Legislature(1995 - 1996)
04/11/1995 08:07 AM House STA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 11, 1995
8:07 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Scott Ogan, Vice-Chair
Representative Joe Green
Representative Brian Porter
Representative Caren Robinson
Representative Ed Willis
MEMBERS ABSENT
Representative Ivan Ivan
COMMITTEE CALENDAR
SB 92: "An Act requiring that, in addition to its operating
budget, all activities of the Alaska Housing Finance
Corporation are subject to the Executive Budget Act."
PASSED OUT OF COMMITTEE
*HB 241: "An Act relating to the use of a candidate's campaign
account."
HEARD AND HELD
HB 232: "An Act establishing an economic development tax
credit; and providing for an effective date."
PASSED OUT OF COMMITTEE
(* First public hearing)
WITNESS REGISTER
JOHN BITNEY, Legislative Assistant
to Representative Terry Martin
Alaska State Legislature
State Capitol Building, Room 502
Juneau, AK 99801-1182
Telephone: (907) 465-3783
POSITION STATEMENT: Testified on SB 92
DAN FAUSKE, Corporate Executive Officer
Alaska Housing Finance Corporation
P. O. Box 101020
Anchorage, AK 99502
Telephone: (907) 564-9326
POSITION STATEMENT: Testified on SB 92
REPRESENTATIVE CON BUNDE
Alaska State Legislature
State Capitol Building, Room 108
Juneau, AK 99801
Telephone: (907) 465-4843
POSITION STATEMENT: Sponsor Statement for HB 241
BROOKE MILES, Juneau Branch Administrator
Alaska Public Offices Commission
240 Main Street, Room 201
Juneau, AK 99801
Telephone: (907) 465-4864
POSITION STATEMENT: Testified on HB 241
PREVIOUS ACTION
BILL: SB 92
SHORT TITLE: AHFC SUBJECT TO EXEC. BUDGET ACT
SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT
JRN-DATE JRN-PG ACTION
02/21/95 349 (S) READ THE FIRST TIME - REFERRAL(S)
02/21/95 349 (S) STA, FIN
02/28/95 (S) STA AT 03:30 PM BELTZ ROOM 211
02/28/95 (S) MINUTE(STA)
03/01/95 436 (S) STA RPT 4DP
03/01/95 436 (S) ZERO FISCAL NOTE (REV #1)
03/15/95 617 (S) FIN RPT 6DP 1NR
03/15/95 617 (S) PREVIOUS ZERO FN (REV #1)
03/15/95 (S) FIN AT 09:00 AM SENATE FINANCE 532
03/15/95 (S) MINUTE(FIN)
03/16/95 (S) RLS AT 12:00 PM FAHRENKAMP RM 203
03/16/95 (S) MINUTE(RLS)
03/17/95 664 (S) RULES TO CALENDAR 3/17/95
03/17/95 666 (S) READ THE SECOND TIME
03/17/95 666 (S) ADVANCED TO THIRD READING UNAN
CONSENT
03/17/95 666 (S) READ THE THIRD TIME SB 92
03/17/95 666 (S) PASSED Y18 N- E2
03/17/95 679 (S) TRANSMITTED TO (H)
03/20/95 802 (H) READ THE FIRST TIME - REFERRAL(S)
03/20/95 802 (H) STATE AFFAIRS, FINANCE
03/30/95 (H) STA AT 08:00 AM CAPITOL 102
03/30/95 (H) MINUTE(STA)
04/04/95 (H) STA AT 08:00 AM CAPITOL 102
04/04/95 (H) MINUTE(STA)
04/04/95 (H) MINUTE(STA)
04/06/95 (H) STA AT 08:00 AM CAPITOL 102
04/11/95 (H) STA AT 08:00 AM CAPITOL 102
BILL: HB 241
SHORT TITLE: NO PERSONAL USE OF CAMPAIGN ACCOUNT
SPONSOR(S): REPRESENTATIVE(S) BUNDE,Rokeberg
JRN-DATE JRN-PG ACTION
03/08/95 642 (H) READ THE FIRST TIME - REFERRAL(S)
03/08/95 642 (H) STATE AFFAIRS, FINANCE
03/10/95 713 (H) COSPONSOR(S): ROKEBERG
04/06/95 (H) STA AT 08:00 AM CAPITOL 102
04/11/95 (H) STA AT 08:00 AM CAPITOL 102
BILL: HB 232
SHORT TITLE: ECONOMIC DEVELOPMENT TAX CREDIT
SPONSOR(S): REPRESENTATIVE(S) KOTT
JRN-DATE JRN-PG ACTION
03/06/95 590 (H) READ THE FIRST TIME - REFERRAL(S)
03/06/95 590 (H) ECD, STA, L&C, FINANCE
03/21/95 (H) ECD AT 09:00 AM CAPITOL 17
03/21/95 (H) MINUTE(ECD)
03/22/95 850 (H) ECD RPT CS(ECD) 6DP
03/22/95 850 (H) DP: KELLY,MOSES,MACLEAN,KOHRING
03/22/95 850 (H) DP: SANDERS, ROKEBERG
03/22/95 850 (H) INDETERMINATE FISCAL NOTE (REV)
03/22/95 850 (H) FISCAL NOTE (DCED)
04/04/95 (H) STA AT 08:00 AM CAPITOL 102
04/04/95 (H) MINUTE(STA)
04/06/95 (H) STA AT 08:00 AM CAPITOL 102
04/11/95 (H) STA AT 08:00 AM CAPITOL 102
ACTION NARRATIVE
TAPE 95-46, SIDE A
Number 000
CHAIR JEANNETTE JAMES brought the meeting to order at 8:05 a.m. and
announced that the Anchorage LIO was on teleconference, listening.
