Legislature(1997 - 1998)
02/04/1997 08:00 AM House STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 4, 1997
8:00 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Ethan Berkowitz
Representative Kim Elton
Representative Ivan Ivan
Representative Al Vezey
MEMBERS ABSENT
Representative Fred Dyson
Representative Mark Hodgins
COMMITTEE CALENDAR
OVERVIEW: Department of Public Safety
HOUSE BILL NO. 1
"An Act relating to taxes on cigarettes and tobacco products; and
providing for an effective date."
- MOVED CSHB 1(STA) OUT OF COMMITTEE
HOUSE BILL NO. 52
"An Act relating to taxes on cigarettes and tobacco products; and
providing for an effective date."
- HEARD AND HELD
* HOUSE JOINT RESOLUTION NO. 18
Proposing an amendment to the Constitution of the State of Alaska
relating to changing the rate of a tax or license that supports a
dedication of its proceeds.
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 1
SHORT TITLE: CIGARETTE AND TOBACCO TAX
SPONSOR(S): REPRESENTATIVE(S) BUNDE, Ivan, Croft, Porter
JRN-DATE JRN-PG ACTION
01/13/97 26 (H) PREFILE RELEASED 1/3/97
01/13/97 26 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 27 (H) STATE AFFAIRS, HES, FINANCE
01/21/97 (H) STA AT 8:00 AM CAPITOL 102
01/21/97 (H) MINUTE(STA)
01/28/97 (H) STA AT 8:00 AM CAPITOL 102
01/28/97 (H) MINUTE(STA)
01/30/97 (H) STA AT 8:00 AM CAPITOL 102
01/30/97 (H) MINUTE(STA)
02/04/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 52
SHORT TITLE: INCREASE TOBACCO TAXES
SPONSOR(S): REPRESENTATIVE(S) JAMES
JRN-DATE JRN-PG ACTION
01/13/97 41 (H) PREFILE RELEASED 1/10/97
01/13/97 41 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 41 (H) STATE AFFAIRS, HES, FINANCE
01/21/97 (H) STA AT 8:00 AM CAPITOL 102
01/21/97 (H) MINUTE(STA)
01/28/97 (H) STA AT 8:00 AM CAPITOL 102
01/28/97 (H) MINUTE(STA)
01/30/97 (H) STA AT 8:00 AM CAPITOL 102
01/30/97 (H) MINUTE(STA)
02/04/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HJR 18
SHORT TITLE: DEDICATED FUNDS: RATE MAY BE CHANGED
SPONSOR(S): REPRESENTATIVE(S) IVAN
JRN-DATE JRN-PG ACTION
01/29/97 164 (H) READ THE FIRST TIME - REFERRAL(S)
01/29/97 164 (H) STA, HES, JUD, FINANCE
02/04/97 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
RONALD L. OTTE, Commissioner
Department of Public Safety
P.O. Box 111200
Juneau, Alaska 99811-1200
Telephone: (907) 465-4322
POSITION STATEMENT: Presented an overview of the Department of
Public Safety.
CRAIG GOODRICH, Director State Fire Marshal
Division of Fire Prevention
Department of Public Safety
5700 East Tudor Road
Anchorage, Alaska 99507-1225
Telephone: (907) 269-5491
POSITION STATEMENT: Presented an overview of the Division of Fire
Prevention.
GLENN G. GODFREY, Colonel, Director
Division of Alaska State Troopers
Department of Public Safety
5700 East Tudor Road
Anchorage, Alaska 99507-1225
Telephone: (907) 269-5641
POSITION STATEMENT: Presented an overview of the Division of
Alaska State Troopers.
JAYNE ANDREEN, Executive Director
Council on Domestic Violence and Sexual Assault
Department of Public Safety
P.O. Box 111200
Juneau, Alaska 99811-1200
Telephone: (907) 465-4356
POSITION STATEMENT: Presented an overview of the Council on
Domestic Violence and Sexual Assault.
JOHN GLASS, Colonel, Director
Division of Fish and Wildlife Protection
Department of Public Safety
5700 East Tudor Road
Anchorage, Alaska 99507-1225
Telephone: (907) 269-5509
POSITION STATEMENT: Presented an overview of the Division of Fish
and Wildlife Protection.
TIM SCHRAGE
P.O. Box 870769
Wasilla, Alaska 99687
Telephone: (907) 440-1512
POSITION STATEMENT: Provided testimony on HB 1 and HB 52.
BOBBY SCOTT
521 Izembek Circle
Anchorage, Alaska 99508
Telephone: (907) 338-9257
POSITION STATEMENT: Provided testimony on HB 1 and HB 52.
BRIAN LICK
9720 Vanguard Drive Apt. 28
Anchorage, Alaska 99507
Telephone: (907) 522-4610
POSITION STATEMENT: Provided testimony on HB 1 and HB 52.
RICHARD CROSS
P.O. Box 204
Glennallen, Alaska 99588
Telephone: (907) 822-5153
POSITION STATEMENT: Provided testimony on HB 1 and HB 52.
GLADYS THOMPSON
7216 Lake Otis Parkway
Anchorage, Alaska 99507
Telephone: (907) 349-1456
POSITION STATEMENT: Provided testimony on HB 1 and HB 52.
REPRESENTATIVE CON BUNDE
Alaska State Legislature
Capitol Building, Room 104
Juneau, Alaska 99801-1182
Telephone: (907) 465-3871
POSITION STATEMENT: Sponsor of HB 1.
