Legislature(2017 - 2018)GRUENBERG 120

02/09/2017 03:00 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 91 APOC REGISTRATION FEES; LOBBYIST TAX TELECONFERENCED
Heard & Held
*+ HB 50 PROF. SERVICES IN STATE-FUNDED CONTRACTS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                        February 9, 2017                                                                                        
                           3:02 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Jonathan Kreiss-Tomkins, Chair                                                                                   
Representative Gabrielle LeDoux, Vice Chair                                                                                     
Representative Chris Tuck                                                                                                       
Representative Adam Wool                                                                                                        
Representative Chris Birch                                                                                                      
Representative DeLena Johnson                                                                                                   
Representative Gary Knopp                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Andy Josephson (alternate)                                                                                       
Representative Chuck Kopp (alternate)                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 91                                                                                                               
"An Act  relating to fees  for certain persons  filing disclosure                                                               
statements  or  other  reports with  the  Alaska  Public  Offices                                                               
Commission;  relating  to a  tax  on  legislative lobbyists;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 50                                                                                                               
"An Act relating to the procurement of architectural,                                                                           
engineering, or land surveying services for state-funded                                                                        
contracts."                                                                                                                     
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 91                                                                                                                   
SHORT TITLE: APOC REGISTRATION FEES; LOBBYIST TAX                                                                               
SPONSOR(s): REPRESENTATIVE(s) KITO                                                                                              
                                                                                                                                
01/30/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/30/17       (H)       STA, FIN                                                                                               
02/09/17       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
BILL: HB 50                                                                                                                   
SHORT TITLE: PROF. SERVICES IN STATE-FUNDED CONTRACTS                                                                           
SPONSOR(s): REPRESENTATIVE(s) KITO                                                                                              
                                                                                                                                
01/18/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/17       (H)       STA, FIN                                                                                               
02/09/17       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE SAM KITO                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 91, as prime sponsor.                                                                       
                                                                                                                                
HEATHER HEBDON, Executive Director                                                                                              
Alaska Public Offices Commission (APOC)                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions during the hearing on HB                                                              
91.                                                                                                                             
                                                                                                                                
CRYSTAL KOENEMAN, Staff                                                                                                         
Representative Sam Kito                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions on HB 91 on behalf of                                                                 
Representative Kito, prime sponsor.                                                                                             
                                                                                                                                
KEN ALPER, Director                                                                                                             
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions during the hearing on HB                                                              
91.                                                                                                                             
                                                                                                                                
REPRESENTATIVE SAM KITO                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 50, as prime sponsor.                                                                       
                                                                                                                                
DALE NELSON, Chair                                                                                                              
Legislative Liaison Committee                                                                                                   
Alaska Professional Design Council (APDC)                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 50.                                                                           
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:02:47 PM                                                                                                                    
                                                                                                                                
CHAIR  JONATHAN KREISS-TOMKINS  called  the  House State  Affairs                                                             
Standing   Committee    meeting   to    order   at    3:02   p.m.                                                               
Representatives  LeDoux, Tuck,  Wool, Birch,  Knopp, and  Kreiss-                                                               
Tomkins  were  present at  the  call  to order.    Representative                                                               
Johnson arrived as the meeting was in progress.                                                                                 
                                                                                                                                
           HB 91-APOC REGISTRATION FEES; LOBBYIST TAX                                                                       
                                                                                                                                
3:04:21 PM                                                                                                                    
                                                                                                                                
CHAIR KREISS-TOMKINS  announced that the first  order of business                                                               
would be HOUSE BILL NO. 91,  "An Act relating to fees for certain                                                               
persons filing  disclosure statements  or other reports  with the                                                               
Alaska  Public   Offices  Commission;   relating  to  a   tax  on                                                               
legislative lobbyists; and providing for an effective date."                                                                    
                                                                                                                                
3:04:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAM  KITO, Alaska State Legislature,  presented HB                                                               
91, as  prime sponsor.   He stated that  HB 91 would  establish a                                                               
fee  for   candidates,  groups,   and  public   officials  filing                                                               
financial reports, as well as a 2.5 percent tax on lobbyists.                                                                   
                                                                                                                                
REPRESENTATIVE KITO stated that a  couple of years ago the Alaska                                                               
State Legislature  provided additional  receipt authority  to the                                                               
Alaska  Public  Offices  Commission  (APOC) and  directed  it  to                                                               
increase  fees to  address budgetary  shortfalls.   He said  that                                                               
APOC currently has statutory authority  to collect a $250 fee per                                                               
lobbyist  client.   Representative Kito  offered that  since APOC                                                               
has no other way to collect  revenue, he looked for a legislative                                                               
solution.  He mentioned that  he worked with the former executive                                                               
director  of  APOC,  Paul  Dauphinais, to  identify  a  means  to                                                               
increase  program receipts  and  to increase  staffing levels  to                                                               
accommodate lobbying reporting activities.                                                                                      
                                                                                                                                
REPRESENTATIVE KITO relayed that  HB 91 would raise approximately                                                               
$425,000 under  the proposed  2.5 percent  tax and  an additional                                                               
$100,000 in  registration fees.   He said that the  revenue would                                                               
support the  $750,000 budget  and allow  APOC to  hire additional                                                               
staff in the lobbyist section  of the organization.  He explained                                                               
that the  reason HB  91 proposes taxes  instead of  an additional                                                               
fee is that increasing the fee  on the lower paying clients would                                                               
be inequitable.  He maintained  that a percentage [of income] tax                                                               
would be graduated based on lobbying fees.                                                                                      
                                                                                                                                
