Legislature(2005 - 2006)

03/21/2005 08:31 AM House W&M


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08:31:30 AM Start
08:31:49 AM Oversight Hearing on the Education Tax, Natural Resources and Non Oil Tax
09:53:50 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                         March 21, 2005                                                                                         
                           8:31 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bruce Weyhrauch, Chair                                                                                           
Representative Norman Rokeberg                                                                                                  
Representative Ralph Samuels                                                                                                    
Representative Paul Seaton                                                                                                      
Representative Peggy Wilson                                                                                                     
Representative Carl Moses                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Max Gruenberg                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
OVERSIGHT HEARING ON THE EDUCATION TAX, NATURAL RESOURCES AND                                                                   
NON OIL TAX                                                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                              
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
MICHAEL WILLIAMS, Auditor                                                                                                       
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Reviewed the education tax and recent                                                                      
proposals to reinstate it.                                                                                                      
                                                                                                                                
DAN BECK, Superintendent                                                                                                        
Delta Junction School District                                                                                                  
Delta Junction, Alaska                                                                                                          
POSITION STATEMENT: Testified in support of an education tax                                                                    
such as proposed in Senate Bill 137.                                                                                            
                                                                                                                                
WILLIAM H. CORBUS, Commissioner                                                                                                 
Office of the Commissioner                                                                                                      
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   During discussion  of  the mining  license                                                               
tax, related that the administration  isn't proposing any changes                                                               
to the mining license tax.                                                                                                      
                                                                                                                                
BRETT FRIED, Economist IV                                                                                                       
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Discussed  the natural resource  revenue of                                                               
the state.                                                                                                                      
                                                                                                                                
AL CLOUGH, Deputy Commissioner                                                                                                  
Department of Commerce, Community, & Economic Development                                                                       
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Reviewed  the mines  in  Alaska and  their                                                               
connection to  the area in  which they are  located, specifically                                                               
in regard to the formation of regional governments.                                                                             
                                                                                                                                
BOB LOEFFLER, Director                                                                                                          
Division of Mining, Land and Water                                                                                              
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Discussed the mining industry in Alaska.                                                                   
                                                                                                                                
RICH HEIG, General Manager                                                                                                      
Greens Creek Operation                                                                                                          
(No address provided)                                                                                                           
POSITION  STATEMENT:     In   representing  the   Alaska  Miners'                                                               
Association  and the  Council of  Alaska Producers,  reviewed the                                                               
mining industry in Alaska.                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR BRUCE WEYHRAUCH called the  House Special Committee on Ways                                                             
and  Means  meeting to  order  at  8:31:30 AM.    Representatives                                                             
Weyhrauch,  Samuels, Seaton,  Wilson, and  Moses were  present at                                                               
the  call  to order.    Representative  Rokeberg arrived  as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
^OVERSIGHT HEARING  ON THE EDUCATION  TAX, NATURAL  RESOURCES AND                                                             
NON OIL TAX                                                                                                                   
                                                                                                                                
8:31:49 AM                                                                                                                    
                                                                                                                                
CHAIR WEYHRAUCH announced that the  first order of business would                                                               
be to discuss the education tax.   He reminded the committee that                                                               
an education tax  was implemented in Alaska during  the 1950s and                                                               
was  repealed in  1980.   During  the  Twenty-Third Alaska  State                                                               
Legislature Senate  Bill 137  proposed an  education tax  of $100                                                               
per employee, which is basically an  income tax that is placed in                                                               
the  general fund  (GF) to  be  appropriated for  education.   He                                                               
added  that some  Alaskans believe  an individual  employment tax                                                               
[education tax] would give people  in the state a vested interest                                                               
in education.                                                                                                                   
                                                                                                                                