She asked who the person was who would be testifying on SB 92.
SB 92 - AHFC SUBJECT TO EXEC. BUDGET ACT
Number 019
JOHN BITNEY, Legislative Assistant to Representative Terry Martin,
introduced himself as the staff to the Chairman of the Legislative
Budget and Audit Committee. As he stated, at their last LBAC
meeting a testifier from the Department of Revenue raised some
concerns about SB 91. They had some proposed language to submit to
the House State Affairs Committee that would address their concerns
about exemptions, procedures and financing, and mechanisms that
would allow them to take advantage of bonding opportunities in the
market, for one.
CHAIR JAMES said this bill had a blank committee substitute (CS),
and asked if everyone had a copy of it.
Number 059
REPRESENTATIVE SCOTT OGAN asked if Mr. Bitney could give an
analysis of the CS, and the changes.
MR. BITNEY explained that the language of the CS was prepared by
the Administration, or a representative of the Governor's office.
He said he was not involved in drafting the language, so he
encouraged the committee to let the drafters speak on that; they
could explain it better.
Number 070
CHAIR JAMES noted that she had requested the work draft. The
changes to the work draft on page 2, came from the Administration.
This was to give an exemption to normal business routines.
MR. BITNEY said there are exemptions that begin on line 5, page 2.
They defined what is on the outside of the procedures of the
Executive Budget Act for the corporation. Line 7 signifies the
things the representative from the Department of Revenue had
pointed out that would allow them to take advantage of various
bonding opportunities in the bond market. The corporation's
borrowing of money is exempted from the review procedures of the
Executive Budget Act. Line 11 asks basically that the loan
programs available for long programs, where no subsidy is provided,
be on the outside. Section C is exempted from multi-family
projects, where they take advantage of various tax credit
opportunities, or arbitrage earnings. Arbitrage earnings are
purchases of securities on one market for immediate resale on
another market in order to profit from a price discrepancy.
REPRESENTATIVE OGAN asked if the sponsor agreed with the
amendments.
MR. BITNEY answered that the sponsor was there at the pleasure of
the Labor and Audit Committee. The concerns brought up there were
the concerns that the committee brought up at the last hearing.
CHAIR JAMES said for the record, that Representative Caren Robinson
arrived at 8:10 a.m.
REPRESENTATIVE JOE GREEN said that he moved they adopt the unmarked
House CS for SB 92 as the working copy. There being no objections,
the unnumbered CS was adopted.
Number 160
DAN FAUSKE, Chief Executive Officer, Alaska Housing Finance
Corporation, testified in support of SB 92. He said it represented
a workable solution for them. The bill considers issues, such as
subsidized mortgage programs, that raised such concern. It does
not tie their hands in reference to entering the capital market, to
continue the bond portfolio in the loan programs. He saw the
language as healthy, and said it was a situation that the AHFC
could live with. It also met requirements and needs that the
legislature stated.
REPRESENTATIVE GREEN said when they last met they discussed item
"C," which was the $10 million, and his recollection was that Mr.
Fauske did not have any problem with that either.
MR. FAUSKE concurred that it was not something they couldn't live
with. He said the original statement applied to bonded
indebtedness. In a bond portfolio $10 million would be rather
restrictive. The new language is fine.
Number 180
CHAIR JAMES recalled that a resolution was drafted for a title
change, but it was not in her folder. Her committee aide
questioned if a title change was necessary, and the consensus of
the committee was that it was necessary. She asked her aide to
check that out.
REPRESENTATIVE CAREN ROBINSON wondered if AHFC would prefer that
things stay as they are. She asked if operations would be better
if things remained as they were, or if this legislation would help
their operation. She said Juneau builders were unhappy with this
bill originally.
MR. FAUSKE said his personal assessment was that the legislation
would help to enhance relations with the legislature. It would
make his job easier, so he viewed it as a win-win situation. It
puts everyone in a situation where healthier dialogue can happen,
so that will be good.
REPRESENTATIVE ROBINSON brought up that the local Juneau Home
Builders Association did not like this bill originally, and
wondered if Mr. Fauske would think they would be happy with the
changes.
MR. FAUSKE said he thought they should like the changes. He felt
this legislation allowed a great deal of flexibility. When they
get into projects of over $10 million, which are few, so they do
not come before them very often. There is a long lead time to give
them adequate time to get before their constituency and the
legislature for dialogue. It changes the operation style somewhat,
but not enough to impede the organization's ability to carry out
its missions. Mr. Fauske said it would be all inclusive in the
sense that many of the programs fall under the capital budget as
representative of the Family Home Loan Program. He thought it
would increase the oversight, and also, it would not lead to
situations as in the past, such as the 5 percent on the subsidies.