REPRESENTATIVE  KITO concluded  by saying  that the  goal of  the                                                               
proposed legislation  is to support  the activities of APOC:   to                                                               
ensure   campaigns  and   lobbying   activities  are   adequately                                                               
reviewed; to ensure reports are  audited in a timely fashion; and                                                               
to generate enough resources to  protect the public's interest in                                                               
reporting   lobbying   activities,   campaign   activities,   and                                                               
financial disclosures.                                                                                                          
                                                                                                                                
3:09:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP   asked  why  HB  91   proposes  to  reduce                                                               
registration fees if the goal is  to raise revenue.  He mentioned                                                               
that some  of his  campaign staff,  who had  national experience,                                                               
considered Alaska's  APOC reporting requirements to  be among the                                                               
most  stringent in  the  country.   He asked  if  there has  been                                                               
further discussion about APOC reforms.                                                                                          
                                                                                                                                
REPRESENTATIVE KITO responded that  the registration fee would be                                                               
eliminated in favor  of the 2.5 percent tax.   He maintained that                                                               
this tax  would double  the amount of  revenue from  lobbyists to                                                               
APOC.    He stated  that  the  drafters  of HB  91  intentionally                                                               
avoided policy  discussions about the operations  and statutes of                                                               
the commission.   He added  that even  though Alaska has  some of                                                               
the most  stringent campaign  finance laws  in the  country, some                                                               
Alaskans support  them.  He emphasized  that the intent of  HB 91                                                               
is to ensure  there is receipt authority  and resources available                                                               
for APOC to do its job.                                                                                                         
                                                                                                                                
3:12:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH  asked  if  Representative  Kito  solicited                                                               
comment  from anyone  in the  lobbying community.   He  said that                                                               
looking at the figures, he  estimates that lobbyists are spending                                                               
about $150,000 per legislator.                                                                                                  
                                                                                                                                
REPRESENTATIVE  KITO stated  that  he  had several  conversations                                                               
with members of the lobbying  community after introduction of the                                                               
bill.  He  reported there were no serious concerns.   He added he                                                               
received  a  few  comments  from   lobbyists  who  were  glad  to                                                               
participate  and   help  with  APOC's   fiscal  situation.     He                                                               
emphasized that  the revenue would  not go into the  general fund                                                               
but would go  toward better oversight and reporting by  APOC.  He                                                               
asserted that  when APOC  can conduct  reviews and  audits before                                                               
fines accumulate,  then lobbyists, campaigns, and  the public all                                                               
benefit.                                                                                                                        
                                                                                                                                
3:14:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH  asked  if   the  comments  were  solicited                                                               
anonymously.                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO answered he did  not know if those commenting                                                               
wanted anonymity.   He  maintained written  or oral  testimony to                                                               
the committee is certainly welcome.                                                                                             
                                                                                                                                
REPRESENTATIVE BIRCH  commented that the issue  could be delicate                                                               
and asked what the cost would be for a candidate.                                                                               
                                                                                                                                
REPRESENTAIVE KITO responded that  for candidates and groups, the                                                               
registration  fee  would  be  $100  and  $50  to  file  financial                                                               
disclosures.   He  relayed a  Department of  Administration (DOA)                                                               
suggestion:    for  a  campaign  spanning  two  years,  a  single                                                               
registration  may be  more appropriate.    He said  his staff  is                                                               
working actively with DOA to  identify enhancements to HB 91 that                                                               
will not change the intent of the bill.                                                                                         
                                                                                                                                
3:15:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX stated that there  is lobbying and there is                                                               
consulting,  and  since  there  has  been  no  tax  on  lobbyists                                                               
previously, there  would have been  no incentive  to characterize                                                               
one's activities as one  or the other.  She asked  if HB 91 would                                                               
include  consulting activities.   She  questioned whether  income                                                               
from work  done outside of  the capitol building, which  was more                                                               
in the category of strategizing,  might be labeled consulting and                                                               
consequently shielded from HB 91.                                                                                               
                                                                                                                                
REPRESENTATIVE  KITO  said  that  the APOC  statutes  have  clear                                                               
definitions  for  what  constitutes  the  activity  of  lobbying,                                                               
including the amount  of time in direct  contact with legislators                                                               
and payment for activities  that involve influencing legislators.                                                               
He  asserted that  whether  one  calls oneself  a  lobbyist or  a                                                               
consultant, the  APOC lobbying definition  would still  apply and                                                               
the  category of  people  required to  pay  the registration  fee                                                               
would  not change.    He added  that HB  91  wouldn't change  the                                                               
definitions for lobbying, only the mechanism for paying the fee.                                                                
                                                                                                                                
3:18:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  asked, "Since  this is a  tax on  only one                                                               
professional category, is  there any thought that  this might run                                                               
into  First Amendment  problems?"   She suggested  that lobbyists                                                               
may  "petition"  their  government,   which  is  considered  free                                                               
speech.   She offered that  because free speech is  a fundamental                                                               
right, it  receives the greatest  amount of scrutiny by  a court.                                                               
She asked if there has been any legal analysis of that aspect.                                                                  
                                                                                                                                