8:33:37 AM                                                                                                                    
                                                                                                                                
MICHAEL WILLIAMS,  Auditor, Tax Division, Department  of Revenue,                                                               
reiterated  the history  of  the education  tax  as explained  by                                                               
Chair  Weyhrauch.   He informed  the committee  that the  highest                                                               
grossing years for  the education tax were in  1979, during which                                                               
the tax  generated $2.5  million, and in  1980 when  it generated                                                               
$2.6 million.   During the Twenty-Third  Alaska State Legislature                                                               
Senate  Bill  137  proposed reinstating  an  employment  tax  for                                                               
education of  $100 per  employee.  The  education tax  would have                                                               
affected employees, 19  years of age and older,  once their gross                                                               
wage exceeded $1,000.   According to the  Department of Revenue's                                                               
fiscal note, during the out  years this employment tax would have                                                               
generated $39  million with  an operating  cost of  $1.1 million.                                                               
In addition, during the Twenty-Third  Alaska State Legislature, a                                                               
similar proposal on the education  tax was introduced, House Bill                                                               
236, by  Representative Wilson.   The fiscal  note of  House Bill                                                               
236  projected   revenue,  in  the   out  years,  to   amount  to                                                               
approximately  $43  million  with   an  operating  cost  of  $1.1                                                               
million.   He  turned  attention  to a  chart  which details  the                                                               
impact of inflation  on the $10 education tax from  1960 to 2004.                                                               
That $10 would've been adjusted upwards  to $49.  Even if the $10                                                               
in 1980 had  been adjusted for inflation the  education tax would                                                               
be $19.50  [in 2004].   He  placed this in  terms of  the state's                                                               
median household  income average.   According to the  U.S. Census                                                               
Bureau  the  median household  income  for  Alaska in  1979,  was                                                               
$29,585 and  the equivalent  of that  median household  income in                                                               
2004, if it were adjusted to  reflect inflation, was $63,555.  He                                                               
offered that the  median household income in Alaska  from 2001 to                                                               
2003,  averaged   $55,143,  and   thus  reflects  a   15  percent                                                               
differential because Alaska hasn't kept pace with inflation.                                                                    
                                                                                                                                
8:37:53 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON highlighted  that  the original  education                                                               
tax  included  a penalty  [provision]  which  was 100  times  the                                                               
amount of  the tax,  hence the  tax was $10  and the  penalty was                                                               
$1,000.    She  suggested  that  the  committee  should  consider                                                               
similar penalty provisions.                                                                                                     
                                                                                                                                
MR. WILLIAMS  related if the  employment tax is  reinstated under                                                               
Title 43 of the statutes, Section  5 of Title 43 already includes                                                               
penalty provisions.   Later drafts  of House Bill 236  and Senate                                                               
Bill 137  included non-payment provisions  in order  to safeguard                                                               
the money from being remitted to  the state.  In further response                                                               
to   Representative  Wilson,   Mr.  Williams   agreed  that   the                                                               
provisions  in  the  bills from  the  Twenty-Third  Alaska  State                                                               
Legislature placed the penalty on the employer.                                                                                 
                                                                                                                                
8:39:57 AM                                                                                                                    
                                                                                                                                
MR. WILLIAMS,  in response to  Chair Weyhrauch, replied  that the                                                               
individual [employment]  tax was  $100 for  both Senate  Bill 137                                                               
and House Bill  236.  He added  that in House Bill  236 there was                                                               
an  incremental percentage  such that  "once your  wages ...  hit                                                               
$1,001,  ...   it  was  actually   a  percentage  of   that  each                                                               
incremental  dollar until  you  hit the  $100  withholding."   In                                                               
further  response to  Chair Weyhrauch,  Mr.   Williams  explained                                                               
that the  statute repealed in 1980  was a $10 per  person tax and                                                               
that the  aforementioned threshold for  House Bill 236 was  not a                                                               
provision of the original statute.   Mr. Williams reiterated that                                                               
the  original $10  tax  amounts  to $49,  when  one accounts  for                                                               
inflation.                                                                                                                      
                                                                                                                                
8:40:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  related his  understanding  reinstituting                                                               
the  1960 [employment]  tax and  accounting  for inflation  would                                                               
generate  $20  million  with  an   administrative  cost  of  $1.1                                                               
million.                                                                                                                        
                                                                                                                                
MR. WILLIAMS agreed, but noted  that the administrative costs are                                                               
a relatively flat rate regardless of the volume generated.                                                                      
                                                                                                                                
8:41:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  highlighted [House  Bill 263]  includes a                                                               
definition  of  compensation.   He  asked  if the  aforementioned                                                               
definition includes the permanent fund dividend.                                                                                
                                                                                                                                
MR.  WILLIAMS answered  that the  definition doesn't  include the                                                               
permanent  fund dividend  however, it  would include  income from                                                               
self-employment.                                                                                                                
                                                                                                                                
REPRESENTATIVE  WILSON  opined  that   [House  Bill  263]  didn't                                                               
provide any  provisions for the  permanent fund  dividend because                                                               
it's  used for  other  things,  such as  owed  back taxes,  court                                                               
fines, child support, et cetera.                                                                                                
                                                                                                                                
8:42:59 AM                                                                                                                    
                                                                                                                                
DAN  BECK,   Superintendent,  Delta  Junction   School  District,                                                               
related his  support for  Senate Bill  137.   He opined  that the                                                               
bill would allow residents from  rural education attendance areas                                                               
(REAA) to pay their "fair  share."  He highlighted that "hundreds                                                               
of people  from out of  state" have  made huge salaries  and left                                                               
the  state with  those dollars  and yet  the pressure  is on  the                                                               
[state] to educate and train a workforce.                                                                                       
                                                                                                                                
