If something extra was needed to be paid for it seemed unfair that the government was the only place to get the service. In addition, she believed it was already being accounted for so she did not see how the bill would make it any easier. Mr. Weller first said that the budget process would reduce the amount of general funds and now he said that they would all be counted as general funds. The issue here was whether or not it should be a legislative decision as opposed to an agency decision; a designation allowed to make these types of deals and to collect funds without authorization of the legislature. Number 2112 MR. WELLER replied, if the bill passed, the program receipts would be treated as non-general fund program receipts. Number 2119 CHAIR JAMES asked Mr. Weller if the $53 million reduction was actual? MR. WELLER replied it was actual as a General Fund reduction. It would not be calculated as part of the FY 97 to FY 98 reduction; but, it would be calculated as part of the overall spending. In other words, there would not be a $53 million drop in total spending. CHAIR JAMES wondered how the public would understand a reduction in the General Fund and a corresponding increase in other general funds. MR. WELLER stated the budget plan as submitted showed general funds, general funds with designated program receipts, and other funds. Therefore, a person could see the total expenditures. The program receipts would not be hidden, and that would not change with the passage of HB 78. CHAIR JAMES asked Mr. Weller if this was the first year that there was a column that indicated the designated program receipts? MR. WELLER replied it was used last year as well. Last year, he explained, was the first year that there were designated program receipts as an account. Number 2188 CHAIR JAMES wondered, therefore, why a statute was needed because it was already being done. Number 2196 MR. WELLER replied a statute was needed for budgeting and accounting purposes. Thus, a budget could be submitted that pointed to the accounting code and no matter what was done on the accounting side it could not be made a non-general fund, without the approval of the legislature. Number 2236 REPRESENTATIVE ELTON stated to change or clarify what in practice was happening gave a certain sense of comfort to those who were paying for a fee. If the oil industry, for example, wanted to give $2 million to help on the Badami Project, it would be comforting to know that the money was designated by statute. It would also help the legislators explain to the public what was going on. He did not want to be in a position to explain how the $2 million from the oil company affected the budget. Number 2321 CHAIR JAMES replied HB 78 would not change that process. REPRESENTATIVE ELTON further stated that the bill provided an education for the legislators and the public because there was a large segment of the population that believed there was too much government so "let's cut it." But, even that portion would not say "let's cut government that the industry was willing to pay extra for." Number 2365 CHAIR JAMES replied, if she was an oil company, she would not give the state $2 million dollars without a contract that said how the state would spent the money. She asked Mr. Weller if there was a written contract? Number 2410 MR. WELLER replied the spreadsheet broke the program receipts by their type: contract, assessment, restricted fee, legal, third party billing, and test fishery. CHAIR JAMES asked Mr. Weller how a contract was measured? Number 2451 MR. WELLER replied he could not answer the question. A contract was entered into by two parties and he assumed that the parties worked out the conditions. TAPE 97-31, SIDE B Number 0001 MR. WELLER further stated that the money did not just go to the General Fund to help close the fiscal gap. There was a contract that backed up the service. He reiterated there were fees that were restricted by: contract, federal law, state law, and third party travel situations. Number 0021 CHAIR JAMES wondered if there would be a profit associated with the $2 million charged for the Badami Project as an example mentioned earlier. She asked Mr. Weller if the department would use existing personnel already authorized in the budget, or if the department would hire new personnel in addition to the already authorized budget to spend the money? Number 0061 MR. WELLER replied he did not know every case, but he did know that new people were not hired in other cases. There could be subcontracting with the university, for example, if the project was highly scientific. In addition, there were only situations where the state had the data base, such as, labor statistics (Department of Labor). He was not sure, however, if it was similar in the resource development agencies as well. Number 0112 REPRESENTATIVE VEZEY replied the data from the Department of Labor was available to anyone who wanted it for $100 - the Geographical Information Management System (GIS). There was also a big private sector that was providing GIS