Legislature(1999 - 2000)
02/18/1999 08:05 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
February 18, 1999
8:05 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative John Coghill
Representative Scott Ogan
Representative Jim Whitaker
Representative Bill Hudson
Representative Beth Kerttula
Representative Harold Smalley
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
* HOUSE JOINT RESOLUTION 9
Urging the President of the United States and the Congress to act
to ensure that federal agencies do not retain records relating to
lawful purchase or ownership of firearms gathered through the Brady
Handgun Bill instant check system.
- MOVED HJR 9 OUT OF COMMITTEE
HOUSE BILL NO. 45
"An Act relating to initiative and referendum petitions; and
providing for an effective date."
- SUBCOMMITTEE APPOINTED
HOUSE JOINT RESOLUTION NO. 7
Proposing an amendment to the Constitution of the State of Alaska
relating to initiative and referendum petitions.
- SUBCOMMITTEE APPOINTED
HOUSE BILL NO. 77
"An Act relating to the Joint Armed Services Committee, a permanent
interim committee of the Alaska State Legislature; and providing
for an effective date."
- WAIVED FROM COMMITTEE
* HOUSE BILL 89
"An Act authorizing an advisory vote on the use of the Alaska
permanent fund earnings reserve account; relating to certain
procedures for the special election; and providing for an effective
date."
- HEARD AND HELD
* HOUSE BILL 90
"An Act making a special appropriation from the earnings reserve
account of the Alaska permanent fund to the constitutional budget
reserve fund; and providing for an effective date."
- HEARD AND HELD
* HOUSE BILL 91
"An Act relating to taxation, including taxation of income of
individuals, estates, and trusts; and providing for an effective
date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HJR 9
SHORT TITLE: DESTROY BRADY BILL RECORDS
Jrn-Date Jrn-Page Action
1/27/99 92 (H) READ THE FIRST TIME - REFERRAL(S)
1/27/99 92 (H) STATE AFFAIRS, JUDICIARY
1/29/99 106 (H) COSPONSOR(S): FOSTER, HARRIS,
COGHILL
2/01/99 121 (H) COSPONSOR(S): HUDSON, MORGAN, HALCRO
2/01/99 121 (H) COSPONSOR(S): AUSTERMAN
2/08/99 172 (H) COSPONSOR(S): OGAN, KOTT, COWDERY
2/12/99 209 (H) COSPONSOR(S): PHILLIPS
2/16/99 227 (H) COSPONSOR(S): SMALLEY
2/18/99 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 45
SHORT TITLE: INITIATIVE/REFERENDUM PETITIONS
Jrn-Date Jrn-Page Action
1/19/99 30 (H) READ THE FIRST TIME - REFERRAL(S)
1/19/99 30 (H) STA, FIN
2/11/99 (H) STA AT 8:00 AM CAPITOL 102
2/11/99 (H) HEARD AND HELD
2/11/99 (H) MINUTE(STA)
2/18/99 (H) STA AT 8:00 AM CAPITOL 102
BILL: HJR 7
SHORT TITLE: CONST AM: INITIATIVE/REFERENDUM PETITIONS
Jrn-Date Jrn-Page Action
1/19/99 17 (H) READ THE FIRST TIME - REFERRAL(S)
1/19/99 17 (H) STA, JUD, FIN
2/11/99 (H) STA AT 8:00 AM CAPITOL 102
2/11/99 (H) HEARD AND HELD
2/11/99 (H) MINUTE(STA)
2/18/99 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 77
SHORT TITLE: JOINT ARMED SERVICES COMMITTEE
Jrn-Date Jrn-Page Action
2/03/99 132 (H) READ THE FIRST TIME - REFERRAL(S)
2/03/99 132 (H) MLV, STA, FIN
2/05/99 147 (H) COSPONSOR(S): MULDER, PHILLIPS
2/16/99 (H) MLV AT 5:00 PM CAPITOL 120
2/16/99 (H) MOVED OUT OF COMMITTEE
2/16/99 (H) MINUTE(MLV)
2/17/99 235 (H) MLV RPT 6DP 1NR
2/17/99 235 (H) DP: FOSTER, PHILLIPS, COGHILL, KOTT,
2/17/99 235 (H) JAMES, MURKOWSKI; NR: CROFT
2/17/99 235 (H) ZERO FISCAL NOTE (LAA)
BILL: HB 89
SHORT TITLE: ADVISORY VOTE ON PF EARNINGS RESERVE ACCT
Jrn-Date Jrn-Page Action
2/10/99 192 (H) READ THE FIRST TIME - REFERRAL(S)
2/10/99 192 (H) STATE AFFAIRS, FINANCE
2/10/99 192 (H) 2 FISCAL NOTES (GOV)
2/10/99 192 (H) GOVERNOR'S TRANSMITTAL LETTER
2/18/99 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 90
SHORT TITLE: APPROP: EARNINGS RES. TO BUDGET RESERVE
Jrn-Date Jrn-Page Action
2/10/99 193 (H) READ THE FIRST TIME - REFERRAL(S)
2/10/99 193 (H) STATE AFFAIRS, FINANCE
2/10/99 193 (H) 2 FISCAL NOTES (REV)
2/10/99 193 (H) GOVERNOR'S TRANSMITTAL LETTER
2/18/99 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 91
SHORT TITLE: INCOME TAX: INDIV/ESTATES/TRUSTS
Jrn-Date Jrn-Page Action
2/10/99 196 (H) READ THE FIRST TIME - REFERRAL(S)
2/10/99 196 (H) STATE AFFAIRS, FINANCE
2/10/99 196 (H) FISCAL NOTE (REV)
2/10/99 196 (H) GOVERNOR'S TRANSMITTAL LETTER
2/18/99 Text (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
REPRESENTATIVE ERIC CROFT
Alaska State Legislature
Capitol Building, Room 400
Juneau, Alaska 99801
Telephone: (907) 465-4998
POSITION STATEMENT: Sponsor of HJR 9.