8:43:57 AM                                                                                                                    
                                                                                                                                
CHAIR WEYHRAUCH  clarified that  no specific  bill is  before the                                                               
committee;  this is  merely an  oversight  meeting regarding  the                                                               
aforementioned bills  [from the  prior legislature].   Therefore,                                                               
Chair  Weyhrauch  took Mr.  Beck's  testimony  to mean  he  would                                                               
support an education tax, he said.                                                                                              
                                                                                                                                
8:44:48 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON asked  if Mr. Beck's school  district is an                                                               
REAA.                                                                                                                           
                                                                                                                                
MR.  BECK  replied,  "yes,"  and related  his  belief  that  most                                                               
residents  [of  Delta Junction]  support  the  institution of  an                                                               
education tax.                                                                                                                  
                                                                                                                                
8:45:11 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  related that the collected  funds [from an                                                               
education tax] would not be  dedicated back to the district where                                                               
the employee was hired.                                                                                                         
                                                                                                                                
MR.  BECK related  that was  his understanding  of the  bill, and                                                               
added that the  funds wouldn't necessarily be  used for education                                                               
either.                                                                                                                         
                                                                                                                                
8:45:30 AM                                                                                                                    
                                                                                                                                
CHAIR WEYHRAUCH inquired as to the appeal of this type of tax.                                                                  
                                                                                                                                
MR.  BECK   explained  there  has   been  controversy   over  the                                                               
unorganized boroughs  not [contributing] for  services, primarily                                                               
education, and this type of  tax would level the "playing field."                                                               
He opined  that the unorganized  boroughs should  offer something                                                               
to the state for the services they receive.                                                                                     
                                                                                                                                
8:46:56 AM                                                                                                                    
                                                                                                                                
CHAIR  WEYHRAUCH  announced that  the  committee  would turn  its                                                               
focus to the mining license tax.                                                                                                
                                                                                                                                
8:47:40 AM                                                                                                                    
                                                                                                                                
WILLIAM H.  CORBUS, Commissioner,  Department of  Revenue, stated                                                               
that the  administration has supported  mining and  will continue                                                               
to encourage  keeping existing mines in  operation and developing                                                               
new mines.   Therefore, the  administration is not  proposing any                                                               
changes to  the mining license  tax.  The revenues  received from                                                               
the  mining  license  tax  are minimal  in  comparison  with  the                                                               
overall state revenue.   However, mining provides  other forms of                                                               
taxes and provides employment, he opined.                                                                                       
                                                                                                                                
8:50:04 AM                                                                                                                    
                                                                                                                                
CHAIR  WEYHRAUCH  relayed  that  although there  is  no  specific                                                               
proposal to  raise taxes on  the mining industry,  it's important                                                               
to review  the industry, its  contribution to the state,  and its                                                               
tax structure.                                                                                                                  
                                                                                                                                
8:50:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON opined  that every  major industry  in the                                                               
state  is  a vital  contributor  to  the economy;  for  instance,                                                               
fishing is the  largest employer in the state and  yet there's no                                                               
proposals to cut fish industry  taxes.  He requested a comparison                                                               
of spin-off  [benefits] and  capital intensiveness  regarding the                                                               
industries,  because currently  the  treatment  of industries  is                                                               
based different political realities rather than economic impact.                                                                
                                                                                                                                
COMMISSIONER  CORBUS replied  that  if  the presentation  doesn't                                                               
address  Representative Seaton's  question,  then the  department                                                               
will have further conversations before the committee.                                                                           
                                                                                                                                
8:52:30 AM                                                                                                                    
                                                                                                                                
BRETT FRIED,  Economist IV, Tax Division,  Department of Revenue,                                                               
presented that  the natural resource  revenue comes to  the state                                                               
through three  means, including taxes,  rents and  royalties, and                                                               
other  revenue sources.   The  direct taxes  on natural  resource                                                               
businesses  include  the  fisheries  business  tax,  the  fishery                                                               
resource  landing  tax,  which  is collected  at  the  local  and                                                               
statewide level, the  local mining tax, and  the corporate income                                                               
tax for Sub  Chapter C Corporations.  The indirect  taxes are for                                                               
purchases  made   by  natural   resource  businesses   and  their                                                               
employees, including:   motor fuel taxes, local  sales taxes, and                                                               
property taxes.   The rents and royalties are  paid by businesses                                                               
located  on state  land.   The  other revenue  sources are  those                                                               
charged for services, fines,  forfeitures, licenses, and permits.                                                               
He  turned   to  the  table  entitled,   "Statewide  Alaska  Fish                                                               
Revenue",  which  breaks  down  the revenue  into  its  component                                                               
parts:                                                                                                                          
                                                                                                                                