REPRESENTATIVE   KITO   answered   that   his   staff   has   had                                                               
conversations  with  Legislative   Legal  and  Research  Services                                                               
regarding this  concern.  He  said it was  less of an  issue with                                                               
the "lobbying  side" of the  proposed legislation and more  of an                                                               
issue with  the "campaign side."   He offered that with  the $100                                                               
and $50  fees on the  campaign side of the  proposed legislation,                                                               
the  restriction on  speech would  not be  as much  of a  concern                                                               
because campaigns  are already paying  $100 for the brochure.   A                                                               
$100 or  $50 registration  fee does not  constitute a  barrier to                                                               
registration.    Lobbyists  already  pay the  $250  fee,  so  are                                                               
already  paying  to participate  in  their  chosen profession  of                                                               
lobbying.    He said  HB  91  would adjust  the  fee  by using  a                                                               
different mechanism  for collecting  revenue.   He opined  that a                                                               
2.5 percent  tax would not  be a barrier  to any client  hiring a                                                               
lobbyist to come to Juneau to lobby.                                                                                            
                                                                                                                                
3:21:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL asked how much  candidates pay now to run for                                                               
office.                                                                                                                         
                                                                                                                                
REPRESENTATIVE KITO  said currently  candidates pay  the Division                                                               
of Elections  (DOE) a $30 filing  fee.  Each candidate  pays $100                                                               
to have his/her information appear in the election pamphlet.                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL  offered  that  the $100  for  the  election                                                               
pamphlet was  not mandatory.  He  added one could run  for office                                                               
and not appear in the election pamphlet.                                                                                        
                                                                                                                                
REPRESENTATIVE KITO responded yes, but  the $30 filing fee to DOE                                                               
is  mandatory.   He  added  that  the  $30  fee would  cover  DOE                                                               
administrative  costs, and  there  are no  fees  to support  APOC                                                               
activities.                                                                                                                     
                                                                                                                                
REPRESENTATIVE WOOL stated  that currently it costs  a minimum of                                                               
$30  to run  for  office,  and HB  91  would  increase that  cost                                                               
fivefold to $150.                                                                                                               
                                                                                                                                
REPRESENTATIVE KITO responded that HB  91 would raise the cost by                                                               
$100  per  candidate.   He  said  that  the mandatory  fee  would                                                               
comprise  the  $100 [APOC  registration  fee]  and the  $30  [DOE                                                               
filing fee], and the $100  for inclusion in the election pamphlet                                                               
would be  voluntary.  He said  the cost for groups  would also be                                                               
$100.   He mentioned  there would  be a separate  fee of  $50 for                                                               
filing financial disclosures.                                                                                                   
                                                                                                                                
REPRESENTATIVE WOOL  offered that the  total cost would  be $180:                                                               
a $30  filing fee;  a $100  registration fee; and  a $50  fee for                                                               
filing financial disclosures.                                                                                                   
                                                                                                                                
REPRESENTATIVE  KITO  said correct.    He  added that  an  exempt                                                               
campaign, one  that does not  raise money, would not  be required                                                               
to pay the registration fee.                                                                                                    
                                                                                                                                
3:23:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL  asked  if  Representative  Kito  considered                                                               
raising the lobbyist registration fee  but keeping it a flat fee,                                                               
as  opposed  to  charging  a percentage  of  the  revenue  earned                                                               
through lobbying.                                                                                                               
                                                                                                                                
REPRESENTATIVE KITO responded  yes.  He relayed  his concern that                                                               
if the registration  fee was doubled from $250 to  $500, it would                                                               
create a burden  for those clients who are  paying lesser amounts                                                               
to a  lobbyist.  He  opined that making  the fee a  percentage of                                                               
income allows the clients who pay  less in lobbyist fees to incur                                                               
less of the expense of APOC's fees.                                                                                             
                                                                                                                                
3:25:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH   asked  for   the  number   of  registered                                                               
lobbyists.  He  offered that there are thresholds  for time spent                                                               
meeting with legislators for registered lobbyists.                                                                              
                                                                                                                                
REPRESENTATIVE KITO  responded that  there are  different classes                                                               
of lobbyists  - representational,  volunteer, and  those employed                                                               
by an organization - and  they all count their hours differently.                                                               
He  said  that   MS.  Hebdon  would  be  able   to  provide  that                                                               
information.   He said that  there are classifications  for which                                                               
one doesn't have to register,  but once one receives compensation                                                               
as a lobbyist,  one must register oneself as a  lobbyist and each                                                               
client that one has.                                                                                                            
                                                                                                                                
3:27:46 PM                                                                                                                    
                                                                                                                                
HEATHER  HEBDON,   Executive  Director,  Alaska   Public  Offices                                                               
Commission (APOC), said that based  on registration receipts, she                                                               
estimates  there are  between  450-500  registered lobbyists  per                                                               
year.  She confirmed for  Representative Kreiss-Tomkins that this                                                               
number represents lobbyists who receive payment for services.                                                                   
                                                                                                                                
REPRESENTATIVE BIRCH  referred to Section  9 on  page 4 of  HB 91                                                               
and  noted  that   the  proposed  new  section   of  statute,  AS                                                               
43.98.020, specifies an income tax, not  a fee.  He expressed his                                                               
concern that most boards and  commissions operate on a fee basis,                                                               
and this  would be Alaska's only  income tax.  He  suggested that                                                               
charging $500 per lobbyist would get APOC the needed revenue.                                                                   
                                                                                                                                
REPRESENTATIVE  KITO replied  that the  500 registered  "actions"                                                               
are  actually  500  registered  clients.   He  added  that  since                                                               
lobbyists have  multiple clients,  the lobbyists would  be paying                                                               
that fee multiple  times.  He conjectured that there  are not 500                                                               
individual registered lobbyists.   He conceded that  the tax does                                                               
single  out lobbying,  just  as  a tax  on  mining activities  or                                                               
fishing  activities   singles  out  those  industries   to  raise                                                               
revenue.                                                                                                                        
                                                                                                                                