DICK BISHOP, Vice President
Alaska Outdoor Council
1555 Gus's Grind
Fairbanks, Alaska 99709
Telephone: (907) 455-6151
POSITION STATEMENT: Testified in support of HJR 9.
BRIAN JUDY, Liaison for State and Local Affairs
National Rifle Association of America
Institute for Legislative Action
555 Capitol Mall, Suite 455
Sacramento, California 95814
Telephone: (916) 446-2455
POSITION STATEMENT: Testified in support of HJR 9.
DEL SMITH, Deputy Commissioner
Department of Public Safety
P.O. Box 111200
Juneau, AK 99811-1200
Telephone: (907) 465-4322
POSITION STATEMENT: Provided information regarding HJR 9.
WILSON CONDON, Commissioner
Department of Revenue
P.O. Box 110400
Juneau, Alaska 99811-0400
POSITION STATEMENT: Testified on HB 89, HB 90 and HB 91.
DON RULIEN, CPA
1407 West 31st #800
Anchorage, Alaska 99503
Telephone: (907) 272-6522
POSITION STATEMENT: Discussed concerns with the state withholding
of crew shares and the filing form.
JOHN LETOURNEAU, CPA
1400 West Benson #400
Anchorage, Alaska 99503
Telephone: (907) 272-1575
POSITION STATEMENT: Discussed the reference to the federal income
tax.
ERIC WEATHERS
P.O. Box 1791
Cordova, Alaska 99574
Telephone: (Not provided)
POSITION STATEMENT: Urged the committee not to impose an
unconstitutional individual income tax.
DENNY KAY WEATHERS
P.O. Box 1791
Cordova, Alaska 99574
Telephone: (Not provided)
POSITION STATEMENT: Urged the committee not to impose an
unconstitutional individual income tax.
ROY CARLSON
HC31 Box 5119-TA
Wasilla, Alaska 99654
Telephone: (907) 376-0916
POSITION STATEMENT: Discussed taxes with regards to HB 89,
HB 90 and HB 91.
ALAN LEMASTER
P.O. Box 222
Gakona, Alaska 99586
Telephone: (907) 822-3664
POSITION STATEMENT: Disagreed with an income tax.
STEVE IRWIN and CHARLOTTE CARROLL
P.O. Box 20537
Juneau, Alaska 99802
Telephone: (907) 586-2037
POSITION STATEMENT: Opposed taxes.
DENNIS PIPER
P.O. Box 35394
Juneau, Alaska 99801
Telephone: (907) 790-4139
POSITION STATEMENT: Opposed to income tax.
ALVIN EVANS
1304 Brittany Place
Juneau, Alaska 99801
Telephone: (907) 780-8674
POSITION STATEMENT: Displeased about the proposed tax.
GREG JERUE
P.O. Box 211434
Auke Bay, Alaska 99821
Telephone: (907) 789-9812
POSITION STATEMENT: Opposed tax.
ACTION NARRATIVE
TAPE 99-3, SIDE A
Number 001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:05 a.m. Members present at the
call to order were Representatives James, Coghill, Ogan, Whitaker,
Hudson, Kerttula and Smalley.
HJR 9 - DESTROY BRADY BILL RECORDS
CHAIR JAMES announced the first order of business would be HJR 9,
"Urging the President of the United States and the Congress to act
to ensure that federal agencies do not retain records relating to
lawful purchase or ownership of firearms gathered through the Brady
Handgun Bill instant check system."
Number 013
REPRESENTATIVE ERIC CROFT explained that HJR 9 addresses the
retention of records under the Brady bill, which he characterized
as a difficult issue and a difficult compromise. One key element,
from the perspective of gun owners and the National Rifle
Association (NRA), was that none of the records generated by the
Brady bill concerning lawful gun owners would be retained by the
governor. There was no controversy over keeping records on people
who were found to be illegally attempting to acquire firearms.
REPRESENTATIVE CROFT stated, "We've all agreed that that's where
the focus should be, on keeping guns out of the hands of people who
should not have them under law. In that compromise, that clear
directive, (indisc.) stated in statute, the Brady bill, concerning
the instant checks, says: 'If receipt of a firearm would not
violate the sections of the bill, the system shall - not may -
destroy all records of the system with respect to the call (other
than the identifying number and the date the number was assigned)
and all records of the system relating to the person or the
transfer.'"
REPRESENTATIVE CROFT said he believes the statutory language to be
clear. He was surprised to learn that the regulations enacted
pursuant to that statute allowed the FBI [Federal Bureau of
Investigation] and other government agencies to keep records on
lawful gun owners for up to 18 months originally, and under the
final regulations up to six months for audit purposes. Therefore,
he had drafted this resolution, which requests that the public stop
keeping these records on lawful gun owners but continue to do
whatever is necessary on illegal gun owners, or persons attempting
to acquire guns illegally. The resolution further asks Congress if
they deem it necessary to clarify that language by inserting the
word "immediately."
Number 092
DICK BISHOP, Vice President, Alaska Outdoor Council, testified via
teleconference from Fairbanks in support of HJR 9 and read the
following statement:
The Alaska Outdoor Council is vitally interested in the safe
and ethical exercise of the individual right to keep and bear
arms and we strongly support HJR 9. We thank Representative
Croft for introducing the measure, and his cosponsors for
their strong bipartisan support. This is an issue that knows
no party lines.
Regulations mandating retention of data on lawful firearms
purchases under the so-called Brady bill's instant check
provisions are a cynical subversion of the clear meaning of
that law. The law's provision mandating destruction of those
records does not mean some Tuesday next week, or six months
later.
The purpose of the instant check is to determine if a firearms
purchase is legal. Once that determination is made, there is
no rationale under the law for retaining that record. The
purpose of the law has been fulfilled when attempted illegal
purchases are forestalled.