REX SHATTUCK
21665 Sheltering Spruce Loop
Chugiak, Alaska 99567
Telephone: (907) 688-0169
POSITION STATEMENT: Provided testimony on HB 1 and HB 52.
THOMAS W. WRIGHT, Legislative Assistant
to Representative Ivan Ivan
Capitol Building, Room 418
Juneau, Alaska 99801-1182
Telephone: (907) 465-4942
POSITION STATEMENT: Provided testimony on HJR 18.
JAMES BALDWIN, Assistant Attorney General
Government Affairs Section
Civil Division
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
Telephone: (907) 465-3600
POSITION STATEMENT: Provided testimony on HJR 18.
ACTION NARRATIVE
TAPE 97-6, SIDE A
Number 0001
The House State Affairs Standing Committee was called to order by
Chair Jeannette James at 8:00 a.m. Members present at the call to
order were Representatives James, Berkowitz and Vezey. Members
absent were Ivan, Dyson, Elton and Hodgins.
CHAIR JEANNETTE JAMES announced the first one-half hour of today's
meeting was dedicated to an overview from the Department of Public
Safety. The committee would then take testimony from invited
participants only. They were the remaining participants who wished
to testify last week but were not able to due to time restraints.
Public testimony would then be closed in the House State Affairs
Standing Committee. Testimony would be taken in the House Health,
Education and Social Services Committee and the House Finance
Committee-the next two committees of referral.
OVERVIEW: Department of Public Safety
The first order of business to come before the House State Affairs
Standing Committee was an overview presentation by the Department
of Public Safety.
CHAIR JAMES called on Ronald L. Otte, Commissioner, Department of
Public Safety, to present the overview.
Number 0180
RONALD L. OTTE, Commissioner, Department of Public Safety, stated
the department appreciated the opportunity to talk to the committee
members today about some of the programs included under the
Department of Public Safety. He introduced the directors and
managers of the department as the best any where in the state
government. He noted Mary Moran, Director, Highway Safety Planning
Agency; Juanita Hensley, Director, Driver Services, Division of
Motor Vehicles; John Glass, Director, Division of Fish and Wildlife
Protection; Kenneth E. Boschoff, Director, Division of
Administrative Services; Laddie Shaw, Executive Director, Alaska
Police Standards Council; Glenn G. Godfrey, Director, Division of
Alaska State Troopers; Craig Goodrich, Director State Fire Marshal,
Division of Fire Prevention, and Jayne Andreen, Executive Director,
Council on Domestic Violence and Sexual Assault.
Number 0266
CHAIR JAMES announced the Department of Public Safety was her
favorite agency because it was the very prime reason there was a
government.
Number 0278
COMMISSIONER OTTE replied it was his favorite agency also. He read
the following introduction from the Department of Public Safety
Overview handout dated, February 1997:
"When the public thinks about the Department of Public Safety they
mostly think of the uniformed Trooper who they'd call in an
emergency, or of the DMV with whom they register their car. In
fishing communities the public would probably think of the
uniformed Fish and Wildlife Protection Trooper who enforces the
commercial harvest regulations. In rural communities they might
think of the Village Public Safety Officer who provides local law
enforcement and who coordinates search and rescue efforts. While
each of these public images is correct, the Department of Public
Safety services the public and the criminal justice community in
many ways, including many not known to the general public."
COMMISSIONER OTTE explained he would bring forward some of the
directors today to present their programs. He would distribute the
handout to the committee members so that they would have a chance
to look at some of the programs that would not be covered in
today's presentation.
COMMISSIONER OTTE continued by stating that public safety provided
direct services to the public. He cited highway patrol and
accident investigation, criminal investigation, search and rescue
operations, driver's licensing and motor vehicle registration,
concealed handgun permitting, enforcement of sport fishing and
hunting regulations, fire prevention and safety education, and
criminal history background checks for employment. Public safety
also provided indirect services to the public. He cited licensing
of commercial drivers, security guard licensing, support for
shelters for victims of abuse and sexual assault, highway safety
planning grants to local communities, plan review and inspection of
all building larger than a 3-plex, coordination of federal drug
grants, enforcement of commercial fishing regulations, criminal
history information to organizations, licensing of all fire arms
and suppression systems, sex offender registration, financial aid
for victims of violent crimes, and staffing for the Emergency
Communications Center. There were other programs and services that
literally touched every community in the state. He explained the
handout also addressed the department's budget. He cited the
department occupied 119 state owned or leased structures in 49
communities around the state; the department operated 43 aircraft
with a value of approximately $6 million and an average age of 25
years; the department operated 19 marine vessels with an estimated
value of $12 million and an average age of 16 years; the department
operated approximately 1,500 mobile and portable radios, dispatch
consoles, and call recorders to support the 911 service; the
department operated more than 1,000 micro computer terminals and
printers interconnected by 20 local area networks; and much more.
The handout also addressed the volume of crime in the state. He
would not go into detail about that today, however.
COMMISSIONER OTTE called on Craig Goodrich, Division of Fire
Prevention, to address the committee members next.
Number 0590
CRAIG GOODRICH, Director State Fire Marshal, Division of Fire
Prevention, Department of Public Safety, encouraged the committee
members to review the information beginning on page 7 of the
handout. He explained the fire marshall was also responsible for
the construction of all facilities larger than a 3-plex.
Furthermore, 1996 was a terrible year for the division. It
expended $500 million and lost 29 lives to fires. The division was
trying a variety of things to achieve a significant reduction in
those areas. For example, it was partnering with 61 different
agencies to apply the rules and to educate the public.