3:30:51 PM                                                                                                                    
                                                                                                                                
CHAIR  KREISS-TOMKINS  requested  clarification  of  the  450-500                                                               
statistic.  He  asked if that number refers to  a discrete number                                                               
of  clients who  have  retained  lobbyists or  to  the number  of                                                               
individuals receiving payment for lobbying services.                                                                            
                                                                                                                                
MS.  HEBDON clarified  that there  are 450-500  registrations for                                                               
lobbyist clients.   She reiterated that  it is not the  number of                                                               
lobbyists, since lobbyists often have more than one client.                                                                     
                                                                                                                                
CHAIR KREISS-TOMKINS  asked how many professional  lobbyists were                                                               
registered with APOC.                                                                                                           
                                                                                                                                
MS. HEBDON  responded that  she did not  know, but  would provide                                                               
that information to the committee.                                                                                              
                                                                                                                                
3:31:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  said he  is trying  to get  an idea  of how                                                               
many lobbyists would  be contributing to the 2.5  percent tax and                                                               
what the fee per lobbyist would have  to be in order to yield the                                                               
quarter of a million dollars needed to support APOC activities.                                                                 
                                                                                                                                
REPRESENTATIVE KITO  said that was  one of the options  his staff                                                               
looked at.  He offered the  example of a lobbyist with 10 clients                                                               
- one of  those clients paying $10,000 for  lobbying services and                                                               
another paying  $60,000.  He  attested that if the  lobbyist pays                                                               
$500 in  registration fees  for each of  those clients,  then the                                                               
amount  of money  paid is  not  commensurate with  the amount  of                                                               
money received from  each client.  He said the  lobbyist, in that                                                               
example, would  be taking  a greater portion  out of  the smaller                                                               
client's payment than  the larger client's payment  to cover APOC                                                               
activities.                                                                                                                     
                                                                                                                                
3:33:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  why not  make the  tax a  sales tax                                                               
rather than an income tax.   She offered that "income" - referred                                                               
to in HB 91 - appears to be  net income.   She suggested it would                                                               
be simpler to tax the gross income, rather than the net income.                                                                 
                                                                                                                                
REPRESENTATIVE KITO  replied that  each client pays  the lobbyist                                                               
the contract amount  to do the work.  He  added that the lobbyist                                                               
takes his/her  expenses out of  that contract amount.   He stated                                                               
that the contract  amount, or gross payment, would  be subject to                                                               
the tax under HB 91.  He  offered that taxing net income would be                                                               
a  much more  complicated method  of collecting  revenue, because                                                               
expenses would have to be  identified and the net profit assessed                                                               
for each client.                                                                                                                
                                                                                                                                
REPRESENTATIVE LEDOUX read  from Section 9, subsection  (a) of HB                                                               
91, which would  require payment of "a tax of  2.5 percent of the                                                               
person's income earned from lobbying  activities".  She suggested                                                               
that the  language should  instead read "2.5  percent of  the fee                                                               
earned from  each client".   She offered that "fee"  suggests the                                                               
amount   after   expenses  were   deducted   and   may  be   what                                                               
Representative Kito intended.                                                                                                   
                                                                                                                                
3:36:46 PM                                                                                                                    
                                                                                                                                
CRYSTAL KOENEMAN,  Staff, Representative  Sam Kito,  Alaska State                                                               
Legislature, on  behalf of Representative Kito,  prime sponsor of                                                               
HB  91, clarified  that "income,"  in Section  9 of  HB 91,  does                                                               
refer to  the fee,  or gross  amount, paid by  the client  to the                                                               
lobbyist.                                                                                                                       
                                                                                                                                
3:37:32 PM                                                                                                                    
                                                                                                                                
KEN ALPER,  Director, Tax Division, Department  of Revenue (DOR),                                                               
said that  he interprets "income  earned from lobbying"  as being                                                               
broad  enough to  include the  gross income.   He  mentioned that                                                               
some lobbyists are earning fees  and some are salaried employees.                                                               
He suggested that if  Section 9 of HB 91 were  to be reworded, it                                                               
should  include  the  employee  lobbyists  as  well  as  contract                                                               
lobbyists.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked if  "2.5  percent  of the  person's                                                               
income" in  HB 91 means "2.5  percent of the fees  earned, before                                                               
deductions."    She  suggested  that  this  interpretation  would                                                               
differ from the federal income tax code's definition of income.                                                                 
                                                                                                                                
MR.  ALPER responded  that there  is gross  income, and  there is                                                               
taxable  income after  deductions.   He said  although it  is not                                                               
altogether clear, if  he were writing regulations based  on HB 91                                                               
as  currently  written, he  would  interpret  it as  being  gross                                                               
income.                                                                                                                         
                                                                                                                                
CHAIR KREISS-TOMKINS  asked what  the intent of  the bill  was in                                                               
the phrase cited.                                                                                                               
                                                                                                                                
REPRESENTATIVE KITO  replied that the  intent was to  capture 2.5                                                               
percent  of the  gross client  fee,  and that  was the  direction                                                               
given to Legislative Legal and  Research Services in drafting the                                                               
proposed legislation.   He mentioned that he has  been in contact                                                               
with Ms.  Hebdon regarding employee  or other  non-group entities                                                               
that could be included in HB 91.                                                                                                
                                                                                                                                