It removes the subsidized loan programs. That program created
confusion and concern. It strengthens the legislature's oversight
activity, or review of projects, so the changes are good. Big bond
issues are reviewed and those are not impaired by this.
CHAIR JAMES said she would like to move the bill out of committee
and asked for a motion.
Number 252
REPRESENTATIVE JOE GREEN moved that they pass the House CS for SB
92 as amended out of committee, with individual recommendations and
attached fiscal note. He was referring to the CS they adopted as
the working draft. Hearing no objections, the motion passed.
REPRESENTATIVE PORTER moved to pass HCR unnumbered, 9-LS1029/A,
dated 4/3/95. There being no objections, the motion passed.
CHAIR JAMES said that the resolution for the title change would
also be passed out.
HB 241 - NO PERSONAL USE OF CAMPAIGN ACCOUNT
Number 275
REPRESENTATIVE CON BUNDE, sponsor of HB 241, provided his sponsor
statement to the committee. He said his least favorite part of
public service is having to raise money for campaigning. Another
concern he had was how people have reacted to fund raising. Many
will gladly support their candidates, yet they resent the idea
that, at some point, the surplus funds could be taken as personal
income. Citizens who contribute to campaigns or to nonprofit
organizations usually want to know where their money is expended.
So, HB 241 will increase the accountability of candidates funds,
and this will facilitate and increase the publics trust.
REPRESENTATIVE BUNDE explained that this bill provides new choices
for the disposal of surplus campaign funds after a candidate elects
not to run for office again. These choices are not currently
available to them. Contributions given to candidates, whether
before, during or after campaigns, are given by people who want
that candidates representation; also, they wish to participate in
representative government. Campaign funds are raised annually from
the same supporters, and it can result in a surplus of funds that
can be used in future campaigns, or taken as personal income if the
candidate elects not to run again. HB 241 provides for surplus
funds to be given to charities, repaid to contributors, contributed
to other candidates, political parties or groups supporting ballot
propositions, or given to the general fund. It cannot be taken as
personal income. This legislation would change what has been
formerly allowed in regard to surplus funds. The use of campaign
funds as personal income or as office allowance funds will not be
an available choice for the disposal of surplus funds. He added
that he doubted anyone in the room has surplus campaign funds, but
it has been known to happen.
REPRESENTATIVE GREEN brought out, first, that this may not hold for
candidates who ran unopposed in the last election. Representative
Green added that it could be a campaign strategy. He pointed to
Item four, where it said the interest must be left in the account,
which, in most cases, is reportable as taxable income. He asked if
Representative Bunde was saying to leave the money in, but pay the
tax on the interest.
REPRESENTATIVE BUNDE said if a candidate chose to end his campaign
there is no provision against repaying loans to your campaign. As
for the interest he did not think it was reportable for tax
purposes. As long as the money remained in the account and was not
used as personal income the candidate did not have to pay tax on
it.
CHAIR JAMES said that somebody has to pay. A social security
number is on the account, and whomever the social security number
belongs to is responsible to pay taxes on the interest.
REPRESENTATIVE BUNDE thought that as long as the accrued interest
is left in the campaign account, and it is used exclusively for
campaign activity, it is not taxable.
REPRESENTATIVE PORTER agreed. If portions of the total are
withdrawn for personal use it would then be taxable. He believed
the interest is treated as a campaign contribution.
REPRESENTATIVE BUNDE pointed out that this legislation does not
change the existing law; candidates are required to leave the
interest in the account now.
CHAIR JAMES stated that the interest on that account will be
reported to the candidate on a 1099 tax form.
REPRESENTATIVE GREEN concurred, and stated that the interest on the
account, wherever they have the funds, is reported as income.
CHAIR JAMES asserted that they would have to report the amount of
interest with an explanation of why it is not taxable.
REPRESENTATIVE PORTER agreed that was true; however, he would have
to check it out. His recollection was that interest is treated as
a campaign contribution and is not taxable.
Number 385
REPRESENTATIVE BUNDE told the Chair he just had his taxes done, and
he was told by the CPA who does the taxes, that they wanted to know
what the funds are. It is reported as income kept in a campaign
account, but there is no tax liability to the candidate. He
stressed that HB 241 does not change the existing regulation on tax
laws.
Number 397
REPRESENTATIVE PORTER had a question about the language on the
first page of the bill where it says that the candidate can give
the surplus funds to charity. He recommended they define
charity. It would eliminate candidates from naming family members
and friends as charity cases.
REPRESENTATIVE BUNDE agreed he had a good point.
CHAIR JAMES mentioned a 501C3 definition of qualifying charity.
REPRESENTATIVE PORTER asked about last section of the bill,
beginning at the end of line 22. It says: The Campaign shall
report the disposal of any item worth at least $1000 at the time of
acquisition. Representative Porter also asked to whom this item
must be reported.
Number 420
REPRESENTATIVE BUNDE said it was referring to a purchase costing
more than $1000, then disposing of it later. It was brought out
that the reports before them were referring to APOC. He added that
building public confidence and filling loop holes to reduce
opportunities to pocket money when reselling of high ticket items
after going out of office, is what they are talking about.