Number 0701
COMMISSIONER OTTE called on Glenn G. Godfrey, Division of Alaska
State Troopers, to address the committee members next.
Number 0711
GLENN G. GODFREY, Colonel, Director, Division of Alaska State
Troopers, Department of Public Safety, stated the division was
complex. It was the most complex state law enforcement agency in
the United States. It was empowered to pursue, apprehend and
obtain evidence to allow for the prosecution of offenders. It was
also a highly visible uniform patrol division. He explained
officers were assigned to specialized major crimes, sexual
assaults, white collar crimes, missing persons, narcotics, and
alcohol investigations; as well as, to provide oversight for the
Village Public Safety Officer Program. In addition, out of 328
communities in the state, the troopers had direct service to 274 of
those communities. Only 45 communities in the state had
established police departments and 67 percent of those were not
accessible by road. The department, on a continual basis,
supported the 45 established police departments. Moreover, the
licensing section was responsible for administering security guard
licenses, sex offender registration, and the concealed handgun
permit program. Another taxing area for the division was the
investigation of deaths. Last year it investigated 527 incidents
that involved death. That averaged to 11 death investigations per
week. The issues he mentioned facing the division for 1997 were
the underfunding of personnel services, improving its access to
technology, and paying for the support of search and rescue
services. These issues were ones that were going to impact the
citizens of Alaska.
Number 0929
MR. GODFREY further presented a brief overview of the Village
Public Safety Officer Program (VPSOP). He explained VPSOs
responded to more than 9,100 requests in 1996. One issue affecting
the VPSOP was funding for 10 additional positions. The program was
a challenge for the division, but it did relieve some of the
pressure placed on the troopers.
Number 1034
COMMISSIONER OTTE called on Jayne Andreen, Council on Domestic
Violence and Sexual Assault, to address the committee members next.
Number 1075
JAYNE ANDREEN, Executive Director, Council on Domestic Violence and
Sexual Assault, Department of Public Safety, explained the council
provided funding to locally based programs throughout the state
that provided services to victims and perpetrators of domestic
violence and sexual assault. It was also responsible for
coordinating and providing technical assistance at the state level
for domestic violence. The domestic violence and sexual assault
movement had been around for the last 20 years to 25 years. It was
exciting because the field was beginning to be recognized for the
seriousness of the crimes. It was also being given the opportunity
and the tools to really make some forward progress. She cited the
Domestic Violence Prevention and Victim Protection Act of 1996
helped put Alaska in the forefront of developing a consistent
statewide policy that held the offender accountable and provided
the maximum level of protection to the victims. The council played
a very significant role in this project. She hoped that within the
next five years the council would be able to know what it needed to
intervene in the cycle of violence.
Number 1197
COMMISSIONER OTTE explained that the delivery of public safety
affected every community in the state. He cited the training
academy in Sitka as an example. It was a program that trained
officers statewide. The academy combined three programs reducing
the need of support from the general fund. He also cited the state
criminal laboratory. Most of its support went to the local
communities.
COMMISSIONER OTTE called on John Glass, Division of Fish and
Wildlife Protection, to address the committee members next.
Number 1335
JOHN GLASS, Colonel, Director, Division of Fish and Wildlife
Protection, Department of Public Safety, explained the primary
purpose and function of the division was to enforce the laws,
rules, and regulations concerning fish and wildlife resources
within the state. These regulations were passed by the various
boards and committees throughout the state. There were two main
components within the division-the aircraft section and the marine
enforcement section. The marine enforcement section was primarily
used for the enforcement of commercial fishing in the Bering Sea.
Commercial fishing, he cited, produced $38.3 million in taxes last
year. The division's 17 marine vessels ranged from 25 feet to 121
feet. Moreover, in 1996 there were 450,000 licenses issued in the
state for hunting and fishing, and 35,000 jobs were associated with
commercial fishing. He also explained in some of the communities
the fish and wildlife protection trooper was the only public safety
resource available.
Number 1432
COMMISSIONER OTTE stated he had been in law enforcement for 31
years, and had visited virtually every community or area of the
country. The public safety program in Alaska was healthy and was
head and shoulders above any other law enforcement or public safety
effort he had seen in the country. It was also the most diverse
and challenging. The managers were extremely professional and
competent. The department did have problems, he declared, but it
handled them well. He would be willing to answer any questions of
the committee members.
Number 1495
CHAIR JAMES commented that the academy in Sitka mentioned earlier
was an example of a building process from one administration to
another, and from one legislature to another.
Number 1537
REPRESENTATIVE AL VEZEY commented that the overview meetings were
tantamount to a bathing suit contest. He believed that legislators
should spend more time with the agencies because it was informative
for both parities. He stated legislators did not spend enough time
talking with the people that ran the government. Legislators
tended to concentrate on passing legislation. It was not the duty
of a legislator to run the government, therefore, it was necessary
to communicate with those that did run it.
Number 1591
REPRESENTATIVE ETHAN BERKOWITZ commented he had the privilege to
work with the troopers when he was in the district attorney's
office. He declared one of the serious problems that faced issues
of public safety and crime, was that they were chronically
underfunded. That was the largest complaint from the villages and
Anchorage. It was said there was "a lot of talk out of Juneau,"
but not much delivery. He would like to work together with
everyone to ensure that the legislature started to deliver on the
public safety that Alaskans deserved. A collateral benefit, he
stated, would be to improve officer safety. Furthermore, there
were ways to increase public safety at zero cost to the budget. He
cited there were great fishery enforcement ideas that could raise
money, as an example.