As anyone who has worked in or with government knows, it's all
too easy for bureaucrats to overlook or ignore statutory
requirements and regulations. The six-month destruction
deadline easily becomes no deadline, through neglect, or for
an ulterior motive. Or it might be revised in a future
regulation if there's no objection to the initial one, to one
year, or five years, or permanent retention.
There's not much good to be said about the Brady bill in my
opinion, but at least it was agreed that it was not to be the
first step in an all out gun registration system in the
nation. We applaud the National Rifle Association's legal
challenge to this foot in the door regulation.
I wonder who decided there should be six-month data retention?
It appears to fit right in with President Clinton's
patronizing political campaign to demonize all gun owners.
The Alaska Outdoor Council urges the legislature to promptly
pass HJR 9. We also recommend that you transmit the
resolution to every state legislature and every governor, in
addition to the distribution outlined in the resolution.
Number 154
BRIAN JUDY, Liaison for State and Local Affairs, National Rifle
Association of America, Institute for Legislative Action, testified
via teleconference from Sacramento, California, in support of HJR
9. He said he was speaking on behalf of the 18,000-plus NRA
members who live in Alaska. He echoed Mr. Bishop's comments
regarding his appreciation to the cosponsors of HJR 9, who have
signed on in an effort to influence Congress and the President to
eliminate the National Instant Check System (NICS) record keeping,
which has been unfairly and inappropriately imposed by the FBI.
Mr. Judy read the following testimony to provide some background:
In 1993, the NRA worked closely with Congress in drafting the
law which created the National Instant Check System in an
effort to ensure the privacy of firearm owners. In one of the
provisions which was paramount importance to the NRA was the
one requiring the destruction of records, it's Section 922 of
Title 18. And this law requires that the instant check
system, and I quote now, 'shall...destroy all records of the
system with respect to the call and all records of the system
relating to the person or the transfer.' There are two small
things that are allowed to be maintained, that is the
identifying number of the transaction and the transaction
date. And the whole point of keeping that unique
identification number and the date was so they would have an
audit log.
The legislative intent was clear that immediate destruction of
the personal information pertaining to the perspective
purchaser would be destroyed [noise - teleconference line].
This is further evidenced by another section of the law which
went on to specify, ... 'No department, agency, officer, or
employee of the United States may require that any record or
portion thereof generated by the system established under this
section be recorded at or transferred to a facility owned,
managed, or controlled by the United States...; nor could they
use the system established under this section to establish any
system for the registration of firearms, firearm owners, or
firearm transactions or dispositions, except with respect to
a person prohibited ... from receiving a firearm.'
Now, clearly, the only information which can be maintained by
these systems, other than those unique identification numbers
and the transaction dates, is information on the bad guys,
information on people who are prohibited from possessing
firearms and who are illegally attempting to acquire firearms
through this system.
History has shown, over and over again, how firearm
registration systems have led to firearm confiscation
mandates. Law-abiding firearm owners clearly understand that
the creation of a gun registration system is a major step
toward the destruction of the Second Amendment.
The NRA urges you to support HJR 9 sending a strong message to
Washington, D.C. that federal bureaucrats are not, and should
not act above the law, and that the integrity o the Second
Amendment must be preserved.
Number 225
DEL SMITH, Deputy Commissioner, Department of Public Safety,
appearing at Representative Croft's request, said that since the
Brady law went into effect, with the exception of a couple of
county sheriffs in the Lower 48, local and state chief law
enforcement officers were responsible for doing Brady checks until
a court decision by the supreme court in 1997. Mr. Smith did not
believe there was a problem with law enforcement administrators in
Alaska running a Brady check. He said law enforcement
administrators got rid of all of the attendant paperwork. He
informed the committee that prior to his current job, he conducted
some audits for the Department of Public Safety on NICS compliance.
MR. SMITH stated, "In the agencies that I checked, there certainly
were no records relative to the Brady. When I had questioned a
transaction, they said that's a Brady check." He acknowledged that
there was no way to confirm whether a transaction had a legitimate
Brady check or not. The state of Alaska and local law enforcement
have always understood that information from Brady checks were to
be destroyed immediately.
REPRESENTATIVE OGAN asked if the sheriffs were the ones that sued
and ultimately won the case to repeal.
Number 250
MR. SMITH replied yes. He believed that a Montana sheriff and an
Arizona sheriff refused to do the Brady checks. The supreme court
ruled that local law enforcement was not obligated to do the
checks.
REPRESENTATIVE OGAN asked if the Department of Public Safety has
pursued any of the convicted felons who have attempted to buy
firearms. He noted that convicted felons are not allowed to
purchase firearms.
MR. SMITH was not familiar with any individual cases.
REPRESENTATIVE OGAN asked whether it is illegal for a convicted
felon to attempt to purchase a weapon, and whether troopers have
been dispatched in such an instance.
MR. SMITH confirmed that convicted felons are not authorized to
purchase a weapon. He suspects charges could be filed if a
convicted felon attempted to do so. Mr. Smith reiterated that he
was unaware of a trooper, a member of the Anchorage Police
Department or any other local officer being dispatched to any
particular location. For a NICS check, it takes three days for a
response. Therefore the individual may not receive the refusal
right away.
REPRESENTATIVE OGAN requested that Mr. Smith let him know if it is
illegal for convicted felons to attempt to buy a weapon. He asked
whether there has been a follow-up on those few illegal attempts.
REPRESENTATIVE HUDSON asked what Mr. Smith would do with the
records of someone who unlawfully attempted to purchase a firearm.
He asked whether the records would be maintained?
Number 295
MR. SMITH said there might be some potential for a criminal
prosecution, in which case one would need the transaction to
support the police report and any potential prosecution relative to
that.
REPRESENTATIVE HUDSON asked, "From the records then, have you had
a number of those in Alaska in the last year?"
MR. SMITH noted that there have been refusals. He indicated
numbers are available for the entire five years because the
Department of Public Safety keeps Brady statistics.
REPRESENTATIVE HUDSON implied the law is working to keep firearms
out of the hands of some of the unlawful recipients.