services. Number 0135 CHAIR JAMES stated the issue of not hiring new personnel bothered her. It appeared that the customer would be paying extra if the state used its existing personnel to provide the service rather than hiring new personnel to work on the contract. Number 0180 REPRESENTATIVE DYSON stated that it would be wise to outline a path for a solution to this issue because there were some programs that everybody would agree on, there were a few programs where assurance would be needed, and for some programs more information would be needed. He suggested moving forward after deciding a course of action. Number 0231 REPRESENTATIVE ELTON stated he also believed that extra program receipts meant additional resources applied to the project and, that the strongest argument to accept the extra receipts was to not hurt the little guy. He assumed that extra personnel would be hired with the money to accomplish the specific purpose. Number 0264 CHAIR JAMES stated it would be a good idea if the Legislative Finance Division would be here to answer some questions. Number 0285 REPRESENTATIVE VEZEY asked Mr. Weller what did HB 78 enable the legislature to do that it could not do without it? Number 0295 MR. WELLER replied HB 78 would clearly define that program receipts were different and unique from general funds; that the program receipts would not close the fiscal gap; and that if the budget was cut for these programs, the receipts would also be cut. Number 0319 REPRESENTATIVE VEZEY wondered if that was an answer to his question. CHAIR JAMES replied, "No." REPRESENTATIVE ELTON stated, actually, it was a good answer. Number 0335 REPRESENTATIVE VEZEY asked Mr. Weller what did the statute enable the legislature to do that it could not do - now - with internal procedures? Number 0344 MR. WELLER replied the statute - AS Sec. 37.05.146 - stated that program receipts were presumed to be for the general fund, minus the programs identified in statute as the exceptions. The bill, therefore, amended the statute to add the children's trust fund, for example. He reiterated that the program receipts for the exceptions should not be considered as general funds when addressing the budget because they were unique receipts and should be treated differently. CHAIR JAMES asked Mr. Weller if the budget was presented like this last year? MR. WELLER replied, "No." CHAIR JAMES asked Mr. Weller if the Administration accounted for the program receipts like this last year? MR. WELLER replied, "Yes." They were presented in the budget as designated program receipts, but they were the general fund designated receipts. House Bill 78 would amend the statute so that the funds from the programs would be designated as program receipts and not as general fund program receipts. Number 0413 CHAIR JAMES replied it would then affect the bottom-line spending of the General Fund. Number 0419 MR. WELLER replied, "Correct." It would affect the bottom line. The budget plan presented would show everything - total state spending. It would show all of the revenue sources and receipts which would still be subject to the committee and appropriation processes. They would also be subject to reduction. He reiterated the bill tried to identify them as unique, and that they did not impact the fiscal gap. Number 0447 CHAIR JAMES asked Mr. Weller where the $53 million would be reflected? Number 0499 MR. WELLER replied, if the bill passed, the program receipts would not show as general funds. The total spending of FY 97 to FY 98 would show the total expenditures. The program receipts would not be taken off of the books. The programs would be reflected separately as: general fund program receipts and designated program receipts for FY 97 and FY 98. It was clear that there would not be a $53 million reduction in FY 98. That was not the intent of the bill at all. Number 0555 CHAIR JAMES explained the bill would be rolled over to Tuesday, March 25, 1997. Number 0558 MR. WELLER replied that the Legislative Finance Division had a listing of the program receipts and how they rolled up in the back of the budget either as a general fund, a federal fund, or another fund. Number 0584 CHAIR JAMES replied that the rolling over of the money bothered her. She asked Mr. Weller, if the legislature authorized something, would it continue to be authorized into the next year? Number 0593 MR. WELLER replied, "No." They were operating expenditures, therefore, subject to an annual appropriation. The Auke licensing mentioned earlier contained carry-forward provisions in the operating budget so that the balance of one year was appropriated into the next year. That required legislative approval, there was no automatic carry forward. CHAIR JAMES reiterated the bill would be held over to Tuesday, March 25, 1997. HB 84 - PULL-TABS LIMITED TO 501(C)(3) OR (19) The next order of business to come before the House State Affairs Standing Committee was HB 84, "An Act limiting the authority to conduct pull-tab charitable gaming to qualified organizations that are exempt from