    Fish Taxes (includes municipal          Fiscal     Year                                                                     
    share)                                  (FY) O4 Revenue                                                                   
     Salmon and Seafood Marketing            $5.3 million                                                                     
     Taxes                                                                                                                      
     Salmon Enhancement Tax                  $3 million                                                                       
     Dive Fishery Management                 $0.2 million                                                                     
     Fisheries Business Tax                  $29.2 million                                                                    
     Fishery Resource Landing Tax            $6.9 million                                                                     
     Total Fish Resource Taxes               $44.6 million                                                                    
     Corporation   Fish   Income   Tax       $3.2 million                                                                     
     Revenue                                                                                                                    
     Total Fish Tax Revenue                  $47.8 million                                                                    
                                                                                                                                
MR. FRIED added  that the salmon and seafood  marketing taxes are                                                               
appropriated to  the Alaska  Seafood Marketing  Institute (ASMI);                                                               
both  the salmon  enhancement and  dive fishery  management taxes                                                               
are  appropriated  to  qualified aquaculture  organizations;  the                                                               
fisheries business  tax and fishery  resource landing tax  have a                                                               
50  percent  share with  the  [qualifying  communities]; and  the                                                               
corporation  fish  income tax  revenue,  includes  sub chapter  C                                                               
corporations and processors.  He  related that the aforementioned                                                               
data was based  on actual tax returns as filed,  which means most                                                               
of the revenues reference calendar  year (CY) 2002, and the total                                                               
fish tax revenue is about $48 million.                                                                                          
                                                                                                                                
MR. FRIED detailed that other  fish revenue, not including charge                                                               
for services, fines, or forfeitures, as follows:                                                                                
                                                                                                                                
     Other Fish Revenue             Revenues for FY 04                                                                        
     Licenses and Permits           $23.2 million                                                                             
     Test Fisheries                 $1.6 million                                                                              
     Total Other Fish Revenue       $24.8 million                                                                             
     Total Fish Revenue             $72.6 million                                                                             
                                                                                                                                
MR. FRIED added  that the revenue from licenses  and permits goes                                                               
to the Alaska Department of Fish & Game fund.                                                                                   
                                                                                                                                
8:57:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  recalled that  some of  the aforementioned                                                               
taxes  were  imposed by  the  fisheries  [industry] in  order  to                                                               
supplement the research  the state wasn't conducting.   She asked                                                               
what percentage of the taxes were self-assessed.                                                                                
                                                                                                                                
MR. FRIED answered  that the salmon enhancement  and dive fishery                                                               
management are both self-assessed taxes.                                                                                        
                                                                                                                                
8:58:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  clarified  that the  salmon  and  seafood                                                               
marketing  tax,   salmon  enhancement   tax,  and   dive  fishery                                                               
management tax are self-assessed  taxes and appropriated back [to                                                               
the local  communities].  He pointed  out that 50 percent  of the                                                               
fisheries business  tax and the  fishery resource landing  tax is                                                               
shared  with   the  local   communities.     The  total   of  the                                                               
aforementioned  two  taxes  in  FY  04  was  $36.1  million,  and                                                               
therefore $18 million went into the  state treasury.  Add to that                                                               
the $3.2 million from the corporate  fish income tax and in FY 04                                                               
the fisheries industry  generated just over $21  million that was                                                               
placed in  the state  general fund  (GF), excluding  licenses and                                                               
permits, he added.                                                                                                              
                                                                                                                                
MR. FRIED agreed.                                                                                                               
                                                                                                                                
8:59:56 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  if there  were other  local taxes                                                               
that were  incident to fisheries  assets or revenues  that aren't                                                               
shown on the chart.                                                                                                             
                                                                                                                                
REPRESENTATIVE  SEATON  related  that   the  Lake  and  Peninsula                                                               
Borough, Kodiak, and  Unalaska have severance taxes of  up to 7.5                                                               
percent on  fisheries resource.   He related his belief  that the                                                               
aforementioned percent  is a significant  tax burden  placed upon                                                               
the gross income of the fishery industry.                                                                                       
                                                                                                                                
MR. FRIED turned to the  document entitled, "2004 Municipal Sales                                                               
Tax, Special  Tax and  Revenues", which  shows the  different raw                                                               
fish taxes that are levied in  the various communities as well as                                                               
the  various  revenues from  those  taxes.    He noted  that  the                                                               
document  doesn't   specify  any   property  tax  or   sales  tax                                                               
contribution that would be paid by the fishing industry.                                                                        
                                                                                                                                
9:01:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  if  there  are personal  property                                                               
taxes or  other taxes  on boats or  fishing equipment  that might                                                               
include a local take.                                                                                                           
                                                                                                                                
MR.  FRIED said  he  wasn't  sure, but  suggested  that it  would                                                               
depend upon the  community itself.  However, he said  that he was                                                               
sure that  there are local  property taxes  that are paid  by the                                                               
fishing industry.                                                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG  commented that this information  is very                                                               
helpful in terms  of the gross government take and  where it goes                                                               
in the various industries.                                                                                                      
                                                                                                                                