MR. SMITH agreed that the Brady checks have prevented people who
were prohibited by law from buying weapons. He estimated that 50
to 100, or potentially more, people have been prevented from
purchasing a weapon.
Number 322
REPRESENTATIVE HUDSON moved to report HJR 9 out of committee with
individual recommendations and the accompanying zero fiscal note.
There being no objection, HJR 9 moved from the House State Affairs
Standing Committee.
HB 45-INITIATIVE/REFERENDUM PETITIONS
HJR 7-CONST AM: INITIATIVE/REFERENDUM PETITIONS
CHAIR JAMES announced that HB 45, "An Act relating to initiative
and referendum petitions; and providing for an effective date," and
HJR 7, proposing an amendment to the Constitution of the State of
Alaska relating to initiative and referendum petitions, have been
assigned to a subcommittee. She appointed Representatives Hudson,
Smalley and herself to serve on the subcommittee, which would meet
on Friday.
HB 77-JOINT ARMED SERVICES COMMITTEE
CHAIR JAMES also stated she would like to waive HB 77, "An Act
relating to the Joint Armed Services Committee, a permanent interim
committee of the Alaska State Legislature; and providing for an
effective date." Hearing no objection, she noted that it would be
waived on the House Floor.
HB 89 - ADVISORY VOTE ON PF EARNINGS RESERVE ACCT
HB 90 - APPROP: EARNINGS RES. TO BUDGET RESERVE
HB 91 - INCOME TAX: INDIV/ESTATES/TRUSTS
Number 350
CHAIR JAMES announced the following bills would be presented as a
package: HB 89, "An Act authorizing an advisory vote on the use of
the Alaska permanent fund earnings reserve account; relating to
certain procedures for the special election; and providing for an
effective date"; HB 90, "An Act making a special appropriation from
the earnings reserve account of the Alaska permanent fund to the
constitutional budget reserve fund; and providing for an effective
date"; and HB 91, "An Act relating to taxation, including taxation
of income of individuals, estates, and trusts; and providing for an
effective date."
CHAIR JAMES called an at-ease at 8:25 a.m. in order to set up the
projector. The committee came back to order at 8:30 a.m.
Number 390
WILSON CONDON, Commissioner, Department of Revenue, appeared before
the committee with respect to HB 89, 90 and 91, which together
represent the Governor's package pertaining to the state's current
fiscal situation and possible solutions. He pointed out that all
Alaskans do not believe there is a problem. Therefore, the
discussion should first address whether there is a problem, and if
so, identify it. Commissioner Condon suggested comparing Alaska's
revenue portfolio in 1975, two years before the North Slope
production began, to the state's revenue portfolio in 1998. In
fiscal year (FY) 1975, $330 million of the state's revenue was from
the oil industry. He stated, "We, of course had an oil and gas
(indisc. - noise) we had a corporate income tax then as we do now,
we had a number of sales and use taxes, principally pertaining to
tobacco, alcohol. We had some natural resource taxes, we had
earnings on the money that was invested in our treasury and we had
an individual income tax that provided just a little over a quarter
of the state's revenue at that time."
COMMISSIONER CONDON moved forward 25 years to look at Alaska's
revenue portfolio for the most recently completed fiscal year,
which illustrates that Alaska has become much more dependent on oil
revenue. He noted that the state has no corporate income tax but
has some sales and use taxes, and other natural resource taxes. He
further noted that the individual income tax was repealed in 1980.
Number 444
COMMISSIONER CONDON presented a slide depicting Alaska's revenue
proportions, oil and non-oil, from 1975 through 1998. Roughly 30
percent of the state's revenue depended on oil in 1975. As a
consequence of the bounty of the North Slope, lots of oil and high
prices, Alaska became a very rich state and very dependent on oil
revenues. Commissioner Condon pointed out that for many years
Alaska was over 80 percent dependent on oil and gas industry
revenues. Currently the proportion has fallen below 80 percent.
The change in proportion reflects the drop in oil revenue and
consequently the drop in the proportion. Non-oil revenues remain
relatively stable, close to $500 million a year, as has been the
case for the last decade.
COMMISSIONER CONDON said the news media have focused on the low oil
prices and amplified the problem. North Slope production in 1998
was a little over 2 million barrels a day. Today, North Slope
production has dropped below 1.2 million barrels a day, a 40
percent drop in production and roughly a 40 percent drop in oil
revenue, whatever the price or revenues happen to be. This decline
began in 1988 and will continue after 2000. Commissioner Condon
forecasts a small bump-up after 2000, but believes it likely that
following 2003 the decline would continue unless there are some new
major discoveries on the North Slope, or oil prices went very high
so that it was economic to develop some of the known resources that
are there, but (indisc.) on economic to develop today. So, that is
the part of the story that doesn't get talked about a lot, but
which really drives the long-term structural difficulty that we've
got to deal with. We've become very dependent on oil revenue and
oil production has dropped almost in half over the decade from 1988
to today."
COMMISSIONER CONDON pointed out that since the oil price crash at
the end of 1985 and the beginning of 1986, prices have averaged
$16.50 per barrel at the destinations where Alaskan North Slope
crude oil is delivered to refineries. The price is currently
hovering around $10 a barrel, with a forecast for the average price
to be in the mid-$11 range for the upcoming fiscal year. It is
expected that fiscal year 2000 will see prices around $12.50 a
barrel, increasing into the low-$16 range around FY 2003. The need
for changes in the industry has always been there, but declining
prices have moved that quest a couple of years closer than it was.
Number 548
COMMISSIONER CONDON referred to a table that compared total state
general fund revenue for FY 1998 and FY 1999. He detailed the 20
mil property tax imposed on the oil industry statewide; the
corporate income tax levied on the oil and gas industry; the
severance tax; and revenue from royalties for the North Slope and
Cook Inlet state-owned land. He pointed out the non-oil revenues,
between $450 and $500 million, expected in FY 1999. He said the
total revenue for FY 1998 was $1.827 billion, and the projected
1999 figure is almost $1.3 billion.