3:40:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH referred  to the  section titled,  "Revenue                                                               
Estimate," on  page 2  of the  fiscal note prepared  by DOR.   He                                                               
cited the  approximately $17 million  average total fees  paid to                                                               
lobbyists  for   the  three-year   period,  2013-2015,   and  the                                                               
estimated $425,000 annual revenue that  would be generated by the                                                               
2.5 percent  tax.  He asked  why the estimated revenue  listed in                                                               
the  HB 91  sponsor statement,  which is  $244,150, differs  from                                                               
that on the bill analysis.                                                                                                      
                                                                                                                                
REPRESENTATIVE  KITO responded  that  the  sponsor statement  was                                                               
based  on  information  from  prior years  and  the  fiscal  note                                                               
reflects more recent information.                                                                                               
                                                                                                                                
MS. KOENEMAN responded that the  fiscal note was prepared by DOR.                                                               
She maintained  that the  initial estimates  were based  on prior                                                               
conversations with Mr. Dauphinais,  the former executive director                                                               
of  APOC,  at  the  time  staff began  working  on  the  proposed                                                               
legislation.  She  asserted that after HB 91  was introduced, DOR                                                               
was  able to  make estimates  based on  "official" numbers.   She                                                               
relayed that  the sponsor  statement will  be updated  to reflect                                                               
the estimates in the fiscal note.                                                                                               
                                                                                                                                
REPRESENTATIVE  BIRCH  asked  about  APOC's  use  of  the  excess                                                               
revenue.                                                                                                                        
                                                                                                                                
MS. KOENEMAN responded  that the intent of the  legislation is to                                                               
offset some  of the  general fund  revenue currently  provided to                                                               
APOC, thus,  making it  more self-sustaining.   She  offered that                                                               
any  additional  revenue  that would  make  APOC  self-sufficient                                                               
would be good for the State of Alaska.                                                                                          
                                                                                                                                
REPRESENTATIVE BIRCH expressed his  concern with the large amount                                                               
of money  that would  go to  APOC and said  he still  supports an                                                               
increased fee over a percent tax.                                                                                               
                                                                                                                                
3:44:43 PM                                                                                                                    
                                                                                                                                
MR. ALPER commented that he has  a conflict of interest in regard                                                               
to HB 91, as he is a public  official and would be subject to the                                                               
$50 registration  fee proposed under HB  91.  He stated  that the                                                               
fiscal note  drafted by  DOR was  specific to  the tax  impact of                                                               
Section 9  of the  proposed legislation.   He offered  that since                                                               
the tax would  replace the existing $250  administration fee, the                                                               
net fiscal  impact would not  be a  positive $425,000.   He added                                                               
that perhaps Ms. Hebdon or Ms.  Koeneman could speak to the total                                                               
value of  the reduction of  funds due  to the elimination  of the                                                               
$250 per  client administration  fee.  He  attested that  he does                                                               
not  know  the  source  of  the  data  in  the  original  sponsor                                                               
statement.  He  asserted that when preparing the  fiscal note, he                                                               
used  APOC's lobbying  reports and  its database  of billings  by                                                               
companies to  the lobbyists.   He said  he arrived at  the $16-17                                                               
million figure through that data.                                                                                               
                                                                                                                                
CHAIR KREISS-TOMKINS  requested that a reconciliation  of the two                                                               
amounts be done before the next hearing of HB 91.                                                                               
                                                                                                                                
3:46:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON asked  if consideration  of HB  91, which                                                               
would  levy an  income  tax  on a  special  group  of people,  is                                                               
premature in  light of the  anticipated introduction of  a larger                                                               
income tax bill.                                                                                                                
                                                                                                                                
REPRESENTATIVE  KITO responded  that the  purpose of  the revenue                                                               
raised  through HB  91 is  to  support APOC.   He  opined that  a                                                               
general income tax  would go into the general fund  and would not                                                               
be designated  to specific  components of  state government.   He                                                               
reiterated that  his goal  in introducing  HB 91  was:   to allow                                                               
APOC  to  take  advantage  of  the  receipt  authority  that  the                                                               
legislature  had granted  it; to  provide  additional revenue  to                                                               
replace a  position in Juneau that  was lost to budget  cuts; and                                                               
to make  the reporting and  auditing of lobbying  activities more                                                               
transparent and efficient.                                                                                                      
                                                                                                                                
3:48:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON asked  if the fee would be  prorated for a                                                               
lobbyist who  did not perform  lobbying activities all  months of                                                               
the year but was employed in another job.                                                                                       
                                                                                                                                
REPRESENTATIVE KITO  claimed that APOC currently  requests that a                                                               
lobbyist  who is  an  employee of  an  organization identify  the                                                               
amount of salary he/she receives for lobbying activities.                                                                       
                                                                                                                                
3:49:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  asked if  the $250 fee  is per  lobbyist and                                                               
not per client.                                                                                                                 
                                                                                                                                
REPRESENTATIVE KITO  answered no,  the current  $250 registration                                                               
fee is per client represented by a lobbyist.                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL commented  that  midwives pay  $4,000 for  a                                                               
license.   He offered  that lobbyists are  passing the  fees onto                                                               
their clients.  He restated  Representative Kito's concern that a                                                               
flat  rate  fee  is  inequitable   among  clients  charging  very                                                               
different amounts.   He mentioned  that he is also  interested in                                                               
finding out how many lobbyists are registered in Alaska.                                                                        
                                                                                                                                
3:51:13 PM                                                                                                                    
                                                                                                                                
CHAIR KREISS-TOMKINS asked  Ms. Hebdon to provide  his office the                                                               
number  of  individual  professional  lobbyists  registered  with                                                               
APOC.                                                                                                                           
                                                                                                                                
3:51:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX offered that  there would be no requirement                                                               
for  the revenue  generated through  HB 91  to be  designated for                                                               
APOC.                                                                                                                           
                                                                                                                                