taxation under 26 U.S.C. 501(c)(3) or (19); and providing for an effective date." Number 0793 ARNOLD BROWER, JR., President, Native Village of Barrow, was the first person to testify via the telephone in Barrow. He explained from time to time the Native Village of Barrow requested a permit from the state for pull-tabs. It was required to disband the permit, however, because it could not exceed a $1 million payout. The Native Village of Barrow had worked with the Charitable Gaming Division to increase the payout. In addition, there were groups, such as, dance groups that had to create their own things to get a permit. Therefore, he saw the bill as restrictive. The tribal governments that operated under a 638 Contract had been gutted and the appropriations had been cut so badly that it only paid for staff and oversight. He asked for a higher payout rate to provide better service. Number 1046 CHAIR JAMES stated that some of the concerns of Mr. Brower, Jr. were not affected by HB 84. The only entity that would be affected by the bill currently was Barrow Search and Rescue, Inc. However, if the bill was to pass any other entity in Barrow would not be able to have a permit to sell pull-tabs. Number 1092 MR. BROWER, JR. replied he was not speaking for the Barrow Search and Rescue, Inc. He was speaking for the Native Village of Barrow. CHAIR JAMES replied she understood and suggested that Mr. Brower, Jr. contact Mr. Dennis Poshard from the Charitable Gaming Division to discuss his concerns further. Number 1135 REPRESENTATIVE TERRY MARTIN, Alaska State Legislature, stated there were six permits in Barrow that pooled together. If they could prove to the committee what they did was charitable then they should be added to the bill. The concern of Mr. Brower, Jr. was of gross receipts and net receipts. His second bill addressed gross receipts. He wondered if the payoff mentioned was to increase gambling or to raise money for charitable purposes, however. CHAIR JAMES replied Mr. Brower, Jr. needed to talk to Mr. Poshard or to testify again when the other bill was before the committee. She did not want to muddy the water today. She was also not interested in adding any people to the bill; it would be too complicated. Number 1215 MR. BROWER, JR. stated he appreciated the comments of Representative Martin and he would be in contact with Mr. Poshard. Number 1255 ALFREDA LORD was the next person to testify via the telephone in Barrow. She just wanted to track the bill so that no other changes were made to affect the 501(c)(3)'s. CHAIR JAMES asked Ms. Lord if she had a 501(c)(3) that she wanted to protect? MS. LORD replied, "Yes." She reiterated that she wanted to make sure that if there were any changes in the wording, such as, "and/or", it would not throw the whole thing out. Number 1370 DENNIS POSHARD, Director, Charitable Gaming Division, Department of Revenue, was the next person to testify in Juneau. He distributed to the committee members three lists titled: "Pull-Tab Permittees that were 501(c)(3) or (19)", "Pull-Tab Permittees that were not 501(c)(3) or (19)", and "501(c)(19) and (3) Organizations Without Pull-Tab Permits". They were not easy to compile because they were prepared by hand. There was no compatibility between the data base from the IRS and the data base from the division. The list of "Pull-tab Permittees that are 501(c)(3) or (19)" was five pages of organizations that currently had pull-tab permits and would qualify because of their status with the IRS. The list of "Pull-tab permittees that are not 501(c)(3) or (19)" was 11 pages of organizations that currently had pull-tab permits that were not listed with the IRS as 501(c)(3) or (19). Their current IRS status was also included. The list of "501(c)(19) and (3) Organizations Without Pull-Tab Permits" was substantial compared to the other two lists. The financial data was not included. CHAIR JAMES replied the lists were very helpful. She wondered how many exactly would be excluded if the bill was to pass. Number 1524 MR. POSHARD further stated that he had talked to Mr. Brower, Jr. already regarding his concerns. He explained that the Native Village of Barrow did not have a permit and conducted illegal gambling activities by bringing in pull-tabs from out of the state and from non-licensed distributors. The division had encouraged him to get a permit. But, he did not want to do it because he would be limited to awarding $1 million in prizes annually. The Native Village of Barrow typically reached that limit within four to five months so a permit would significantly reduce the amount of money it made. He was able to get around this because it claimed sovereignty and no one had challenged the claim. The Department of Public Safety had chosen not to place illegal gambling as a priority. He reiterated Mr. Brower, Jr. was concerned about the limit on the amount of activity raised. He would gladly come under state jurisdiction if the limit was raised. Number 1655 REPRESENTATIVE VEZEY thanked Mr. Poshard for providing the lists and pointing