COMMISSIONER CONDON then directed attention to the expenditure side
of the general fund over the last decade. In 1992-1993, the
unrestricted general fund budget pushed $3 billion, declined to a
$2 billion to $2.5 billion figure, and is currently at $1.3
billion. He agreed that the budget deficit is larger than it has
been over the last few years; however, the same structural problem
has been present most of the decade. Spending has averaged $4
million to $5 million more than the general fund revenue each year.
The warrants did not bounce, he added, because the state was able
to turn to a savings account created in 1990, the Constitutional
Budget Reserve (CBR) fund. This fund contained proceeds from the
settlements of disputes about taxes and royalties pertaining to the
mineral industries, principally the oil and gas industry.
COMMISSIONER CONDON referred to a table showing the history and
projections of the CBR fund. He said after the fund was created in
1990, almost $5 billion in various settlement revenue was
deposited. The fund was invested and earned income, and funds were
not withdrawn to balance the budget in 1991 or 1992. Beginning in
1993, however, the state began to draw on the CBR to balance the
budget. Over the next six years, amounts were withdrawn each
fiscal year through 1998, and the balance at the end of FY 1998 was
between $3.5 and $3.6 billion. With the withdrawals the state has
had to make so far this year, the balance is a little under $3
billion. More disputes are expected to settle, resulting in more
deposits for this fund, and these are projected at a little over
$100 million a year over the next five fiscal years. Based on
current oil projections, in terms of price and volume, the draw on
the CBR will be approximately $1.1 billion this year, almost $1.1
billion for fiscal year 2000, and then in the high $800 million
range for the next three years. If that happens, the fund will be
exhausted some time in early fiscal year 2003.
Number 686
REPRESENTATIVE HUDSON asked if the committee could get a copy of
all of the slides in the order they were presented.
COMMISSIONER CONDON agreed to that. He continued his presentation
by stating, "If we flat-line the budget, and if we are right on our
forecast about oil prices and volumes, then we are going to run out
of our CBR fund in February of 2003." He added, "If we were to
slightly increase the budget at 2 percent a year, we would exhaust
our CBR fund in December of 2001. If our budget levels are set at
the level that will pertain to the plan that the legislative
majority has been following for the last three years, with a $40
million cut this year and a $30 million cut next year, and oil
stays at $10.50 a barrel, then we will exhaust the CBR in April of
2002." He further stated, "If we average $16.50 a barrel this year
and following years, we would get out to May 2004." He emphasized
that this problem exists because the state became so dependant on
oil revenue and oil production is dropping.
TAPE 99-3, SIDE B
Number 001
COMMISSIONER CONDON outlined various considerations made by
Governor Knowles, reflected in this proposed legislation. The
first was whether the state can balance the budget on a sustainable
basis, and if so, whether it shouldn't be done. He agreed that
budget reductions must be responsible, and that it should be
determined what services should and must be provided to Alaskans.
Commissioner Condon cited another consideration as the health of
Alaska's economy, in which government plays a large role. He said
Alaska is often compared to Alberta, Canada, where the government
had restructured its budget. However, Alberta's economy is very
different from Alaska's economy; there are not many people waiting
to employ Alaska's public sector workers if they are suddenly out
on the job market. Commissioner Condon reiterated that budget
reductions must be responsible. He said public officials'
responsibility goes to public services, as well as to the place of
government in the economy.
Number 079
COMMISSIONER CONDON identified the third principle as maintaining
a healthy permanent fund dividend (PFD), which is important to the
Governor. Fourth is the growth of the state's savings accounts.
He indicated the need with to avoid simply funding savings. He
said if new taxes are necessary, the Governor believes that any new
tax should be fair and broad-based. Commissioner Condon recognized
that people have differing views of fairness. He pointed out that
any broad-based tax includes the questions of horizontal equity,
neighbor comparisons, and vertical equity; he mentioned the
progressiveness of a tax system. He emphasized the importance to
the Governor of not changing the PFD program without a vote of the
people.
COMMISSIONER CONDON discussed tools to address a $1 billion-plus
deficit today, with a $800 million deficit in the future. He noted
that everyone wants as large a PFD as possible, and no one wants to
pay taxes if it can be avoided. Therefore, he surmised that most
would say that if expenditures could be cut, that route should be
chosen. He said the general fund operating budget is a little over
&2.2 billion, and the state has a $1 billion problem.
COMMISSIONER CONDON utilized an overhead that separated the general
fund operating budget into more manageable areas. One area is the
core state government, which includes the legislature, the courts,
executive branch agencies, and state employees around the state.
The core state government will spend approximately $780 million in
the FY 1999 general operating budget. Due to a policy chosen many
years ago, the majority of local schools have been funded out of
the state treasury. Most states contribute to a considerable
portion of local school budgets from the state's treasury. Alaska
contributes to elementary and secondary education out of the state
treasury on a percentage basis. Commissioner Condon noted that
although assistance to local governments is still provided, that
assistance has shrunk significantly over the years. A significant
portion of the university's budget, $172 million in FY 1999, is
provided from the general fund.
Number 220
COMMISSIONER CONDON noted that nonprofits provide services such as
health services statewide; the $110 million in grants to nonprofits
and independent agencies should be viewed as a part of core state
government. He referred to the formula programs, social safety net
programs such as Adult Public Assistance, the Alaska Temporary
Assistance Program, Medicaid and the Longevity Bonus Program. He
said if the legislature and court systems were shut down, as well
as the nonprofit agency programs, but if the social safety net was
continued, along with local schools and the university system,
there still wouldn't be enough to close the gap.
Number 252
REPRESENTATIVE OGAN pointed out that the general operating budget
reflects $2.2 billion, while the actual spending - considering the
off-budget items, federal pass-through and total state spending -
is $6.2 billion. He asked where the rest of the money is going.