REPRESENTATIVE KITO  responded that  technically that  is correct                                                               
except the candidate fees proposed  under HB 91 would go directly                                                               
to  APOC.   He added  that it  would be  more of  a challenge  to                                                               
ensure the income tax was designated for APOC.                                                                                  
                                                                                                                                
[HB 91 was held over.]                                                                                                          
                                                                                                                                
3:52:30 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:52 p.m. to 3:59 p.m.                                                                       
                                                                                                                                
         HB 50-PROF. SERVICES IN STATE-FUNDED CONTRACTS                                                                     
                                                                                                                                
3:59:49 PM                                                                                                                    
                                                                                                                                
CHAIR KREISS-TOMKINS  announced that the final  order of business                                                               
would be HOUSE  BILL NO. 50, "An Act relating  to the procurement                                                               
of  architectural, engineering,  or land  surveying services  for                                                               
state-funded contracts."                                                                                                        
                                                                                                                                
4:00:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAM  KITO, Alaska State Legislature,  presented HB                                                               
50, as  prime sponsor.  He  stated that the concept  behind HB 50                                                               
is championed  by the Alaska Professional  Design Council (APDC),                                                               
a coalition of professional  organizations that represent members                                                               
of the design community.   He mentioned that he is professionally                                                               
affiliated with the council through  his membership in the Alaska                                                               
Section  of  American Society  of  Civil  Engineers (ASCE).    He                                                               
relayed that  through the  proposed legislation,  the predominant                                                               
factor  for  selection  of design  services  for  a  construction                                                               
project  would be  the qualifications  of  those services  rather                                                               
than cost.   He asserted that the Department  of Transportation &                                                               
Public Facilities  (DOT&PF) already  uses this  selection process                                                               
for  projects it  funds directly,  and  HB 50  would extend  that                                                               
requirement to  projects funded  by the  State of  Alaska through                                                               
grants to municipal governments.                                                                                                
                                                                                                                                
REPRESENTATIVE KITO attested  that the goal of HB 50  would be to                                                               
ensure that projects  funded by the State of Alaska  are the most                                                               
efficient and  cost effective.   He  relayed that  the activities                                                               
performed   by  architects,   engineers,   land  surveyors,   and                                                               
landscape architects are not cost-based.   He asserted that these                                                               
professionals would  not be competing  based on their  ability to                                                               
minimize the cost  of their services, but on  their knowledge and                                                               
experience in their  area of expertise.  He said  for most design                                                               
projects, design  services constitute about six  to eight percent                                                               
of the cost of a project.  He  offered that HB 50 would allow the                                                               
hire of a design professional  who could provide the service most                                                               
efficiently and who has the best experience for the work.                                                                       
                                                                                                                                
REPRESENTATIVE  KITO said  that when  an owner  has identified  a                                                               
short  list of  candidates,  he/she can  work  directly with  the                                                               
number  one scoring  individual or  firm to  negotiate a  fee for                                                               
doing  the work.    If the  owner  is not  able  to negotiate  an                                                               
acceptable fee,  then those negotiations  can be  terminated, and                                                               
the owner  can negotiate with  the number two scoring  company or                                                               
individual.  He said in that  way, the State of Alaska can ensure                                                               
that  the  people  doing  this state-funded  work  are  the  most                                                               
qualified.                                                                                                                      
                                                                                                                                
4:05:23 PM                                                                                                                    
                                                                                                                                
DALE  NELSON,   Chair,  Legislative  Liaison   Committee,  Alaska                                                               
Professional Design  Council (APDC),  testified in support  of HB                                                               
50 on behalf of the APDC  Legislative Liaison Committee.  He said                                                               
that he also  represents the American Society  of Civil Engineers                                                               
Region 8,  which includes nine  states and soon will  include two                                                               
territories and  two provinces of  Canada.  He mentioned  that he                                                               
also  sits on  the board  of  the American  Society of  Engineers                                                               
(ASCE).    He directed  the  committee's  attention to  the  APDC                                                               
position statement in the committee  packet.  He stated that APDC                                                               
represents the  Alaska Society of Professional  Engineers (ASPE),                                                               
the Alaska  Society of Professional  Land Surveyors  (ASPLS), the                                                               
American  Institute  of  Architects  (AIA)  Alaska  Chapter,  the                                                               
American Society  of Civil Engineers  (ASCE) Alaska  Section, the                                                               
American Society  of Landscape Architects (ASLA)  Alaska Chapter,                                                               
and  the  American Council  of  Engineering  Companies of  Alaska                                                               
(ACEC-Alaska).                                                                                                                  
                                                                                                                                
MR. NELSON relayed that the  State of Alaska requires that design                                                               
professionals  for   state-funded  projects  be   selected  using                                                               
qualifications  based criteria,  and HB  50 would  implement that                                                               
requirement  at   the  community   level.    He   explained  that                                                               
Qualifications Based Selection (QBS)  procedures are specified by                                                               
the U.S.  Brooks Architect-Engineers  Act [of 1972]  ("the Brooks                                                               
Act"),  more than  40  mini  Brooks Acts,  and  the American  Bar                                                               
Association's (ABA's) Model Procurement  Code for State and Local                                                               
Governments.                                                                                                                    
                                                                                                                                
4:09:34 PM                                                                                                                    
                                                                                                                                
MR.  NELSON paraphrased  from the  ASCE policy  statement in  the                                                               
committee packet, which read [original punctuation provided]:                                                                   
                                                                                                                                