out the size of the businesses involved. "Sometimes we think of these as nickel and dime operations." Number 1671 REPRESENTATIVE BERKOWITZ referred to AS Sec. 05.15.150, "Limitation on use of proceeds", and asked Mr. Poshard how the section would be impacted by the bill? Number 1687 MR. POSHARD replied the bill did not make any statutory change to the section. It affected it, however, in that 501(c)(3) and (19) organizations were limited by the IRS as to how they spent their funds and that the IRS could narrow the section and then the state would have to enforce it. Number 1737 REPRESENTATIVE BERKOWITZ asked Mr. Poshard if 501(c)(3) organizations were the only ones authorized for pull-tabs? MR. POSHARD replied, "No." A 501(c) status had nothing to do with who was or who was not qualified for a permit - currently. Alaska Statute Sec. 05.15.690 defined a qualifying organization; it did not have to be incorporated, however. REPRESENTATIVE BERKOWITZ asked Mr. Poshard if an organization did not go through its 501(c) paperwork it would be precluded from running a charitable game. MR. POSHARD replied, "Correct." REPRESENTATIVE BERKOWITZ asked Mr. Poshard if the bill required that the federal government dictate who would be allowed to do charitable gaming in Alaska? MR. POSHARD replied essentially that was correct because nobody could make a 501(c)(3) or (19) designation except the IRS. Number 1846 REPRESENTATIVE ELTON explained a Juneau Montessori and a Fairbanks Montessori schools were on different lists. He asked Mr. Poshard if the Juneau Montessori, for example, would have to apply for a 501(c)(3) status if the bill passed? MR. POSHARD replied it could apply and receive a 501(c)(3) status. He declared a conflict of interest in answering the question, however, because his daughter attended the Juneau Montessori school. REPRESENTATIVE ELTON declared a conflict of interest because he was a members of the House Democratic Campaign Committee that had a pull-tab permit which would be disallowed if the bill passed. REPRESENTATIVE BERKOWITZ declared a conflict because he had received funds from the House Democratic Campaign Committee. REPRESENTATIVE ELTON replied that he had not receive any funds but he did help determine who received them. CHAIR JAMES stated that she did know if she had a conflict of interest. Number 1973 REPRESENTATIVE IVAN IVAN declared a huge conflict of interest because most of his communities that he represented were on the lists. The bill would impact a lot of good work that was being done in his communities. The city of Akiak operated with a permit and it was three years behind in its accounting. He did not support the bill. Number 2073 REPRESENTATIVE ELTON stated the testimony indicated that charitable organizations should be allowed access to a gaming permit and non- charitable organizations should not be allowed access to a gaming permit. There were 11 pages of organizations that would not be allowed, and 5 pages of organizations that would be allowed. He suggested changing AS Sec. 05.15.150 to ensure that charities would get the money. That would allow for 16 pages of organizations that could benefit charities. It appeared that the bill almost hurt charities by limiting the number of groups. If the goal was to help charities, "Don't say who could sell, just say who could get." Number 2190 CHAIR JAMES replied the bill tried to define what was a charity - a 501(c)(3) and (19). Generally, an organization wanted to be a 501(c)(3) because of the tax deduction. She disagreed that 501(c)(3)'s and (19)'s were the only charities, however. Number 2319 REPRESENTATIVE ELTON replied that they would be able to sell pull- tabs but then give the money to a politician, for example. CHAIR JAMES replied a 501(c)(3) could not be involved in political activities or affect legislation. Number 2361 REPRESENTATIVE BERKOWITZ explained that a charitable organization was already defined in statute as "an organization, not for pecuniary profit, that is operated for the relief of poverty, distress, or other condition of public concern in the state;" CHAIR JAMES replied Representative Martin wanted a different definition. Number 2401 MR. POSHARD replied a charitable organization was defined in statute. But also look at who the division was allowed to issue permits to under "qualified organizations" in the same section - educational, religious and political organizations. TAPE 97-32, SIDE A Number 0001 MR. POSHARD stated there was confusion amongst the charities because of the unrelated business income tax provision in Alaska. The money could be used for administrative expenses or for their own organizations, while other states required that the money be donated to a 501(c)(3) in order not be taxed. In other words, every penny that was made was donated to a non-profit 501(c)(3) organization. In Alaska, any pull-tab money was taxable under the unrelated business income tax. Number 0126 REPRESENTATIVE MARTIN stated there was no doubt that many, many organizations were bringing in more money