COMMISSIONER CONDON explained that the $6 million budget includes
the dividend, which is $900 million, and inflation proofing, which
is about $300 million at today's inflation rate. If just talking
about the operating budget, he believes the number comes back to a
little over $4 billion. He indicated it is $2 to $3 billion of
general fund, with roughly one billion of federal money; another
billion shows up in the appropriation bill, the off-budget part of
this. He said $200 million has "already been appropriated to an
agency and then is sent to another agency and the legislature wants
to control that, as they should."
COMMISSIONER CONDON pointed out that the legislature appropriated
$14-$15 million to operate the Child Support Enforcement Program,
which requires the heavy use of lawyers. About $1 million is used
for legal services to that program. Therefore, the Department of
Law's budget reflects that $1 million moving from the Department of
Revenue to the Department of Law to operate the Child Support
Enforcement Program. Commissioner Condon explained, "So, $15
million is appropriated to us, and then of that 15, another million
is appropriated over to the Department of Law. And that activity
throughout state government, whether you're talking the provision
by the Department of Law's legal services, the way we handle the
use of data processing in our budget, and so on - the billing of
Department of Transportation personnel to individual capital
projects and so on. When you add all of that up, it's about $200
million of the billion dollars. Then we have all of the
independent corporations and the money that they spend, the
permanent fund, the housing finance corporation, the Alaska
Industrial Development and Export Authority, the Municipal Bond
Bank, the student loan corporation."
COMMISSIONER CONDON said the legislature controls the budgets for
all of those corporations mentioned. Those corporations generate
revenue that is intended to be used to run the program. If
attempts are made to obtain the revenue generated from those
corporations to utilize in other departments, those quasi-business
entities will disappear along with the money. Commissioner Condon
acknowledged the importance of the legislature's controlling the
expenditure of this money since the legislature is the policy
maker. From a revenue forecasting perspective, Commissioner Condon
found $110-$120 million that was not included in the general fund
revenue forecast for FY 1998. He emphasized the importance to
determine the correct number in order that the discussion can move
forward to address the problem. Commissioner Condon said, "I
believe ... that maybe it's a $100 million smaller than what I've
testified to, but it is not a $1 billion smaller, and you got a $1
billion problem, and maybe it's $900 million."
Number 336
CHAIR JAMES said she believes this exercise to be extremely
important for everyone. Noting that state spending is $6 million,
recognizing other federal spending, military spending, and private
sector spending, she asked what the top amount of money is in the
state that fuels our economy, and what portion the $6 million is of
that.
COMMISSIONER CONDON said he did not know.
REPRESENTATIVE HUDSON said about $15 billion total in the state.
CHAIR JAMES asked if that included the $6 billion.
REPRESENTATIVE HUDSON replied yes.
COMMISSIONER CONDON told members he did not have those figures but
would provide them. He added that all available options take money
from the Alaska economy somewhere.
Number 396
REPRESENTATIVE COGHILL referred to the core state government and
the dedicated funds that are off-budget. He asked whether the
retirement funds are dedicated funds or fall under the core state
government.
COMMISSIONER CONDON said they are dedicated funds. The ongoing
contributions taken out of employee paychecks and the state match
are reflected in the core state government. Persons receiving a
retirement check are not reflected in the core state government,
nor are the funds used to pay the management fees for managing the
money in the retirement portfolio or administrative costs of the
Division of Retirement and Benefits and the Department of
Administration. Benefits paid to state employees other than the
retirement benefits are included in the core state government
funds.
REPRESENTATIVE OGAN pointed out that if money is taken out of the
economy by a tax, that takes the money out of the private sector
economy and places it in the government economy, which helps
Juneau. He said the $6 billion contains $2 billion of the
permanent fund, which results in $4 billion with federal
pass-through. He agreed with Commissioner Condon that the budget
gap cannot be closed by laying off every state employee; he
suggested, however, that if some programs were eliminated, progress
could be made towards closing the budget gap. Alaska provides many
programs that other states do not offer. If some of those programs
were eliminated, the budget could possibly be seriously reduced.
COMMISSIONER CONDON acknowledged that the budget could be reduced
by cutting programs, but it is difficult to take a significant
proportion of $1 billion out of programs without eliminating a
large percentage of the functions of state government.
Number 452
REPRESENTATIVE COGHILL agreed, but pointed out that a $4 billion
gap would result in a $12,000 burden for each person in Alaska.
COMMISSIONER CONDON concurred. He said the point is how far one
can cut and still maintain responsibility to Alaska's citizens.
Number 463
COMMISSIONER CONDON turned to the permanent fund as a possible tool
for decreasing the budget gap. He said the income of the permanent
fund, which has a market value of $25 billion, is projected to
surpass oil revenues after 1998. Thinking of the permanent fund as
an endowment, he asked how much could be taken from it for
dividends while preserving the purchase power of the fund. Setting
aside the formula specified in statute, Commissioner Condon said
the purchase power of the fund could be preserved while taking out
5 percent of the market value of the fund annually. With regard to
endowments across the country, some universities invest more
aggressively than the permanent fund does; those universities
strive for 5.25 percent payout per year.
COMMISSIONER CONDON said he did not believe it likely that
investing at a risk level that would generate more than 5 percent
per year would be tolerated, however. If 5 percent were taken from
the permanent fund and investments were made at the current risk
level, the fund would be inflation-proofed. He noted that 5
percent of $25 billion is $1,250,000,000 per year. Taking 4
percent from the permanent fund would result in $1 billion per
year. If public spending was not touched and the permanent fund
was utilized for $800 million a year to pay government expenses,
the dividend program would be cut in half. He mentioned the desire
to maintain the dividend program close to its level today, saying
only $400-$500 million would be available.
Number 530
CHAIR JAMES inquired as to the statutory amount placed in the
dividend from the oil revenues.
COMMISSIONER CONDON said approximately $100 million per year in
today's oil prices, placed in the principal of the fund.