     Often  a contracting  entity "owner"  may believe  that                                                                    
     the pivotal  issue in the  selection of  a professional                                                                    
     engineer is the cost of  the necessary services.  Also,                                                                    
     an owner may  perceive that accepting the  low price to                                                                    
     perform the  work produces the project  with the lowest                                                                    
     total cost.   In this case, the owner is  of the belief                                                                    
     that the  required engineering services  are completely                                                                    
     described and  the qualifications of all  engineers are                                                                    
     equal.                                                                                                                     
                                                                                                                                
MR. NELSON  went on to  say that  it is impossible  to completely                                                               
describe  the  scope  for required  professional  services.    He                                                               
continued  paraphrasing from  the  ASCE  policy statement,  which                                                               
read [original punctuation provided]:                                                                                           
                                                                                                                                
     A  poorly  defined  scope of  services  can  result  in                                                                    
     numerous change  orders.  Lacking specifics,  each firm                                                                    
     may  be  compelled  to, in  order  to  be  competitive,                                                                    
     submit a price for the  least amount of work reasonably                                                                    
     envisioned.                                                                                                                
                                                                                                                                
MR. NELSON concluded  by saying, "APDC strongly  believes that it                                                               
is  in  the public's  interest  to  utilize  QBS for  all  public                                                               
projects  while allowing  for subsequent  fee negotiations."   He                                                               
contended that HB 50 would do this.                                                                                             
                                                                                                                                
4:12:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK asked where QBS is located in HB 50.                                                                        
                                                                                                                                
REPRESENTATIVE  KITO replied  that a  new statute,  AS 36.90.110,                                                               
proposed  in Section  1 of  HB 50,  discusses how  procurement of                                                               
engineering  services   would  be   performed  and  the   use  of                                                               
qualifications as the selection criteria for design services.                                                                   
                                                                                                                                
REPRESENTATIVE  TUCK  asked  if  there was  a  standard  for  the                                                               
qualifications used for selection criteria.                                                                                     
                                                                                                                                
REPRESENTATIVE  KITO explained  that a  typical project  would be                                                               
advertised  with a  request for  proposal  (RFP).   He said  that                                                               
qualified candidates  would then  submit proposals  for providing                                                               
the  services designated  in  the  scope.   He  relayed that  the                                                               
proposals would  be reviewed according to  identified criteria in                                                               
the [RFP]  notice.   He added that  the criteria  typically would                                                               
include  the individual  resumes, the  corporate experience,  the                                                               
team experience,  and the  workload of the  designer.   These are                                                               
all  qualifications  of  the firm  or  individual  providing  the                                                               
service.   He  mentioned  that  the RFP  may  also include  local                                                               
selection as  a criteria.  He  stated that all of  these criteria                                                               
components  are assigned  a  certain number  of  points based  on                                                               
their importance as  determined by the project owner.   A team of                                                               
reviewers then would review and  score the proposals according to                                                               
the criteria set  forth.  He reiterated that  the highest scoring                                                               
proposer  would be  the first  to be  offered the  opportunity to                                                               
negotiate a  fee.  If that  fee negotiation fails, then  the next                                                               
highest scoring proposer would be engaged to negotiate a fee.                                                                   
                                                                                                                                
4:15:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  expressed his irritation with  design people                                                               
who  "don't  know   what  they  are  talking   about,"  which  he                                                               
experienced in his  street lighting and traffic  control work for                                                               
DOT&PF.  He offered  that it is a huge process  to try to resolve                                                               
any design  flaws "in  the field."   He stated  that he  sees the                                                               
need to  "qualify" the bid  with experience and  workload, rather                                                               
than using  the low  bid as a  qualifier.  He  opined that  HB 50                                                               
does not  state how selection is  made but appears to  leave that                                                               
up  to the  judgement of  the contracting  person.   He suggested                                                               
that the criteria components, mentioned by Representative Kito,                                                                 
should be  stated in the  proposed legislation.  He  asked, "What                                                               
in our procurement  codes right now prevents you  from doing this                                                               
already?"                                                                                                                       
                                                                                                                                
REPRESENTATIVE  KITO responded  that  the language  in  HB 50  is                                                               
language copied from  DOT&PF statutes, and that  language is what                                                               
provides DOT&PF  the [procurement]  flexibility.  In  response to                                                               
Representative Tuck's first question, he  opined that it would be                                                               
difficult for the  legislature to anticipate all of  the types of                                                               
projects  that would  be  advertised.   He  added that  providing                                                               
direction on  certain criteria could  create limitations  for the                                                               
procurement  officer issuing  an RFP.    He said  that DOT&PF  is                                                               
already required by Alaska's mini-Brooks  Act to select designers                                                               
based  on qualification.   He  offered that  HB 50  would require                                                               
municipalities receiving public money  through the legislature to                                                               
use  QBS.    He  added  that  many  municipalities  already  have                                                               
ordinances  with this  requirement  but offered  that since  some                                                               
don't, HB  50 would "even  the playing field"  for municipalities                                                               
receiving state money.                                                                                                          
                                                                                                                                
4:18:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked if  HB 50  could have  prevented "what                                                               
happened with the  Port of Anchorage," if that had  been a state-                                                               
funded project.   He mentioned that  the Port of Anchorage  was a                                                               
design flaw;  many consultants  were involved;  much of  the work                                                               
was  sole sourced;  there were  many judgement  calls; and  there                                                               
were warnings from engineers.  He  offered that a project such as                                                               
that  gives a  great deal  of responsibility  to the  contracting                                                               
person.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  KITO  offered  that  he  believes  the  [Port  of                                                               
Anchorage] situation  to have  been unique.   He said  he doesn't                                                               
know enough about that project to  say if HB 50 would have helped                                                               
in that situation.                                                                                                              
                                                                                                                                