Number 1642
REPRESENTATIVE VEZEY commented on the recent drug bust in
Fairbanks. He asked Commissioner Otte if he had a handle on
measuring the magnitude of the drug problem in Alaska? He knew
that it was so pervasive that it was hard to describe.
Number 1673
COMMISSIONER OTTE replied he could not give Representative Vezey a
measurement today. He could, however, say that the drug problem in
Alaska continued to grow. As the profits from marketing and
selling drugs remained substantial, there were always people
willing to replace the ones that were arrested. Law enforcement
believed that enforcement would not be the tool that eliminated or
reduced drug use. If it was, the "war on crime" over the years
would have done it by now. But, "Frankly, we haven't really made
much of a dent," he said. He believed law enforcement would not
make a significant difference until attitudes were changed.
Number 1736
REPRESENTATIVE VEZEY replied the key words were "just growing."
COMMISSIONER OTTE responded, "It is growing, yes, sir."
REPRESENTATIVE VEZEY stated he was constantly amazed at how
commonplace drugs were.
Number 1745
CHAIR JAMES thanked Commissioner Otte for his presentation.
CHAIR JAMES announced for the record that Representatives Kim Elton
and Ivan Ivan arrived shortly after convening the meeting.
HB 1 - CIGARETTE AND TOBACCO TAX
HB 52 - INCREASE TOBACCO TAXES
Number 1790
The next order of business to come before the House State Affairs
Standing Committee was HB 1, "An Act relating to taxes on
cigarettes and tobacco products; and providing for an effective
date." And, HB 52, "An Act relating to taxes on cigarettes and
tobacco products; and providing for an effective date."
CHAIR JAMES announced she would open the committee meeting to the
invited testifiers only.
Number 1805
TIM SCHRAGE was the first person to testify via teleconference in
Anchorage. He stated he was against the tobacco tax. He was a
retail owner of a couple of liquor stores in Anchorage and the
Matanuska Valley. The current state tax was $2.90 per carton, the
current federal tax was $2.93 per carton, and the current
municipality of Anchorage tax was $2.72 per carton. Therefore, a
total of 50 percent of the wholesale price was pure tax. In
addition, the retailer paid for a license to sell tobacco from the
federal government, the state government and the municipal
government. The bill was asking the smoker to pay a higher price.
He asked, "Aren't they already doing that?" Furthermore, a smoker
could not smoke in public buildings and on public transportation.
A smoker also paid a higher insurance rate. He asked, "Where do
these taxes go that they're paying?" He believed they were going
to the general fund, and he wondered if the public was getting
their money back. Mr. Schrage stated before an additional tax was
added, the state should look at other ways to spend the money from
the existing taxes. Furthermore, the heath organizations in
support of the tax had 33 years, since the first report from the
surgeon general that indicated smoking was a habit, to educate
them. If the state was truly interested in stopping the children
from smoking, then it should enforce the laws already in place and
close the loopholes. Since it was illegal to sell cigarettes to
minors he wondered where they were getting them. He stated they
were probably getting them from stealing, their parents, friends,
and illegal retailers. He reiterated, "Let's close the loophole,
let's not tax more."
Number 1962
BOBBY SCOTT was the next person to testify via teleconference in
Anchorage. He did not promote or condone the use of tobacco
products by the youth. He wondered why kids were using tobacco if
it was illegal now. The kids today had the same attitude that the
adults did when they were in school, therefore, the price did not
matter. The tobacco tax would put an unfortunate amount of
pressure on the less fortunate kids encouraging them to obtain
cigarettes in order to fit in with the other kids. But, it was his
responsibility to teach honesty, responsibility and respect to his
kids. He explained he worked for a small retailer and he feared
that the small retailers would be put out of business before long
and send the economy on a downward spiral. There were other
powerful ideas that had been discussed in Juneau and he would like
to see them continued with the proper communication to reach the
goal of deterring teens from smoking. The tax would not reach that
goal. It would accomplish diversity, havoc and ultimately
destruction. He thanked the committee for letting him testify.
Number 2095
BRIAN LICK was the next person to testify via teleconference in
Anchorage. He was a non-smoker, and he worked in the retail
industry. A retailer he spoke to recently cited he was missing
$20,000 in cigarette products. A reasonable amount of that was
contributed to theft. He believed the tobacco tax would increase
the amount of theft. In Canada the price of cigarettes went up to
$50 per carton and bootlegging and smuggling became a real issue.
The retailers would have to absorb $20,000 to $25,000 per year to
protect their investments. This was not a threat, it was just a
realistic perspective, he declared. The retailers would pass that
cost on in a gallon of milk, for example, causing all Alaskans to
pay and not just the smokers. Furthermore, he stated that the
permanent fund dividend program invested in stock of the Phillip
Morris Company. He felt that was a double standard.
Number 2201
CHAIR JAMES explained that the Phillip Morris Company was a family
of trading companies. It sold more than tobacco products.
Number 2218
RICHARD CROSS was the next person to testify via teleconference in
Glennallen. He was against the cigarette tax. He did not think it
was right to tax one segment of society. It would not stop the
kids from smoking. He had been smoking for 33 years and the price
had increased every since he started. It did not stop him from
smoking. The kids would steal and borrow for cigarettes. He
stated the current laws needed to be enforced. He had seen kids
burglarize to get cigarettes and then sell them at school to make
money. It was not right to tax something that did not need to be
taxed, he declared. Enforce what already existed. Some members of
his family smoked and some did not. He tried it and liked it.