REPRESENTATIVE OGAN referred to the graph provided by Commissioner
Condon, which illustrates over the last 20 years quite a few peaks.
He said the portion referring to the next 20 years indicates a
pessimistic view with regards to the price of oil. He asked
whether that information is politically motivated.
COMMISSIONER CONDON said no. The graph is an honest professional
judgment about oil prices and oil production volumes. There has
been a price of $40 per barrel for oil, which may happen again, but
at a production level much lower than that earlier $40-per-barrel
production level. He said the fiscal gap cannot be solved with the
permanent fund, if the dividend is to be preserved; the Governor
believes it is important to preserve the PFD program and does not
believe the fiscal gap could be resolved with a combination of
budget cuts and the permanent fund; therefore, there must be some
manner in which to raise public revenue. The Governor believes
that should be accomplished through a broad-based tax.
Number 569
COMMISSIONER CONDON used an overhead to compare Alaska's tax
program with an average of all the state's tax programs. For 1998,
Alaska's oil and gas tax revenues, except the oil and gas corporate
income tax, constituted almost 60 percent of the state's tax
revenue, or over 70 percent when the oil and gas corporate income
tax is included. Alaska's taxes rely heavily on the oil and gas
industry. Alaska does receive some property tax revenue, some
excise tax revenue, and corporate income from oil and gas as well
as outside oil and gas, and some other small taxes. On average,
one-third of the tax revenue in other states comes from sales and
income taxes.
COMMISSIONER CONDON presented the next overhead; it illustrated the
entire public revenue picture for Alaska, including the nontaxed
revenue and federal revenue, in comparison to other states. He
said other states turn to broad-based taxes for a little less than
20 percent of their revenue; Alaska does not take that approach.
Five states do not have a state sales tax, and seven states do not
have an individual income tax. Tennessee and New Hampshire have an
individual income tax that is only imposed on interest in
dividends, not on wages and salaries. In general, those states
with individual income taxes apply them to wages, salaries and
investment income. Alaska is the only state without a statewide
sales tax nor a statewide individual income tax.
Number 627
COMMISSIONER CONDON, in response to Representative Ogan, agreed to
provide a graph that illustrates how much each individual was paid
with respect to their income and number of dependents. He alluded
to a scenario with $350 million in taxes; he asked what kind of
per-capita state income tax load Alaskans would carry, relative to
people in other states. He said under the aforementioned scenario,
Alaska falls in the middle.
Number 0648
REPRESENTATIVE WHITAKER said he did not believe this would be a
per-capita tax, but that a significant portion of the population
would be excluded. He expressed interest in having information
that showed what those actually paying the tax would pay.
COMMISSIONER CONDON acknowledged that who pays, relative to who
does not, is important. He indicated that he would need to have
some slides regarding that information as this discussion
continues. Commissioner Condon suggested the committee would
conclude that the Governor's proposal is very progressive with
regard to who pays the tax. The Governor invites comments on the
fairest manner in which to raise tax revenue on a broad base.
Number 677
DON RULIEN, CPA [Certified Public Accountant], testified via
teleconference from Anchorage. Mr. Rulien expressed concern with
the state withholding on crew shares. Currently federal law
requires fishermen to issue a 1099 form for earnings of $600 or
more per fisherman. To change this to "all earnings from every
crew member" will be difficult. Mr. Rulien also expressed concern
with how these fishermen would be trained to do this, which may
result in a large cost to the state. He mentioned the three-mile
limit and the different reporting requirements for withholding; he
further mentioned review of the filing of these tax forms. He said
newspapers have reported that the form will be the size of a
postcard, but in order to come up with a state income tax portion
based on the federal filing, many computations will be required.
Mr. Rulien believes a closer look at the form is necessary. For
CPAs, a state income tax will require more work.
JOHN LETOURNEAU, CPA, testified via teleconference from Anchorage.
If adoption of a tax is chosen, he suggested that the statutory
language tie the tax more directly to the Internal Revenue Code
than it does currently. The proposed legislation includes language
referring to the federal income tax, which he believes was not a
defined term under the Internal Revenue Code.
TAPE 99-4, SIDE A
Number 005
MR. LETOURNEAU stated, "If this deletion were ... to make it into
law, it appears to me ... that our ability to look to the
well-developed set of law under the Internal Revenue Code would be
removed. And we would now be pretty much ... at the mercy of
looking to the lesser body of law in the state of Alaska, which if
we were to search for guidance would require more regulations,
which would imply a broadening of the ... state's requirement to
provide information, which kind of appears to be contra to
lessening the burdens of government." Mr. Letourneau said he would
forward to the committee both his testimony and his suggested
technical amendments.
DENNY KAY WEATHERS testified via teleconference from Cordova. She
first read the testimony of her husband, Eric Weathers, which
follows.
ERIC WEATHERS:
The state can only tax something they create. They cannot tax
"people" because they did not create them.
The state can tax corporations and individuals who work for
the state and municipalities because their source of income
was created by the government.
The state may tax the permanent fund because it is state-owned
and created.
The only thing a tax will do is to make more government and
more government spending, and can only be paid by those who
are employed and/or benefit from that government.
An unconstitutional tax on private businesses and "people"
will generate more tax consuming public servants and welfare.
If a tax is to be imposed, it must be apportioned. For
example, if I pay $100 everyone else will each pay their $100.
When government taxes "We the People," the government becomes
the master and the "people" the slaves.
The IRS cannot tax a private persons just compensation without
deceit, and neither can the state.
Remember that the "people" created the Constitution and
government for the people's use and it is the right of the
"people" to alter or abolish it, and to institute a new
government if the government becomes too repressive.
I strongly urge you not to impose an unconstitutional
individual income tax. Thank you for the opportunity to
testify.
Number 088
MS. WEATHERS read her own testimony into the record as follows:
The Constitution of the United States of America recognizes
two classes of taxes. The first one is the "direct" tax
authorized by Congress under ...