9:02:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  asked if  the Department of  Revenue runs                                                               
numbers  on  the  economic  impact,  particularly  in  regard  to                                                               
fishing in the  State of Washington.  He inquired  as to what the                                                               
State of Washington receives when taking Alaska's fish.                                                                         
                                                                                                                                
MR. FRIED said that he doesn't have such information.                                                                           
                                                                                                                                
REPRESENTATIVE   SAMUELS  related   that  [U.S.]   Senator  Maria                                                               
Cantwell has  relayed that  those in Washington  are in  favor of                                                               
Alaska  not  developing its  natural  resources.   Therefore,  he                                                               
questioned  whether the  residents of  Washington know  what they                                                               
receive from Alaska's natural resources.                                                                                        
                                                                                                                                
MR. FRIED said that no  economic analysis on the fishing industry                                                               
or its impact on the State of Washington has been performed.                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS  noted that  80  percent  of the  oil  in                                                               
Washington State's refineries comes from Alaska.                                                                                
                                                                                                                                
9:03:53 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SEATON  returned   attention  to   the  document                                                               
entitled, "2004  Municipal Sales Tax, Special  Tax and Revenues",                                                               
and asked if the Kodiak  Island Borough's 9.25 mill severance tax                                                               
is the fishery tax.                                                                                                             
                                                                                                                                
MR. FRIED related his belief that  the 9.25 mill severance tax is                                                               
from timber and fish.                                                                                                           
                                                                                                                                
9:04:37 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG asked  if that means that  the [9.25] tax                                                               
is paid if the fish is landed  in Kodiak, but it wouldn't be paid                                                               
if the fish was landed in Unalaska.                                                                                             
                                                                                                                                
REPRESENTATIVE  SEATON answered  that Representative  Rokeberg is                                                               
correct.  He  pointed out that Unalaska has a  2 percent raw fish                                                               
tax.  If  the fish was landed  in Wrangell or the  City & Borough                                                               
of Yakutat, one would  pay a 1 percent raw fish  tax while no raw                                                               
fish tax would  be paid on fish  landed in St. George.   He noted                                                               
that the [raw fish tax] is a tax on the gross value.                                                                            
                                                                                                                                
REPRESENTATIVE  ROKEBERG questioned  how  that  would impact  the                                                               
natural market place.                                                                                                           
                                                                                                                                
9:05:27 AM                                                                                                                    
                                                                                                                                
MR.  FRIED  turned  attention to  a  chart  entitled,  "Statewide                                                               
Alaska  Mining  Revenue."    He  explained  that  the  chart  was                                                               
prepared  on   a  calendar  year   basis  because  most   of  the                                                               
information  comes from  a table  prepared by  the Department  of                                                               
Natural  Resources   (DNR)  and   the  Department   of  Commerce,                                                               
Community, &  Economic Development  (DCCED).  The  resources tax,                                                               
including  the mining  license  tax, amounted  to  $1 million  in                                                               
revenue in  FY 03 and that  rose to $3.2  million in FY 04.   The                                                               
rents  and  royalties   in  CY  03  amounted   to  $3.9  million.                                                               
Therefore, the total mining tax  revenue summed $4.9 million.  He                                                               
explained  that  the chart  doesn't  specify  that the  corporate                                                               
mining income  tax revenue  in CY  03 was  related to  the timing                                                               
issue  with  regard to  corporation  income  taxes.   He  further                                                               
explained that  although [the division]  has the filings  from FY                                                               
04, most  of those  tax returns reference  2002.   Therefore, one                                                               
must return to CY 02 when  the revenue amounted to $300,000.  The                                                               
total other mining revenue amounted  to $1 million and when added                                                               
to the  material sales and  fees, the total other  mining revenue                                                               
summed $5.9 million for CY 03.                                                                                                  
                                                                                                                                
9:08:00 AM                                                                                                                    
                                                                                                                                
MR.  FRIED, in  response  to Representative  Seaton, related  his                                                               
understanding that material sales are  for sales of gravel, sand,                                                               
and  rock.   In further  response to  Representative Seaton,  Mr.                                                               
Fried confirmed that  the state selling someone  a material would                                                               
be from where the $1.8 million in CY 02 comes.                                                                                  
                                                                                                                                
9:08:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  referred to the Department  of Revenue's                                                               
document  entitled, "Alaska's  Mineral  Industry  2003 -  Special                                                               
Report   58."     That  document   specifies  that   payments  to                                                               
municipalities in 2003 amounted to $10.5 million.                                                                               
                                                                                                                                