REPRESENTATIVE ROBINSON wondered if there had been a major problem
with candidates pocketing money. She was not fighting this bill,
but she wanted to stress that not everyone could afford to take six
months off work to campaign for office. Some people are less
privileged and do not have political money to finance them. She
urged the committee to be careful about what they are saying, and
to be sure they really wanted such tight restrictions for
candidates leaving office. She would not like to see candidates
taking political money illegally, but she thought it should be up
to the people contributing their money. Some people need more help
than others during an election.
Number 477
REPRESENTATIVE BUNDE said they seemed to be talking about two
different kinds of people. Nothing in this legislation would
prevent a new person running from paying for lunches and so forth.
This bill aimed at a different kind of person, namely persons who
have achieved power and influence. Contributors often do not feel
they have the flexibility to contribute or not. If they do not
there might be retribution. Even if there is not, the concern is
there. He pointed out that ongoing campaign expenses are not
addressed. Also, when someone decides not to run for office again,
there is a question about how to dispose of that money, such as a
surplus of $60 or $70 thousand. Contributors normally do not intend
for their contributions to be used as income.
Number 524
REPRESENTATIVE ROBINSON spoke of herself when she was a new
candidate, and at the end of the campaign she had a surplus of $2
thousand. She lost the campaign and was struggling to find a job.
As she understood it, she could not use that surplus of $2 thousand
to live on until she found work.
REPRESENTATIVE BUNDE stated that she was correct in her assumption
that she could not use the money.
REPRESENTATIVE ROBINSON did not have a problem with saying a
candidate whos been in office for five, ten or twelve years, with
a surplus of $60 thousand, cannot take all of that as personal
income. It could go back to a political party of their choice, a
particular charity of their choice, or back to the contributors.
Her concerns were the first time people who are just getting
started. Running for office is an incredible strain on the family,
even for families with two incomes.
Number 550
REPRESENTATIVE BUNDE concurred. He realized that campaigning is a
strain and he understood Representative Robinsons concern. To
open the door, however, to personal income, and to those people who
are accustomed to a life style that is several hundred thousand a
year, might say they should be allowed to take extra $60 thousand
just as the less privileged person would about taking $2 thousand.
REPRESENTATIVE ROBINSON wondered what would stop anyone from
pocketing surplus funds. She did not believe this bill would stop
them.
REPRESENTATIVE BUNDE said this legislation will not stop this, yet
if candidates continue to raise funds and have surplus funds it
will go into the political process somewhere and not into their
pocket. He thought they might become less ambitious, perhaps,
about fund raisers.
Number 610
REPRESENTATIVE OGAN said he was supportive of this bill. He said
he knew some long time legislators who retired with significant
amounts of money in their campaign accounts. He is interested to
see the next APOC report. He said they would spend what they had
last year, then what they raised this year kept building up for
retirement. This is a good bill, since it will end that activity.
REPRESENTATIVE PORTER said, for the record, if the bill passed it
would capture existing campaign accounts. It would not start with
campaign contributions after the effective date.
Number 661
CHAIR JAMES said she is one who has worked on reduced government.
What we do in this country is make laws to fit the few and inhibit
the many. We do it consistently. She said we also have the
attitude that candidates and legislators are cleaning up. People
complain about the per diem and say legislators should not take it.
Some people probably do not need the higher per diem rate, while
others do. The solution they think is to put everyone at the same
level, and in the process they could squeeze people out from the
bottom. She had concerns about that. She would like to see how
big of an infraction it is, and if it inhibits the political
process or makes it dirtier. Chair James reflected on what
Representative Robinson said, and she would visualize a political
process opened to everyone, whether or not they are financially
able. A campaign takes its toll, whether the candidate wins or
loses, and her belief was that after a person has been in the
process for a while, and they have accumulated a war chest, that it
should be treated differently.
CHAIR JAMES noted on the 1994 APOC report that only one was very
large. However, she said she could see a person with a family
being down and out by the end of the campaign. She did not feel
comfortable with that, and could not take a position one way or
another on the bill. She said she was happy to move the bill out,
but she had concern about it. It is the same old practice of
getting to a few and then inhibiting the many.
REPRESENTATIVE OGAN shared Chair James concerns. He ran one of
the most frugal campaigns, maybe in history. He spent a total of
$5 thousand to get elected. He is not a rich man; he is a working
man with a small business. If he had not won, he would probably
still be working to catch up. So, he was wondering if setting some
limits would be workable. There are long-time political types that
run year after year; they hold fund raisers and take in huge
donations and build up a retirement account. Representative Ogan
wondered if they should consider some kind of amendment to set a
dollar amount. It could allow people on the lower end who run for
office the ability to recover some expenses for time out of work.
Number 633
REPRESENTATIVE BUNDE spoke about the necessity for restrictions.
He knew of people who bought tires and other things that he might
not consider a normal campaign expense, but this would defray the
impact the actual campaign makes. As for reimbursements, it is a
more difficult situation. To get to that we need the Federally
Financed Campaign where everyone gets the same amount, and it comes
through taxes. Most people will not be impacted by this
legislation. Some people might even be negatively impacted. The
goal is to re-establish public confidence in the process, and to
change the perception some have that we are all getting rich here.