"Some people were born with that." He reiterated the cigarette tax
was wrong.
Number 2279
GLADYS THOMPSON was the next person to testify via teleconference
in Anchorage. She was a long time resident of Alaska. She had
also lived in the Midwest and New England. When she was a little
kid she remembered signs on the barns that were paid for by the
tobacco companies encouraging the farmers who were not doing well.
She agreed with the tobacco tax. She would even double the amount.
She recognized the other ramifications that previous testimony
referred to that needed to be addressed also. It was illegal to
steal. Furthermore, she recalled from her earlier days that the
signs on the barns were advertizing chewing tobacco. In Cleveland,
Ohio spittoons were placed on the streets for those chewing
tobacco. She started to smoke when she went to college because of
the influence of the movie stars in the 1930's and the 1940's. It
was considered glamorous. She only enjoyed it to an extent. That
was another example of how the tobacco companies marketed their
products to encourage young people to smoke. She believed they
should be put out of business in the long run.
Number 2414
REX SHATTUCK was the next person to testify via teleconference in
Anchorage. He was representing himself and not the tobacco
industry or the health industry. It appeared that it was only the
tobacco and the health industries that were testifying on this
issue. He believed that testimony should be weighed. He started
smoking 28 years ago and quit last year. The price of a package of
cigarettes was not a deterrent nor was it a consideration when he
quit, it was due to the urging of his children. The gradual price
increases over the years were not effective. Two of his parents
suffered from emphysema, but that did not spur him to support a 344
percent tax increase. That was the biggest increase ever.
TAPE 97-6, SIDE B
Number 0001
MR. SHATTUCK continued by stating that there was not a way to
earmark the money from this tax to education. He reiterated he did
not support a tobacco tax, and he strongly recommended that the
committee members review the federal and the state constitution to
determine their responsibilities in terms of raising revenues.
Furthermore, last year the legislators did a good job of decreasing
the budget. He suggested they do the same thing this year and not
increase the revenues.
Number 0041
CHAIR JAMES closed the House State Affairs Standing Committee
meeting to public testimony on HB 1 and HB 52. It was now time for
the committee members to deliberate.
CHAIR JAMES explained there was an amendment that changed HB 1 to
look like HB 52. She called for a motion to adopt the amendment.
Number 0062
REPRESENTATIVE IVAN IVAN moved that the committee adopt Amendment
1, dated 1/28/97.
Number 0081
REPRESENTATIVE CON BUNDE announced he did not have a problem with
Amendment 1, dated 1/28/97.
REPRESENTATIVE VEZEY objected. A roll call vote was taken.
Representatives James, Berkowitz, Elton and Ivan voted in favor of
the motion. Representative Vezey voted against the motion. The
amendment was adopted.
CHAIR JAMES announced for the record that Representatives Fred
Dyson and Mark Hodgins were excused from today's committee meeting.
CHAIR JAMES further explained that HB 1 was the vehicle that would
move through the committees, while HB 52 would remain in the House
State Affairs Standing Committee. Two tobacco tax bills were not
needed.
Number 0127
REPRESENTATIVE BUNDE expressed his appreciation of the efforts of
Representative James in soliciting the testimony heard on this
subject. He also thanked the public for taking the time to
testify. Representative Bunde recapped the goal of CSHB 1(STA) by
stating it was designed to achieve an economic barrier to young
people starting to smoke, and a user fee for those who wished to
continue to smoke. He responded to prior testimony from the
tobacco industry. He suggested that the spokes people acquaint
themselves with the laws in Alaska. He explained one had not
bothered to register with the state as a lobbyist. His latest
research showed that the nicotine industry had spent over $200,000
in lobbyists. That alone told him that the bill would work. The
committee members also heard considerable comments about protecting
the small business person. He took those comments to heart.
However, if smuggling was such a challenge, he stated, "I don't
think anybody would go so far as to recommend we remove existing
taxes." And, the mail order problem could be addressed through
other legislation. That was something that needed to be looked at.
The business people that he heard from supported the notion that
the legislators should stop kids from smoking, and research showed
that the vast majority of people began smoking when they were
children. If that was accepted as a fact, then these business
people had better be making plans for the future because if they
stopped children from smoking they would indeed put themselves out
of business over a period of time. He reiterated he was
sympathetic to the small business owner. He reminded the
committee, however, that at one time cocaine was put in Coca-Cola
because it was thought to be healthy. And, codeine was put in a
lot of patented medicines causing addictions at one time. As more
information was obtained, businesses needed to change.
Furthermore, there were concerns about enforcement and Indian
country. He thought it was a little unfair to assume that the
majority of the Native citizens would become scofflaws and
immediately begin smuggling. It was necessary to consider the
geography of Alaska. He stated, "Not too many people are gonna go
to Egegik to buy smuggled cigarettes." Moreover, there would not
be the common border problems that the Canadians had on the East
coast. The people in Western Canada did not lower their prices
because of smuggling problems. Furthermore, if the state faced the
issue of Native sovereignty, he thought that the issue of smuggling
tobacco would be only one of many, many challenges the state would
face. The bottom line was that the increase in the tobacco tax
obviously worked to reduce the demand. "If it didn't," he asked,
"Why would the nicotine industry be here spending so much time and
money to fight this increase." He thanked the committee members
for their time.