than a true charitable organization. He cited the Home Builders Association. "Man that group is slick as can be in raising money - the Anchorage Home Builders Association, the Fairbanks Home Builders, the Kenai Home Builders, and the statewide home builders association - they've all got permits and a lot of money coming in. And I think relatively little is for charity." Charity begins at home. Number 0192 CHAIR JAMES replied that was where charity was supposed to begin. REPRESENTATIVE MARTIN replied if you want that concept then fine. The organizations were doing very well. Maybe, we should change the bill so that all of the money went to a designated true charity. Number 0286 REPRESENTATIVE BERKOWITZ stated that he would hate to give the IRS any more power than it already had. He was concerned about allowing it to define the designations because "once they get in your business they never get out." Number 0324 REPRESENTATIVE MARTIN replied the IRS now realized how much money Alaska was making on pull-tabs. Therefore, it was going back to the organizations and analyzing their accounts. The state had misled these organization into thinking that they would get away with it. Number 0356 CHAIR JAMES replied the state had not misled the organizations. CHAIR JAMES asked the committee members if anybody was interested in making a motion to move the bill forward. REPRESENTATIVE VEZEY replied he would make a motion but he did not want to waste the time of the committee members. Number 0380 REPRESENTATIVE ELTON replied the committee could put this to rest by moving the bill and recommending a "no" vote. Number 0398 REPRESENTATIVE VEZEY moved that HB 84 move from the committee with individual recommendations and the attached fiscal note(s). REPRESENTATIVE IVAN objected. A roll call vote was taken. Representatives James, Dyson and Vezey voted in favor of the motion. Representatives Berkowitz, Elton and Ivan voted against the motion. House Bill 84 failed to move from the House State Affairs Standing Committee. Number 0483 CHAIR JAMES introduced from the audience, Michelle Jenkins from North Pole. She was a visiting Page in the House and the Senate. REPRESENTATIVE ELTON stated that Ms. Jenkins was the most pleasant person on the floor of the House of Representatives this week. HB 155 - HUMAN RIGHTS COMMISSION FEES & HEARINGS The next order of business to come before the House State Affairs Standing Committee was HB 155, "An Act relating to hearings before and authorizing fees for the State Commission for Human Rights; and providing for an effective date." Number 0575 PAULA HALEY, Executive Director, Alaska State Commission for Human Rights, was the first person to testify via the telephone in Anchorage. The bill was part of the agency's response to increased demand for services from the Alaskan public in the wake of diminished resources. Over the past 15 years complaints of discriminations filed had nearly tripled while at the same time the agency had lost 35 percent of its staff. As a result, the agency had been working to increase its efficiency but because of the increase in filings it had not been able to bring its inventory down. In fact, the filings had burgeoned to an all time high. The commission realized that seeking additional resources alone was not enough so to better face the work load challenge it had reviewed and revised its internal processes and procedures, amended its regulations, and proposed HB 155. The bill would allow for both a cost-saving measure and would give the authority to charge fees for certain services. Any fees generated or money saved, from holding hearings at the agency's office, and by not transcribing every hearing would be used towards the investigation and enforcement of the law. The money would allow the agency to use temporary staff, for processing, investigations, pay overtime, and quicker investigations. The public was not satisfied with the time it took to complete an investigation. At this moment, there were over 360 cases that were not assigned to an investigator and could stay on hold for up to nine months. Therefore, HB 155 would be an essential piece of the commission's effort to grapple with the delays by saving money, streamlining its process, and allowing for the collection of fees. She and the commissioners urged the support of the committee members. Number 0762 REPRESENTATIVE IVAN asked Ms. Haley if she had a breakdown of the cases for the whole state? Number 0814 MS. HALEY stated that the agency would hold hearings only in instances where there was substantial evidence. And if the employer, for example, did not wish to fly to the commission's office, the hearing would be heard telephonically. If it was important to see the chief witness, for example, he or she would be brought to the hearing site. However, often the complaining party in rural Alaska moved from the area and the state. Therefore, telephonic communication would help deal with the problem. She also hoped that the impact on the non-urban areas would be very limited. CHAIR JAMES