CHAIR JAMES wished to add that although she has been here only
three years, she could personally say that you give up a lot to be
in this position. It is hard to say if a balance in a campaign
account is not worth it for what you give up. She is cautious
about this, because she doesnt want anyone to be hurt.
Number 678
REPRESENTATIVE PORTER said he recently got a sheet with transfers
to legislative office account. He asked if this bill would
preclude that.
REPRESENTATIVE BUNDE answered Yes. The reason is that
legislative office accounts can be personal income. There are two
ways they can take their office account money: take it and verify
it with receipts, or take it in a lump and pay taxes on it. That
way it is personal income.
TAPE 95-46, SIDE B
Number 000
REPRESENTATIVE BUNDE said that only when you stop running are you
required to define the money in a campaign account as personal
income.
REPRESENTATIVE ROBINSON did not see that they had a definition for
personal income. During the campaign she used a very small
percentage of her office for her business. So, she took a
percentage of that and used the money from the campaign to pay for
it. The office, at that time, was 100 percent campaign. She
wondered if that would be perceived as personal.
REPRESENTATIVE BUNDE said that it would not. This would apply when
a candidate stopped running.
Number 042
REPRESENTATIVE ROBINSON still thought they should define personal
income. Also, pertaining to what Representative Porter had said,
she was trying to spend as little as possible of her $6 thousand
and it is disappearing very quickly. She is only responding to
constituents who write, who want information on different bills.
REPRESENTATIVE PORTER thought they decided that charities should be
defined, and he asked the sponsor to consider adding a definition
of personal income that would perhaps exclude money spent for
legitimate campaign or legislative activities.
REPRESENTATIVE BUNDE asked if they could defer to APOC.
Number 071
BROOKE MILES, Juneau Branch Administrator, Alaska Public Offices
Commission, said the Commission had the opportunity to review HB
241, and thanked the Chair for the opportunity to participate. The
Commission had recommendations concerning the original draft,
having worked with the sponsors staff, and they came forward with
the CS that is in the packets. One idea the commission had that
the sponsor did not embrace was to permit transfers to an office
account, but to require reporting expenditures from the transfers
on their Campaign Disclosure Report. Currently, a candidate only
reports the transfer on their expenditure schedule to an office
account. There is no follow up reporting on how the funds were
expended. That would tighten up that issue if the committee would
prefer that recommendation be put back in. Ms. Miles said the
commission supports this legislation. Nationwide, in all of the
states and at the federal level, there have been reform acts
regarding the personal use of campaign funds. This legislation
simply prohibits taking surplus funds as personal income when a
candidate is no longer going to be an active candidate.
REPRESENTATIVE PORTER asked if his impression was correct, that a
candidate could take funds as personal income.
Number 134
MS. MILES answered that the campaign disclosure law would not
prohibit making expenditures from the campaign account, which may
be construed as personal use. Each expenditure must be listed with
an explanation on the campaign disclosure, however. Candidates
must list expenditures by date, check number and payee. This bill
would not prohibit a single mother from paying rent or buying
groceries, for instance during the course of her campaign, though
she would be required to disclose this on her report (i.e.,
Foodland, for groceries).
REPRESENTATIVE PORTER asked if Ms. Miles knew what other states
provide in this area of law.
MS. MILES said she was not familiar with what each state provides
in this area. She directed Representative Porter to the sponsors
staff, saying they could probably supply him with summaries.
Number 146
REPRESENTATIVE OGAN asked if Ms. Miles was aware of anyone who
retired and where there were major withdrawals from campaign
accounts used as personal income.
MS. MILES answered, Yes. Candidates have retired with over $100
thousand in their campaign accounts, which they took as personal
income.
Number 175
REPRESENTATIVE ROBINSON asked about the report Ms. Miles gave them,
which Ms. Miles said was a jumbled list, and it listed the balances
in campaign accounts of 60 unidentified legislators. She also
reiterated her suggestion that they add a definition of personal
income.
MS. MILES said in statute there are existing definitions of
personal income that could be incorporated.
REPRESENTATIVE ROBINSON wondered if the Commission discussed the
person who loses a campaign and has to use some of the finances
while running to live, then had a $2 thousand surplus at the end of
the campaign and needed to use that to get going again. She
wondered if it was discussed or if it was more on the large left-
over amounts after a person has been around for a long time.
MS. MILES said this was not discussed. Many issues were discussed
in past times, including the personal use of campaign funds, which
is much more complex and controversial. Usually, there is not a
significant surplus left in a campaign account.
CHAIR JAMES asked what the committee wished to do with the bill.
REPRESENTATIVE PORTER wanted to ask a question of the sponsor
before making any decision. He said it appears, even though it
must be reported, that there is unlimited opportunity for
conversion while a person is an active candidate or active
legislator. It is only that you cannot convert it if you quit. He
asked what the rationale for making that distinction is.
REPRESENTATIVE BUNDE said there is plenty of sunlight on campaign
funds while a person is actively campaigning; the active candidate
is personally responsible. When a person is no longer running the
public has no more influence on them.
CHAIR JAMES said, with her background in accounting, that she
understands how people get around things. Her impression was that
when a person is an active legislator they can take money out, and
it is reportable. There is nothing stopping a person from
transferring that money, but, of course, they tell the world they
are doing it. If they decide not to run again and they have a
large surplus of funds, say $100 thousand, they cannot take it.