Article 1; Section 2, Clause 3: "Representatives and direct
taxes shall be apportioned among the several states which may
be included within this Union, according to their respective
numbers ..." and,
Article 1, Section 9, Clause 4: "No Capitation, or other
direct taxes shall be laid, unless in proportion to the census
or enumeration herein before directed to be taken."
The second one is "indirect" taxation authorized by Congress
under ...
Article 1, Section 8, Clause 1: "The Congress shall have
power to lay and collect taxes, duties, imposts and excises to
pay the debts and provide for the common defense and general
welfare of the Unites States; but all duties, imposts and
excises shall be uniform throughout the United States."
The State of Alaska also recognizes direct and indirect taxes
and I believe the State recognizes "franchise taxes" too ...
Franchise tax: An annual tax on the privilege of doing
business in the state. A tax on the franchise of a
corporation ....
All three taxes mentioned above are constitutional taxes. But
HB 91 is not a direct tax nor a indirect tax and it does not
fall under the franchise tax. What type of tax is contained
in HB 91?
Our government in Alaska seems to want to reward the
unproductive and penalize the producer. Politicians have been
writing laws designed to confiscate the fruit of the working
peoples labor and use those confiscated dollars to buy the
votes of the unproductive. This is wrong and "We the People"
are realizing it.
Just remember, Tax protest is our American political heritage.
It was tax protestors who formed our two greatest documents,
the Declaration of Independence and the Constitution for the
United States of America. Our first four presidents were
notorious tax protestors who were criminals under the laws of
England.
The Revolutionary War fought between 1775 to 1783 was for many
reasons and the Declaration of Independence lists those
reasons...interestingly one of those reasons was and I quote
"For imposing taxes on us without our consent" is it time for
another revolution?
I strongly urge you not to impose an unconstitutional
individual income tax.
Madame Chair, please could your committee answer my two
questions stated within my testimony and do you have any
questions for me.
Thank you for this opportunity to testify.
REPRESENTATIVE OGAN said that if there is an income tax, he would
want to have a vote of the people.
Number 155
ROY CARLSON testified via teleconference from the Matanuska-Susitna
Legislative Information Office (Mat-Su LIO). Mr. Carlson said,
"Let me give a brief summary of the three bills, 89, 90 and 91.
Briefly, no, no, and hell no." With regards to HB 90, Mr. Carlson
was opposed to an advisory vote. These three bills seem to be a
"cry wolf" approach to the state's financial problem. Mr. Carlson
believes that people should have as much government as they are
willing to pay for. If an advisory vote is the course, a list of
the services and the tax consequences of those services would be
very helpful to the legislature.
MR. CARLSON expressed opposition to the actual appropriation of
money embodied in HB 90. Although he agreed with Commissioner
Condon that a long-term plan is necessary, the current long-term
plans have a major flaw: all of the plans have been created by
people with an interest in the plan. An objective view of what is
needed in the budget can be obtained from people who do not benefit
from the budget. Mr. Carlson said, "There is nothing so innovative
as a government employee protecting his job."
MR. CARLSON referred to HB 91. He said he would fall into the
over-$50,000 tax bracket, and he noted that people in that bracket
presently pay 90 percent of the taxes. He indicated his dislike of
paying for national defense, Medicare, Medicaid, the Anchorage
Native hospital, and the Bush subsidies, and he said he would like
some help. For those reasons, Mr. Carlson believes an income tax
is an unfair approach.
MR. CARLSON restated that the three bills represent a "cry wolf"
approach to the problem. He said Commissioner Condon very expertly
has shown the worst-case approach. To Mr. Carlson, a little more
moderate view is that the state probably has, depending upon the
level of significant cuts the legislature will make, probably five
to seven years. He stated, "In fact, I can solve your budget
problem for you in an afternoon with coffee breaks. All you have
to do is take the revenue in, go ahead and give the amount of money
up to the caps, out of the budget reserve, and then take an
across-the-board cut, hand it to the Governor, and make him do his
job as a financial manager." Mr. Carlson expressed the need for a
committee to identify the long-term needs, with the priority that
the state is willing to pay for. A long-term revenue approach is
a good idea, and "perhaps, at that point, we look at tax." He
concluded by saying the Governor is taking advantage of the
"crisis" of low oil prices.
Number 252
ALAN LEMASTER testified via teleconference from Gakona. With
regards to Representative Ogan's comment that Alaska is one of the
most socialistic states in the country, Mr. Lemaster expressed
dismay at the installation of an income tax, which seems repressive
against those who are producers in the state, the wage earners. He
asked: If a tax is necessary, why is an income tax the approach?
He pointed out that a sales tax would tax people according to their
ability to purchase. Many other states utilize sales tax very
effectively to raise funds for their governments.
CHAIR JAMES noted that four people from Juneau had called in and
would like their comments read into the record. She read the
following comments into the record:
STEVE IRWIN and CHARLOTTE CARROLL:
No to taxes -- get spending in line with income; that's
what households have to do.
DENNIS PIPER:
Adamant no to income tax. We are taxed enough; sales,
property and hidden taxes. Cut back on spending. If you
must, use money from permanent fund to reduce deficit.
ALVIN EVANS:
Expresses great displeasure about the proposed tax by the
governor. No taxes, cut spending. Add $.02 for gas tax so
everybody pays. He could go for a flat tax which would be
equitable and fair for everyone.
GREG JERUE:
Against tax, get spending down. There are lots of places
that can be cut; more cuts to the Arts , for instance. He
could accept a small gas tax, like $.02 a gallon.
REPRESENTATIVE OGAN requested that Commissioner Condon provide the
committee with the per capita spending of the state governments
that do not have income tax, and of the states that do not have
sales tax, compared to Alaska.
COMMISSIONER CONDON agreed to provide that information.
CHAIR JAMES expressed interest in hearing more about the permanent
fund issue. [HB 89, HB 90 and HB 91 were held over.]
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 10:00
a.m.
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