Number 0335
CHAIR JAMES stated that this issue was not one of her favorite
issues. She believed strongly in a person's right to do what was
legal, and smoking tobacco was legal. She also believed that
imposing a tax at a time when the legislature was trying to cut the
budget was not wise. It violated the pledge to not impose taxes
until the budget was under control. She had never smoked and she
hated smoking. She did not want any children to start to smoke,
and she would prefer that everyone would quit. However, she
recognized the legal right of those that wanted to use tobacco.
Therefore, she struggled with this issue and had been very candid
about her feelings from the beginning. She also had a great
passion for school maintenance and construction and the children of
the state. In addition, over the past four years, she had not seen
much interest in putting money towards that process. She did not
want to fill the general fund with more money creating a tendency
to spend it. Therefore, the pre-dedicated school fund was much
more palatable. Moreover, she was pleased to have the approval of
Representative Bunde as sponsor of HB 1. She was also pleased to
hear the testimony from the public supporting the dedication. The
committee today would also be hearing HJR 18 which called on the
people to vote on a constitutional amendment that would allow the
raising or lowering of a tax in a pre-dedicated fund and close the
opportunity for a law suit. She thought it was a better idea to go
to the public than it was to go to the courts. She had very little
confidence in the court system due to decisions made whimsically by
judges. She felt guilty that she did not have confidence in the
judicial system, but she would rather go to the public to vote on
this issue. She was happy to walk together with Representative
Bunde the rest of the way with this bill.
Number 0507
REPRESENTATIVE KIM ELTON stated he hoped the money that went into
the school construction and maintenance account was not seen as a
substitute for general fund dollars. The money generated from the
tax would not be enough to accomplish what needed to be done in
school maintenance and construction. It should not be seen as the
only answer for the problems that many of the school districts
faced.
Number 0548
REPRESENTATIVE ELTON moved that CSHB 1(STA) move from committee
with the attached fiscal note(s) from HB 52 and with individual
recommendations. There was no objection. The CSHB 1(STA) was so
moved from the House State Affairs Standing Committee.
Number 0569
CHAIR JAMES announced that she was in the process of designing
legislation that would improve the enforcement of the current laws
surrounding teenage smoking. She asked for assistance from anybody
that knew where more enforcement was needed.
Number 0599
REPRESENTATIVE ETHAN BERKOWITZ stated that he was offended because
a representative of the tobacco industry had not provided
information to him within the time that he indicated.
Number 0630
CHAIR JAMES stated that it had only been one week. She suggested
putting his request in writing to ensure a response.
Number 0640
REPRESENTATIVE VEZEY stated that if a lobbyist promised information
one should allow three weeks to four weeks to receive it.
HJR 18 - DEDICATED FUNDS: RATE MAY BE CHANGED
The next order of business to come before the House State Affairs
Standing Committee was HJR 18, "Proposing an amendment to the
Constitution of the State of Alaska relating to changing the rate
of a tax or license that supports a dedication of its proceeds."
CHAIR JAMES called on Representative Ivan Ivan, sponsor of HJR 18,
to present the resolution.
Number 0713
REPRESENTATIVE IVAN IVAN announced his staff, Thomas W. Wright, was
here to answer any technical questions about the resolution.
Representative Ivan read the following sponsor statement into the
record:
"This resolution proposes an amendment to Article IX, Section 7 of
the state constitution. The current article allows for the
dedication of funds for a specific purpose as long as it existed by
April 24, 1956. This resolution would allow a changing of a rate
of a tax or license of which the proceeds are dedicated to a
special purpose. This proposed amendment would be placed before
the voters at the next general election, if approved by the
Legislature.
"I introduced this resolution because of the differing opinions
represented by the attorney general's office and Legal Services in
regards to the dedication of a tax increment to a specific purpose.
In order to avoid litigation, especially if the proceeds of the
tobacco tax are to be placed into the school fund or if the
legislature changes any other tax rate or license fee, into which
proceeds are to be placed into a dedicated fund, this resolution is
a means to resolve that potential problem."
REPRESENTATIVE IVAN further stated he would like to see that the
proceeds of the tobacco tax go to the maintenance and construction
of school facilities. It was an opportunity to assist the
government in some of its most important aspects.
Number 0860
REPRESENTATIVE ELTON asked how many dedicated funds were there,
other than the education fund?
Number 0869
CHAIR JAMES replied there was a fish and game fund and a school
fund.
REPRESENTATIVE ELTON wondered if those were the only two funds that
would qualify under this resolution.
CHAIR JAMES replied, "Yes."
Number 0877
REPRESENTATIVE VEZEY stated he believed that there were more than
two funds. He cited the Fishermen's Fund as an example. He could
not remember how many there were, but he knew there were more than
two.
Number 0883
CHAIR JAMES asked Thomas W. Wright, Legislative Assistant to
Representative Ivan Ivan, to respond to the question.
Number 0879
THOMAS W. WRIGHT, Legislative Assistant to Representative Ivan
Ivan, stated the opinion of Mr. Gerald L. Wilkerson, Legislative
Auditor, dated November 30, 1982, outlined what dedicated funds
existed. He cited the Tobacco Tax (school) Fund, the Fish and Game
Fund, the Reserves for Capital Outlay and Energy Facilities
Development, the Renewable Resources Fund, the Public Employees
Retirement System Fund, the International Airport Funds, the
Continuing Debt Service Appropriation, and the Rural
Electrification Revolving Loan Fund. Some of those funds, he
explained, were out of existence and according to the attorney
general's opinion, once a dedicated fund was out of existence it
could not be re-instituted.