She wondered what would stop a person from splitting the amount,
and putting some in their own savings account somewhere and leaving
the rest in the campaign account.
Number 272
REPRESENTATIVE PORTER thought he understood the intent of the bill,
but he questioned the operative line, page 1, line 6, where it
says, A candidate may not take money from the surplus balance of
the candidates campaign account as personal income. He asked
where the bill says this only means after he or she decides never
to run again.
CHAIR JAMES said the candidates report a surplus every month if
they do an APOC report.
REPRESENTATIVE BUNDE explained that any expenses a candidate feels
they can justify to APOC, and to the public, they can reasonably
pay for out of the campaign account. They cannot just take the
money and put it in their pocket.
REPRESENTATIVE PORTER did not see how their description of paying
rent could not be personal income.
MS. MILES said this issue would be different if this law goes into
effect. It would be different as to making expenditures from your
campaign account, which could be construed as personal use, or
taking a lump sum as personal income. Taking a lump sum as
personal income would be prohibited. She said writing amounts that
could be construed as personal use would not be prohibited under
this bill. The IRS may see it differently, however.
Number 325
CHAIR JAMES said they are defining surplus balance. All the money
in a campaign account that the candidate has not used is the
surplus balance. Any time a person writes something, and it
could be construed as personal income, they are taking it out of
the surplus. She believes that is prohibited in this bill, so what
this bill would do is make everything on everyones campaign report
suspect as personal. In Chair James opinion, ethics violations
would skyrocket.
REPRESENTATIVE PORTER noted that he did not oppose this
legislation; he was just trying to make it work. He thought the
first sentence needed changing.
Number 352
CHAIR JAMES thought the net was too big. It is not doing what the
sponsor intends.
MS. MILES said that when the commission considered this bill, they
were limiting the scope as to an actual surplus. The first
sentence could be amended to say something like: "When a candidate
elects not to run for office and is ready to disperse the surplus
balance in a campaign account," and it would probably remove the
concerns.
REPRESENTATIVE BUNDE said they should look at Section 15.13.105.
He would not be opposed to adding that language, but he would speak
with his staff about it.
REPRESENTATIVE ROBINSON commented that they are trying to get at
the person who has the $100 thousand, who is no longer going to run
and takes the money to live on. They are not trying to get after
the other candidates who lose the election and have a small surplus
balance and who might need to use it to get their lives back in
order. She suggested putting a dollar amount on this also.
REPRESENTATIVE PORTER said the only thing that will do is set the
level from which someone will be influenced. Some people would be
influenced by $1000; others would not. If you set into statute
that you can give someone a $1000, you could have a problem.
REPRESENTATIVE OGAN had a question for Ms. Miles about a candidate
who decided not to run for a few years, then decided to run again.
MS. MILES said this would apply to people who are stopping their
campaign and closing their campaign account.
REPRESENTATIVE BUNDE concurred that they were not focusing on
people who might decide to run again later. All they want to do is
determine that people dont pocket the money.
REPRESENTATIVE ROBINSON said the majority of people who are
candidates continue to do that. People who lose are included,
because they probably intend to run again.
Number 431
REPRESENTATIVE GREEN spoke hypothetically about a candidate who had
a good bank account and planned to run again. He built his
campaign fund for several years, then he decided to siphon off the
money and leave the country. He wondered if this bill would
inhibit that type of thing.
REPRESENTATIVE BUNDES response was only that you cannot take this
money as personal income at any time. The other is a gray area and
a candidates personal integrity keeps them out of it.
REPRESENTATIVE ROBINSON asked about one change, to add definitions
for charity and personal income. She would also like to see that
the bill would permit transfers of money from the campaign account
to the legislative account to use for public purposes. There is a
running count because in the legislative account they keep an
ongoing record of everything spent, so it would be public record.
Number 481
REPRESENTATIVE PORTER said that was not true. The way it is now,
a person can take campaign money and put it into the legislative
account and transfer it as personal income; then they do not have
to account for it.
MS. MILES stated under current law an office holder can transfer
money in one of two ways: They can transfer a lump sum to an
office account, and that is all the reporting that the public gets
on it; or they can write checks on their campaign account that
deal directly with expenses arising from legislative offices. The
public sees that they used the money for stamps, newsletters, etc.,
so the Commissions suggestion was if they continue to permit bulk
transfers, such as $5000 to an office account, they will also
request the disclosure.
After speaking with Representative Bunde about what how he wished
to deal with the necessary changes, Chair James said they would
hold the bill over until the next meeting. Representative Bunde
said he would come back with a CS.
REPRESENTATIVE PORTER said his concerns about the office account
and so forth would be fixed with a definition of personal income
that excludes campaign or legislative expenses. One thing that
bothered him was defining what some activities are. For instance,
if they send out a newsletter, is it a campaign item or is it a
legislative item? It probably depends on the timing. He supposed
that during an election year it would be a campaign item, and other
times it would be a legislative item. He would prefer campaign and
legislative were defined the same.