MR. FRIED  agreed that  the $10.5 million  refers to  payments to                                                               
municipalities,  which isn't  included in  the "Statewide  Alaska                                                               
Mining  Revenue" document.   He  specified that  the payments  to                                                               
municipalities  refers  to  local  taxes and  other  payments  to                                                               
municipalities from  the minerals industry.   In further response                                                               
to  Representative   Rokeberg,  Mr.  Fried  clarified   that  the                                                               
document  entitled, "Alaska's  Mineral  Industry  2003 -  Special                                                               
Report 58"  is from  the Division  of Geological  and Geophysical                                                               
Surveys in  cooperation with the  Office of  Economic Development                                                               
of the  Division of Mining,  Land &  Water.  Mr.  Fried confirmed                                                               
that the numbers  provided in the aforementioned  document are CY                                                               
numbers.                                                                                                                        
                                                                                                                                
9:10:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  expressed curiosity with  placing material                                                               
sales in the  tax category because that means,  for example, that                                                               
ice  sales are  revenue to  the state,  although it's  actually a                                                               
sale  of an  item.   Representative Seaton  suggested considering                                                               
that the sale of something to  an industry doesn't mean that it's                                                               
a tax on the industry.                                                                                                          
                                                                                                                                
9:12:00 AM                                                                                                                    
                                                                                                                                
MR.  FRIED clarified  that the  material sales  comes from  DNR's                                                               
table,  which  is  the  only  reason  that's  listed  for  mining                                                               
although there isn't anything comparable listed for fishing.                                                                    
                                                                                                                                
CHAIR  WEYHRAUCH pointed  out  that the  expense  to the  fishing                                                               
industry for buying  ice would be comparable  to purchasing drill                                                               
bits, which  are an essential  part of  the mining industry.   He                                                               
asked if the aforementioned is an appropriate comparison.                                                                       
                                                                                                                                
MR.  FRIED  replied  no.    He  related  his  understanding  that                                                               
[purchasing  ice] is  like selling  gravel or  timber from  state                                                               
land.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG likened  it  to a  severance  tax.   "If                                                               
we're going to  have a statewide severance tax on  fish like they                                                               
do  in Kodiak,  then I'd  buy  the argument  otherwise I  don't."                                                               
Representative  Rokeberg  commented  that   it  has  always  been                                                               
considered a source of revenue in the state.                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  agreed, but  pointed out  that it's  not a                                                               
tax  revenue.   He  reiterated that  it's  selling [an  industry]                                                               
something, which he  suggested was mainly gravel  to build roads.                                                               
When a state  resource is sold, it  isn't the same as a  tax.  He                                                               
expressed  the need  to  have clarification  with  regard to  the                                                               
material sales.                                                                                                                 
                                                                                                                                
9:14:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON inquired  as to why the  mining license tax                                                               
revenue increased in 2004 when it rose to 3.2.                                                                                  
                                                                                                                                
MR. FRIED replied  that the prices of the  minerals gold, silver,                                                               
and zinc have increased.                                                                                                        
                                                                                                                                
9:15:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON turned to the  [FY] 02 corporate mining tax                                                               
numbers of  Table 10 entitled,  "Estimated mineral  production in                                                               
Alaska, 2001-2003"  that specifies  total [mineral  production in                                                               
2002]  as  $1,012,809,000.   He  asked  that  the same  table  be                                                               
prepared  for fisheries  in order  to  have a  comparison in  tax                                                               
rates versus the value of the raw product.                                                                                      
                                                                                                                                
9:16:14 AM                                                                                                                    
                                                                                                                                
AL   CLOUGH,  Deputy   Commissioner,   Department  of   Commerce,                                                               
Community,  & Economic  Development (DCCED),  said that  he would                                                               
describe the mineral industry beyond  the tax revenue aspect.  He                                                               
noted  that the  committee  packet should  include the  municipal                                                               
revenue handouts.   He  highlighted that  the Red  Dog mine  is a                                                               
negotiated  agreement  of  about  $5.7 million.    The  Northwest                                                               
Arctic  Borough  doesn't  have  a   property  tax.    He  further                                                               
highlighted that  the Fairbanks North Star  Borough receives over                                                               
$4 million  in direct tax  revenues from the mine.   Furthermore,                                                               
the mine receives many services.   In regard to the Fort Knox and                                                               
True  North mines,  Mr. Clough  informed the  committee that  the                                                               
customers of Golden Valley Electric  benefit from the power usage                                                               
of the mine because it decreases  the power cost for residents in                                                               
the area.   He  estimated that  it amounts to  about a  7 percent                                                               
reduction for the  residential customers.  In  Juneau, the Greens                                                               
Creek mine  pays about  $300,000 in  property tax  to the  City &                                                               
Borough of  Juneau.   He highlighted that  the Greens  Creek mine                                                               
isn't in the  roaded area, and therefore Juneau  receives quite a                                                               
benefit  without providing  a  lot of  municipal  services.   Mr.                                                               
Clough  pointed  out that  the  current  operating mines  in  the                                                               
state:    Red Dog,  Greens  Creek,  Fort  Knox, True  North,  and                                                               
Usibelli  Coal Mine  are all  located  within existing  boroughs.                                                               
However, the Northwest Arctic Borough  wouldn't exist without the                                                               
Red Dog mine,  and the Pogo Project, north of  Delta Junction, is                                                               
the driver  for the  current discussion of  the formation  of the                                                               
Delta Borough.                                                                                                                  
                                                                                                                                