asked Ms. Haley to provide to Representative Ivan a recap of where the majority of the cases came from in Alaska. Number 0930 REPRESENTATIVE DYSON said he could provide to Representative Ivan the annual report that gave the information today. Number 0941 MS. HALEY replied in the annual report there was pie-shape chart of the areas where the cases came from around the state. Number 0963 REPRESENTATIVE VEZEY asked Ms. Haley who the fees would be assessed to? Number 0971 MS. HALEY replied the commissioners had not spent a great deal of time discussing the particulars of the assessment. It would have to be done by regulation. The initial reaction was in response to the educational aspect of the commission. She did a fair amount of training, as resources allowed, hoping that the training would prevent complaints from being filed. And many that approached the commission were willing to pay for the seminars or the materials prepared but it was unable to accept the money. If those fees could be secured, they could go to the enforcement aspect of the commission. Number 1035 REPRESENTATIVE VEZEY asked Ms. Haley if there was intent to assess a fee from those that filed a complaint? Number 1045 MS. HALEY replied the commissioners could look at that under the bill. However, the Equal Employment Opportunity Commission that gave $100,000 to $120,000 to support its efforts strongly discouraged and had indicated by letter that it would terminate its contract if the agency was to charge a fee for filing a claim. Number 1099 REPRESENTATIVE VEZEY stated he would be even more concerned if we were looking at assessing a fee for those who were required to defend themselves. REPRESENTATIVE VEZEY asked Ms. Haley why the entire sentence was not deleted on page 2, lines 19-21? By deleting the entire language, it reverted to the Open Meetings Act. Number 1124 MS. HALEY replied the requirement for a transcript had been in the statute for a long time. The hearings were sometimes very short and informal and sometimes they were like mini-trials lasting up to a week. It was very expensive to contract for those services. The agency wanted to just be able to record the hearings and to make the tapes available rather than transcribing every hearing. She did not fully understand his reference to the Open Meetings Act because the hearing process was already open to the public, except for the deliberations. Number 1181 REPRESENTATIVE VEZEY wondered why the entire sentence was not deleted because the commission was required to follow the Open Meetings Act by law anyway. Number 1203 MS. HALEY replied she was not sure about the applicability of the Open Meetings Act. In other words, these were administrative hearings on cases presented under the Human Rights Law. They were not meetings of the commissioners as public policy makers that would be bound by the Open Meetings Act, for example. Number 1247 REPRESENTATIVE DYSON explained he had a part in getting this going when he was on the Human Rights Commission. The dilemma that the commission faced was a huge back log of investigations and complaints of untimely investigations. As a result, the commissioners found themselves directing the activity of the staff. For instance, when Ms. Haley conducted a training, time was spent away from the job. He wondered, therefore, if the commission could be reimbursed for her expenses. The answer was, no, under existing law. Thus, he suggested a bill that would allow the commission to be reimbursed for the out of pocket expenses incurred. REPRESENTATIVE DYSON further explained the second step was to eliminate the mindless obedience of the law on where the meetings were held when it did not serve the purpose of justice and the complainant. This allowed for more flexibility, cost effectiveness, and effectiveness for the complainant and the defendant. Number 1368 MS. HALEY replied she had been allowed to be reimbursed for the cost of an airplane ticket but not for the time away from the agency or for the value of the training in terms of preparations and materials. It was time to look for cost effective measures and if telephonic hearings would save money then that was the way to go and the bill would allow for that. It also allowed for people to request a change of venue for good cause. Number 1449 REPRESENTATIVE VEZEY stated he was concerned about the broad nature of Section 1. The bill would give the agency the regulatory authority to assess fees for investigations, complaints and hearings. CHAIR JAMES asked Representative Vezey if he was proposing a change to the bill? Number 1492 MS. HALEY replied the commissioners would not be opposed to a change. The original version had the word "educational" included for clarification. Number 1524 REPRESENTATIVE IVAN explained he also had the same concern as Representative Vezey. CHAIR JAMES announced the bill would be held until Tuesday, March 25, 1997 in order to look at Section 1 further. ADJOURNMENT Number 1566 CHAIR JAMES adjourned the House State Affairs Standing Committee meeting at 12:07 p.m.