REPRESENTATIVE BUNDE agreed. Whatever they do as legislators can
be considered as campaigning, and he was not concerned about using
campaign expenses to pay for legislative mail-outs, nor did he feel
the legislation would preclude that. Whatever they do pertaining
to personal income would not countermand IRS regulations. They
could use IRS regulations to define personal income.
REPRESENTATIVE PORTER said he does that and he pays the tax. He
would rather pay the tax and avoid the hassle. The wording about
expenditures concerned him. He thought it should be reworked.
Number 557
REPRESENTATIVE ROBINSON said would like the charity concept to be
broader. She brought up a donation to the Police Department for
the teddy bear program. What she was concerned about was the
definition of charitable organization. She would like to give
money to the school district for student activities, but she
wondered if that would fit.
REPRESENTATIVE BUNDE brought up that if you give money to an
individual, or to a relative, it is not a charity.
CHAIR JAMES added that you can give donations to an organization,
but not directly to a person and consider it as a charitable
donation.
REPRESENTATIVE OGAN wondered if they should consider giving a
minimal amount that a person can use after a campaign to get
started again. It might be worth helping the people who are not so
privileged but want to run for office, as compensation.
REPRESENTATIVE BUNDE sympathized with the goal, but he saw
problems. He wondered how many first time people who run and lose
will have a positive balance. He said they might encourage some
people to win an election just for the money.
CHAIR JAMES thought Representative Bunde had plenty of
instructions, so she suggested that he return to the next meeting
with a new CS.
HB 232 - ECONOMIC DEVELOPMENT TAX CREDIT
ROD MOURANT, Administrative Assistant to Pete Kott, presented a
proposed CS for HB 232. It was titled 9LS0323/0. He said the
difference between this version and the other version, which had
passed through the Economic Development Committee, was the result
of conversations their office had with the Department of Revenue,
the Department of Commerce, and the Alaska Industrial Development
and Export Authority. Mr. Mourant confirmed that the original
concept still pertains to a tax credit for economic development
that results in real business expansion; real increase in the
states economy; and a real increase in jobs in the state. Those
themes remained intact throughout that draft legislation.
MR. MOURANT informed the committee what had changed in the new
version of the bill. The change was who the authority is who would
be responsible for reviewing the proposals for an economic tax
credit. Also, there was language in the original HB 232 about
creating a new Board. Version O states, instead, that the Alaska
Industrial Development and Export Authority had the expertise and
ability, and capability, to review proposals of this type for
economic development.
MR. MOURANT said he spoke with Department of Commerce, and
Department of Revenue, and both support the concepts of this
legislation. They would work together to decide what would be in
regulation and in statute, and also what would be in the actual
conduct of the tax credit and how it would be administered. Section
1 of the legislation of Version O defines the program. It also
limits the tax credit that could be granted under this program to
no more than 10 consecutive tax years. In addition, it could not
be used in conjunction with any other tax credit program on the
books. So, if a corporation availed themselves with this economic
development tax credit they could not use it with another tax
program in statute. This legislation calls for an annual review by
the Commissioner of Revenue, to assess the companies that receive
this tax credit, and to see how well they have done to meet their
expectation, and also comparing the effectiveness of the program.
The determination of compliance comes about when the entity files
their annual corporate tax returns with the state.
MR. MOURANT continued to say there are criteria to determine which
programs qualify, and it includes that the authority must verify
that at least one other state is considering this project. For
example, if Tyson Seafood decided to put in a value added
processing plant, shore based instead of offshore, they could show
that Washington State was considering the same project and that it
would cost more for the company to put it in Alaska. That would
meet the criteria of an eligible tax credit. This would create a
new business, expand a business, and expand employment in the
state. It is that kind of value added manufacturing and processing
that this bill hopes to motivate in the state. They dont believe
there will be a huge growth with people applying. This bill lays
out criteria for the number of employees also. It will have to be
at least an increase of 25 percent in an existing business. It
does not preclude the Mom and Pop operations with only a few
employees from being eligible. The proposal has to include the
potential effect on the economy, the potential investment, the
magnitude of cost differential between here and another that is
considering the project. Mr. Mourant explained that the credit is
limited to the lesser of 5 percent of the gross wages payable to
new employees, or 25 percent of the tax due, and payable by the
taxpayer under the state tax codes. They would have 10 years to
take that credit, and, again, they could not take it in conjunction
with any other program. Their certificate of verification will
have to be filed annually with their tax returns, so the program
can be monitored.
TAPE 95-47, SIDE A
Number 000
MR. MOURANT explained that the department would be more comfortable
with the bill if it said Membership of the Authority, AIDEA," so
it was clear whom they were addressing. Also, for the record, the
AIDEA Board is comprised of the Commissioner of Revenue, the
Commissioner of Commerce, and a commissioner appointed by the
Governor, and two public members. They would be the controlling
authority using the staff expertise within AIDEA.
Number 017
CHAIR JAMES asked if people must apply for this before they begin
development, or after the development is established.
MR. MOURANT said the program is designed to encourage development,
so the legislation speaks of applying before development begins.
One of the criteria for receiving the tax credit is evidence that
the development would not be economically sound without a tax
credit of this type to help it through the financial struggles of
the first five years.