MR.  CLOUGH said  that when  reviewing the  mineral industry  the                                                               
following dates  are critical to  remember.  The  mineral deposit                                                               
of the  Red Dog Mine was  first identified in the  late 1960s and                                                               
it  didn't move  into production  until 1989.   The  Greens Creek                                                               
deposit was first  identified in the early 1970s, but  was not in                                                               
production  until 1989.    Fort  Knox was  identified  as a  good                                                               
exploration  target  in  1984  and   production  began  in  1987.                                                               
Exploration  at the  Pogo Mine  began in  the mid  1980s and  the                                                               
actual discoveries  at the  site were made  in 1994.   Production                                                               
for the Pogo Mine is scheduled  for 2006.  Mr. Clough highlighted                                                               
that the exploration  of the pebble, copper, and  gold deposit in                                                               
the peninsula began in the  early 1990s.  The earliest production                                                               
from the aforementioned  would be in 2010.  He  noted that Donlin                                                               
Creek and  the Upper  Kuskokwim have similar  dates.   The modern                                                               
exploration of  the Kensington mine  in Juneau began  with placer                                                               
oil  in the  early 1980s  and  the earliest  production would  be                                                               
around 2008.   Mr. Clough then  turned to the Alaska  Juneau Gold                                                               
Mine and  related that its  modern exploration began in  1984 and                                                               
culminated with close-out and abandonment  of the project in 2000                                                               
with  $130   million  invested.    Similarly,   the  Quartz  Hill                                                               
(Indisc.)  project out  of Ketchikan,  for which  exploration and                                                               
discovery occurred in 1974, was  abandoned in 1990 following over                                                               
$100 million investment.                                                                                                        
                                                                                                                                
MR. CLOUGH related  that the mineral industry will  say that it's                                                               
different from  other resource sectors  in the state,  with which                                                               
he agreed.   From  DCCED's perspective,  the development  of more                                                               
large scale  mines in  the state  is associated  with family-wage                                                               
jobs  and   economic  engines  to  develop   regional  government                                                               
formation  and  operation.    The most  obvious  example  of  the                                                               
aforementioned is  the association between  the Red Dog  Mine and                                                               
the Northwest Arctic Borough.   The association between mines and                                                               
regional   government  formation   is  also   evidenced  in   the                                                               
discussion  to  organize  in the  Delta  Junction  and  Kuskokwim                                                               
regions.  The aforementioned, he  opined, is viewed as a positive                                                               
for the state.                                                                                                                  
                                                                                                                                
9:22:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG   inquired  as  to  how   effective  the                                                               
incentives  enacted to  encourage mineral  development in  Alaska                                                               
have  been.   He  further inquired  as to  the  impacts of  those                                                               
incentives on the state revenue stream.                                                                                         
                                                                                                                                
MR. CLOUGH said that the  most effective incentives have been the                                                               
geophysical  exploration programs.   The  aforementioned required                                                               
modest investments  of several hundreds  of thousands  of dollars                                                               
per appropriation  cycle and have  immediately resulted  in claim                                                               
staking  and  exploration,  from  which the  state  has  received                                                               
revenue.   There are several  other incentives that  he suggested                                                               
would  provide a  longer term  payback.   Again,  he stated  that                                                               
providing good  data has  been the  best incentive,  although the                                                               
tax breaks are  certainly beneficial.  In  particular, the phase-                                                               
in and  mining license tax  [has been beneficial]  and recognizes                                                               
the high start-up  costs of these projects,  which is exemplified                                                               
in  the  $1.5 billion  in  start-up  costs  for the  Pebble  Gold                                                               
Project.   Mr. Clough  noted that all  of these  business sectors                                                               
are different.                                                                                                                  
                                                                                                                                
REPRESENTATIVE   ROKEBERG  opined   that   the   policy  of   the                                                               
legislature,  even  since  territory  days, has  been  to  incent                                                               
mining activities in the state.   The aforementioned is important                                                               
to understand  if there is a  desire to review taxation  that may                                                               
impact  the  aforementioned  public  policy and  shift  it.    He                                                               
mentioned the need to take a broader view.                                                                                      
                                                                                                                                
9:25:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON recalled  testimony  that  due to  changes                                                               
over the  last couple of  years there  has been more  interest in                                                               
obtaining permits.                                                                                                              
                                                                                                                                