Number 0940
REPRESENTATIVE VEZEY asked was that five funds?
CHAIR JAMES replied there were a number of funds listed by Mr.
Wright. Some of which were already gone.
Number 0948
REPRESENTATIVE BERKOWITZ asked Mr. Wright, if the funds out of
existence had been zeroed out in terms of the account, or had they
been repealed?
Number 0956
MR. WRIGHT replied he understood that they were not funded and
considered discontinued programs. He suggested asking the
Department of Revenue who had a better understanding. He did not
know if they were out of existence in statute. He had not gone
that far back, yet. He reiterated he understood that they were in
existence, but they were not being funded.
Number 0978
CHAIR JAMES responded that according to a legal opinion relating to
the tobacco tax that once the tax was taken completely away, it
could not be brought back. That was in accordance with the minutes
at the constitutional convention. It would need to be re-
instituted again. Chair James called on James Baldwin, Department
of Law, to address the issue.
Number 1016
JAMES BALDWIN, Assistant Attorney General, Government Affairs
Section, Civil Division, Department of Law, stated the question of
how many dedicated funds there were, was subject to definition.
The only true dedicated funds now were the Fishermen's Fund and the
Tobacco Tax (school) Fund. Those were the only two that he had
been able to confirm. There was, of course, the permanent fund,
that was constitutionally dedicated. There was also the
Constitutional Budget Reserve Fund. There were also the funds that
were required by federal statute. The funds that Mr. Wright
referred to were not truly dedicated funds. They were rather
segregated funds that were established for bond covenant purposes.
They were an exception to the dedicated fund prohibition because
the assets were pledged to buy off bond indebtedness. There was an
exception allowed in the constitution to allow the state to incur
debt for that purpose.
Number 1085
CHAIR JAMES stated there were funds that the state used as though
they were dedicated funds. She liked the term "segregated fund"
that Mr. Baldwin mentioned earlier. The general public thought of
these accounts as dedicated funds when technically they were only
considered dedicated for political purposes. In addition, funds
were also appropriated to get around the issue of dedication. She
called it an end-run around the situation. She believed that the
legislature should have free reign of the general fund to spend it
in the best way.
Number 1186
MR. BALDWIN replied the dedicated fund prohibition was put into
place so that the power of the legislature would be preserved to
the maximum extent possible over revenues coming into the state.
Therefore, as long as the legislature retained its ability to
appropriate funds, it did not violate the dedicated fund
prohibition.
Number 1210
CHAIR JAMES replied she understood that. However, "It's a
perception, and perception is sometimes reality as far as people
are concerned."
Number 1217
MR. BALDWIN stated there were many funds that the legislature
established by law and then appropriated money to them. That was
clearly not a violation of the dedicated fund prohibition. The
Governor's bill, he explained, would appropriate the revenues from
the tobacco tax to a particular fund rather than dedicate them in
the beginning.
Number 1246
REPRESENTATIVE ELTON asked Mr. Baldwin if the language in the
resolution would not allow the legislature to change the rate of
contribution to the permanent fund or to the Constitution Budget
Reserve Fund?
Number 1279
MR. BALDWIN replied it would not because it only referred to those
funds in existence before April 24, 1956. The permanent fund was
established after that date. The constitution did allow the
legislature to change the rate upwards, but the constitution would
have to be amended to decrease the rate.
Number 1317
REPRESENTATIVE ELTON asked Mr. Baldwin if the language in the
resolution would allow the legislature to bring back a fund that
had disappeared, such as, the Renewable Resources Fund?
Number 1338
MR. BALDWIN replied he did not think that it did. The language
would have to be changed to do that. It did not revive passed
repealed dedicated funds. The statutory interpretation would say
that "you cannot revive a prior repealed provision unless expressly
provided." This resolution did not expressly provide for that.
Number 1382
REPRESENTATIVE BERKOWITZ asked Mr. Baldwin if, according to the
opinion of Mr. Jack Chenoweth, Attorney, Legislative Legal and
Research Services, Legislative Affairs Agency, a change in the rate
of the tax by the legislature would not have an impact on the
existence of the dedicated fund or undo the legal effect of the
dedicated fund?
Number 1405
MR. BALDWIN replied the 1959 opinion of the attorney general
indicated such an act would nullify a fund. "We didn't explore
that, as to what would be the effect. Whether it would destroy the
underlying dedication." He read the opinion to say it would be an
empty act. It would not accomplish anything. The legislature was
without power to do that. It would leave the existing dedication
in place. It would not destroy the existing dedication. That,
however, was an open question.
Number 1455
REPRESENTATIVE BERKOWITZ asked Mr. Baldwin, in his opinion, if
there was a change in the tax rate, would it nullify the fund?
Number 1469
MR. BALDWIN replied, "No." If the tax rate was increased then the
law was nullified. If the tax rate was increased and went to a
dedicated fund then that law was nullified. If it was repealed, it
was also gone and it could not be revived according to the current
wording of the constitution.
Number 1490
REPRESENTATIVE BERKOWITZ asked Mr. Baldwin in his opinion if the
increase in the tobacco tax in CSHB 1(STA) that the House State
Affairs Standing Committee just passed would nullify the fund?
Number 1501
MR. BALDWIN replied the opinion of the attorney general indicated
there was a good faith legal argument that could be made of Mr.