CHAIR JAMES inquired about the possibility of acquiring tax relief
for the Danish Pork Project they are currently working on. This is
a $210 million investment and it involves approximately 1000
employees. The Danish people had asked for some sort of tax relief
to get that moving, but whether or not they could get moving
without the tax credit, she did not know. She wondered if they
would fit under the criteria.
MR. MOURANT answered that they could apply, but he could not answer
for the AIDEA board about whether or not it would meet the
criteria. He thought it might have potential for meeting the
required criteria.
Number 053
REPRESENTATIVE PORTER had two questions. In reference to the
prohibition against applying this to a program that was already
receiving tax credits, he wondered if they meant state tax credits.
MR. MOURANT answered, Yes. He said the legislation spells that
out. It says: unto this chapter.
REPRESENTATIVE PORTER verified that if they were getting federal
tax credits it would not affect them.
MR. MOURANT said that was correct.
REPRESENTATIVE PORTER went to page 4 of the bill. He asked,
referring to the criteria for establishing the amount of credit--25
percent of the tax due and payable by the tax payer under this
chapter, or 5 percent of the wages--if he could assume that was a
years worth of taxes. He noted that it did not say annual
taxes, so that should be looked into.
MR. MOURANT confirmed that it was a years worth of taxes. It
refers to AS 43.20, which is the chapter they are speaking of, on
annual state filings. He confirmed that he would make certain of
it.
Number 081
REPRESENTATIVE GREEN spoke on the restrictions of requiring that at
least one other state be considered, and further, that the project
would be cheaper to develop in the other state than in Alaska. He
wondered, if the company needed a tax credit in order to justify
its existence in Alaska, if it would cause such a burden that they
wont go to the other state. To say it will cost more here, like
the Pork Project, they will need a tax credit, but they probably
look at Alaska because it fits into a scheme that makes it more
advantageous to work here. He wondered if this bill would work
against the Pork Project because of those restrictions.
MR. MOURANT reflected back to the criteria at the bottom on page 2.
(See Sec.2.) An applicants project satisfies at least one of the
following: They verify that at least one other state is being
considered for the project, and they determine that the projected
costs for the applicants project in this state would exceed the
costs of the project in the competing state, and, third, that the
tax credit is a major factor. That is one possibility for
eligibility of a tax credit. The second possibility is that it
increases 25 percent of the number of new employees.
Number 135
CHAIR JAMES said there are other options they could meet, so for
the Danish Pork Project the restrictions probably were not a
concern. She agreed with Representative Green, that this was
skimming it pretty slim concerning people looking to put anything
here in Alaska who are also looking at another state. They would
be looking for the resource or whatever it is that we have. She
asked about when the numbers of years of credit are established for
the development, so they know when the credit expires.
MR. MOURANT said this legislation merely sets a limit of no more
than 10 years. In working out the details for a company awarded
$10 thousand worth of credit, he did not know what fashion the
state would use to set a time limit, but it would have to use it
within 10 years. He said it would be hard to predict a year to
year businesss needs for credits.
Number 161
CHAIR JAMES had an experience to share that was applicable to the
subject. She was involved in the city planning department in her
area before moving to Alaska. The city had a saw mill, which had
been in the area for 20 years. In order to get that saw mill into
town they gave them free water. They used large amounts of water.
So, for 20 years they grew and became very successful, and after 20
years things changed. There were new people, and new city
planners, and people were begrudging about the mill getting free
water; so, the city fathers decided they would no longer provide
the saw mill with water without charge. Six months later the saw
mill closed down and put 500 people out of work. There is a
benefit to having some decision making down the road. So, a point
Representative James wished to make was that there should be some
closure, and boundaries, and something these companies can depend
on in the future, so they know what the rules are from the
beginning.
MR. MOURANT said that the established agreement would hold for the
duration of the terms of the agreement, unless the taxpayer
violated the agreement, or failed to comply.
CHAIR JAMES asked if there were any more questions on this bill.
There were no problems, so they could move it out.
Number 207
REPRESENTATIVE PORTER moved to adopt CS for HB 232, Version /O, as
their working draft, dated 4/6/95. Hearing no objections, the
motion passed and CS for HB 232, Version /O, became their working
draft.
CHAIR JAMES said the CS was before the committee, and they had an
amendment.
REPRESENTATIVE PORTER moved they adopt the amendment, which they
would mark as number 1. It was HB 232 9LS0323/O. There being no
objections, the amendment was approved.
Number 225
REPRESENTATIVE PORTER moved to pass from committee CS for HB 232 as
amended, with individual recommendations and a zero fiscal note.
There being no objections, the motion was passed out of committee.
REPRESENTATIVE ROBINSON asked if they should add that it is a zero
fiscal note with the changes, since they do not have a fiscal note
on it yet.
CHAIR JAMES wanted to put on the record that a zero fiscal note is
anticipated on this bill. It is not attached, but it is
anticipated, and should be attached before reaching the next
committee.
MR. MOURANT said he would provide the Chair copies of the fiscal
note when he received it.
CHAIR JAMES said the motion before them was to move out HB 232,
Version O, as amended, and with a presumed zero fiscal note. There
were no objections, so the motion to pass CS for HB 232, Version O,
passed.
ADJOURNMENT
CHAIR JAMES adjourned the meeting at 9:50 a.m.
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