4:20:01 PM                                                                                                                    
                                                                                                                                
MR.  NELSON   responded  that  "sole   source"  is  the   key  in                                                               
Representative Tuck's  testimony regarding the Port  of Anchorage                                                               
project.   He said that  sole source procurement is  not included                                                               
in HB  50; instead, HB  50 represents  a process to  be followed.                                                               
He  suggested  that  following the  mini-Brooks  Act  might  have                                                               
prevented what happened with the Port of Anchorage project.                                                                     
                                                                                                                                
REPRESENTATIVE  TUCK  expressed  his  concern  that  there  be  a                                                               
process and stated  that he doesn't see  one in HB 50.   He cited                                                               
language in Section 1  of HB 50, on page 1,  beginning on line 7,                                                               
which read as follows:                                                                                                          
                                                                                                                                
     The  contracting  person   shall,  when  selecting  the                                                                    
     contractor,  negotiate  with  the  most  qualified  and                                                                    
     suitable    professional    person   of    demonstrated                                                                    
     competence to  perform the  services.   The contracting                                                                    
     person shall  award the contract for  those services at                                                                    
     fair and  reasonable compensation as determined  by the                                                                    
     contracting person.                                                                                                        
                                                                                                                                
REPRESENTATIVE  TUCK attested  that  HB 50  doesn't identify  the                                                               
criteria; it is  too subjective; and it is all  determined by one                                                               
person.   He asked if there  was any way a  design engineer could                                                               
appeal if he/she saw a  design flaw in another engineering firm's                                                               
proposal.                                                                                                                       
                                                                                                                                
REPRESENTATIVE   KITO   said    that   different   projects   are                                                               
administered  in different  ways.   He  relayed  that very  large                                                               
projects will  often budget  for value  engineering, in  which an                                                               
engineer or  architect will complete  a design and forward  it to                                                               
another  engineering   or  architecture  firm  to   review.    He                                                               
mentioned  that  this probably  wouldn't  be  done for  a  simple                                                               
project, but might  be for a major international  airport or port                                                               
project.    He  said  it  would  be  at  the  discretion  of  the                                                               
procurement officer.   He  explained that if  HB 50  becomes law,                                                               
the  procurement officer  would not  make all  of the  decisions.                                                               
When selecting  a designer, the  procurement officer  would write                                                               
the  RFP and  assemble  the selection  team  with the  knowledge,                                                               
experience,  and  responsibility  to  review  the  proposals  and                                                               
select the most qualified offeror.                                                                                              
                                                                                                                                
4:23:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON asked  if HB 50 would  preclude awarding a                                                               
contract based on low bid.                                                                                                      
                                                                                                                                
REPRESENTATIVE KITO explained that there  are two components to a                                                               
construction project:  the  actual construction activities, which                                                               
are  generally awarded  based on  low bid;  and the  design work,                                                               
which through HB 50 would  be awarded based on the qualifications                                                               
and experience of the designer.                                                                                                 
                                                                                                                                
REPRESENTATIVE JOHNSON  commented that she has  seen some amazing                                                               
design  work portfolios,  but unfortunately  the firms  were from                                                               
out of state.  She offered  that the larger cities already follow                                                               
QBS practices and asked how HB 50 would benefit smaller cities.                                                                 
                                                                                                                                
REPRESENTATIVE  KITO asserted  that  QBS would  actually help  in                                                               
regard to smaller  cities.  He mentioned his  experience with the                                                               
Department of Education and Early  Development (DEED), in which a                                                               
district requested  proposals to  be submitted  based on  cost of                                                               
services.    He  suggested  that  time  drives  the  cost  of  an                                                               
engineering project:  lower cost  engineers may take more time to                                                               
complete  a project  and higher  cost engineers  less time.   The                                                               
discrepancy  between   engineers  is  based  on   experience  and                                                               
knowledge, not cost.                                                                                                            
                                                                                                                                
[HB 50 was held over.]                                                                                                          
                                                                                                                                
4:27:22 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
State Affairs  Standing Committee  meeting was adjourned  at 4:27                                                               
p.m.                                                                                                                            

Document Name Date/Time Subjects
HB 50 ver A 1.31.17.PDF HSTA 2/9/2017 3:00:00 PM
HB 50
HB 50 Sponsor Statement 1.31.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB 50 Sectional Analysis 1.31.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB 50 Supporting Documents-ASCE Policy Statement 304 2.7.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB 50 Supporting Documents-ASCE QBS State Issue Brief Aug 2011 1.31.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB 50 Supporting Documents-APDC LLC Fly-In Position Statement 11 Feb 2015 1.31.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB 50 Supporting Documents-Leg Research Report 1.31.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB 50 Fiscal Note-DOA-DGS 2.3.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB091 Version A.PDF HSTA 2/9/2017 3:00:00 PM
HB 91
HB091 Sponsor Statement 020217.pdf HSTA 2/9/2017 3:00:00 PM
HB 91
HB091 Sectional Analysis 020217.pdf HSTA 2/9/2017 3:00:00 PM
HB 91
HB091 Supporting Document - APOC Funding.pdf HSTA 2/9/2017 3:00:00 PM
HB 91
HB 091 Fiscal Note DOA 2.6.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 91
HB091 Fiscal Note 2.6.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 91
HB050 Supporting Document Letter 2.8.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50
HB050 Opposing Document Letter AML 2.9.17.pdf HSTA 2/9/2017 3:00:00 PM
HB 50