Jack Chenoweth's opinion. It was still an open question for the
courts to decide, however. It was the opinion of the attorney
general that it was worth testing. He could not say that it was
flat out void or unconstitutional. The opinion of the attorney
general in 1959 had been in effect for a long time, and the
legislature had followed if for a long time. All those factors
would be considered by a court. He could not say today that the
bill passed out of the committee was flatly prohibited by the
constitution.
Number 1554
REPRESENTATIVE BERKOWITZ asked Mr. Baldwin if the opinion had ever
been tested before in court? He had more faith in the court system
than Chair James.
Number 1567
MR. BALDWIN replied this particular issue had not been tested in
Alaska. He was not aware of a case tested in another state either.
There were dedicated funds in other states, but he did not believe
that there was a dedicated fund prohibition similar to the one in
Alaska. The dedicated fund prohibition had been tested in other
aspects, in particular, the breadth of the revenue covered. It was
believed at one time that the prohibition only applied to tax and
license proceeds. But, in the mid-1980's, it was ruled by the
court that it covered all revenues received by the state. The
court also ruled that the revenues that went to the ferry proceeds
was not a dedicated fund. He was not aware of any other court
cases.
Number 1659
CHAIR JAMES stated that Mr. Jack Chenoweth's opinion contained the
same caveat-that it could be challenged in court. The resolution,
however, put the choice to the public as opposed to the courts.
Number 1689
MR. BALDWIN explained there was a timing issue involved here as
well. The resolution would go before the voters in 1998. And,
according to the terms of the constitution it would take effect 60
days after certification. The CSHB 1(STA) indicated the primary
tax would take effect in October of 1997. There was a one-year
difference. He suggested considering a provision to include
retroactivity or somehow linking the two together.
Number 1770
CHAIR JAMES thanked Mr. Baldwin for his suggestion. The committee
substitute was drafted so that if there was court action that
negated it from putting revenues into the school fund, the money
would then go into the general fund. It was assumed that the taxes
collected before the court case would go to the dedicated fund.
The money would be identifiable and the net result would then go to
the general fund. She agreed the bill and the resolution should be
coordinated. She hoped that the resolution would deter anybody
from challenging this issue in court.
MR. BALDWIN replied he thought somebody would file as soon as the
first return was due.
CHAIR JAMES stated it did not deter her determination, however, to
move this issue forward.
Number 1901
REPRESENTATIVE VEZEY stated the effort of HJR 18 was a bad idea.
He called it an attempt to assuage ones conscience over raising
taxes. The legislature had a 38 year history of defending its
right to appropriate revenues. The hottest issue in terms of
dedicating funds was the highway fund. Moreover, "Every time we
get into a dedicated fund, it just turns into such a christmas tree
that it goes into a hole and stays there the rest of session."
That would probably happen to HJR 18 as well.
Number 1972
CHAIR JAMES replied during the last legislature, she proposed a
bill that addressed a state highway dedicated fund. She believed
there needed to be a relationship between a tax and a fund for a
connection. There was no connection between a tobacco tax and a
school fund. There was a definite relationship between a fuel tax
and a road maintenance fund. However, the state currently spent
$75 million on road maintenance, but only collected $24 million in
gas taxes. Even if the current gas tax was tripled there would not
be enough money available to maintain the roads. Therefore, it did
not serve the purpose of the dedicated fund. She agreed HJR 18
assuaged her because she had as much passion for spending money to
make the schools safe and healthy as the people who supported the
tobacco tax.
Number 2080
REPRESENTATIVE VEZEY commented that, if all the fees and taxes were
added together that were directly contributed to highway and
vehicle use, they would amount to approximately $75 million. It
just so happened, he explained, that what the legislature
appropriated was at about the level that the state taxed and
assessed fees at.
Number 2111
CHAIR JAMES replied she understood that argument. The general
public was concerned about losing federal funding in Alaska if it
did not start taking care of its roads. That was a nationwide
problem, however. She understood in other states that there was a
dedicated highway fund and in other states that a transportation
authority took care of the funds. The funds did not go through the
legislature. She was not questioning whether the resolution or the
bill was a bad idea or not. It was just what she wanted to do.
Number 2217
REPRESENTATIVE ELTON said he was concerned because the
constitutional convention provided the notion that dedicated funds
were not good. He announced he was not prepared to move the
resolution today, especially since there was a suggestion to
include a retroactivity clause. He asked Chair James to postpone
the final disposition of the resolution until Thursday, February 6,
1997, to allow the committee members to review the possible added
language. He also wanted more time to ponder the wisdom of the
members of the constitutional convention who were adamantly opposed
to dedicated funds.
Number 2312
CHAIR JAMES replied she did not have a problem with his concerns.
The prohibition in the constitution had a rational purpose. It
also allowed for the grandfathering of those dedicated funds prior
to statehood. That was done for a reason. She did not want to
question the reason, however. She believed, if the opinion of the
attorney general had not been written in 1959 in its context, then
the state would probably still have a highway use fund, for
example. She would like to have a fund for the roads and a tax
that was directly related to the use of the roads. She would not
vote for a school fund if a highway use fund was an issue before
the committee. There was no relationship between a tobacco tax and
a school fund. But, it was here, it was reasonable, and it was
available. That was her rationale and she knew there were holes
all through it. She reiterated she would support a dedicated fund
for the maintenance of the roads as long as the money going into it
had a direct relationship to the use of the roads. This should not
be a political issue, it should be a realistic issue.
ADJOURNMENT
TAPE 97-7, SIDE A
Number 0017
CHAIR JAMES adjourned the House State Affairs Standing Committee at
9:38 a.m.
| Document Name | Date/Time | Subjects |
|---|