MR. CLOUGH agreed.                                                                                                              
                                                                                                                                
REPRESENTATIVE WILSON acknowledged that  it takes many years from                                                               
exploration  to production.   She  inquired as  to the  number of                                                               
years before increases in production are apparent.                                                                              
                                                                                                                                
MR. CLOUGH informed  the committee that the data  from the recent                                                               
large  mining projects  illustrate a  15- to  20-year cycle  from                                                               
discovery,  through exploration,  and development  to production.                                                               
The  dynamic the  [mining]  industry is  facing  is that  Alaska,                                                               
geologically speaking,  is a  good place  to be,  although Alaska                                                               
isn't  the best  place  to be  due to  the  cost of  exploration,                                                               
development,  and discovery.    In fact,  most  of these  mineral                                                               
deposits are  located in areas  in the state with  limited public                                                               
infrastructure.    The  average  lead   time  from  discovery  to                                                               
production is  15 years.  He  noted that the mineral's  price, as                                                               
with  the price  of many  resources, is  cyclical.   Stability is                                                               
necessary in order to encourage  and maintain interest in Alaska.                                                               
The aforementioned  is evidenced  in the  taxation system  at the                                                               
state and municipal levels.  If  such certainty is lost, it would                                                               
result   in  a   large   disincentive   for  this   international                                                               
investment.   Mr.  Clough informed  the committee  that from  the                                                               
largest minerals  gathering in North America  he understands that                                                               
Alaska is competing against Australia,  South America, and Africa                                                               
as well as developing countries.   He explained that certainty of                                                               
the  investment climate,  particularly when  there are  such long                                                               
lead times and  large capitalization costs, is a  major driver in                                                               
how money will be spent.                                                                                                        
                                                                                                                                
9:29:11 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON pointed out that  the latest year for which                                                               
there is  a complete  tax picture  is 2002 in  which there  was a                                                               
total mining  tax revenue  of $3.9 million.   According  to Table                                                               
10, in 2002 there was  $1,012,809,000 of extracted mineral value.                                                               
He said he  didn't mind a proposal  by which there is  a delay of                                                               
taxes.   However, the  administration has  said that  the state's                                                               
resources would be developed, which  would place [revenue] in the                                                               
state  treasury.   He  pointed  out  that  in the  [current]  tax                                                               
structure after there  is development, there is no  time at which                                                               
the state recoups  any revenue from an over  $1 billion extracted                                                               
industry.    He inquired  as  to  whether the  [administration's]                                                               
position is to maintain the  aforementioned situation or is there                                                               
a manner in which a time delay could be instituted.                                                                             
                                                                                                                                
MR. CLOUGH  opined that  [the state's mining]  is in  a marketing                                                               
conundrum.   He  explained that  [Table 10]  refers to  the gross                                                               
value of all the dollars in  the mineral resource, but it doesn't                                                               
necessarily  equate to  the dollars  paid to  the mining  company                                                               
once extraction costs, debt service,  et cetera are included.  He                                                               
noted that four to five years ago,  the Red Dog Mine showed a $28                                                               
million operating  loss for the  year.  Although the  gross value                                                               
of  the metal  was  still  a big  number,  the  company lost  $28                                                               
million getting it out of the ground.   He also noted that in the                                                               
late  1980s low  metal prices  forced Greens  Creek to  close its                                                               
doors for  two-and-a-half years.   Mr. Clough offered  to provide                                                               
the committee with more details with the equations.                                                                             
                                                                                                                                
9:32:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  said  that  he would  like  to  see  some                                                               
proposals  from   the  administration   such  that   the  state's                                                               
resources contribute to  the state treasury.   From the testimony                                                               
today, Representative Seaton surmised that  no matter the size of                                                               
the mine, [the  mines in Alaska, which] include  the largest mine                                                               
in North  America, will only  provide 10  percent of what  a head                                                               
tax  for   education  would   provide.     Representative  Seaton                                                               
expressed  interest in  a program  by  which resource  extraction                                                               
[results  in funds  being placed  in the]  state treasury,  which                                                               
doesn't seem to be the case under the current structure.                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG interjected  that Representative Seaton's                                                               
suggestion  should  be  utilized  for  all  the  state's  natural                                                               
resources, particularly with regard to the fishing industry.                                                                    
                                                                                                                                
9:34:32 AM                                                                                                                    
                                                                                                                                
BOB  LOEFFLER,  Director, Division  of  Mining,  Land and  Water,                                                               
Department  of Natural  Resources (DNR),  reminded the  committee                                                               
that mining taxes are net  profits taxes.  The aforementioned was                                                               
established when Alaska became a state.   Over the last couple of                                                               
years, metal  prices have  been at  a historic  low.   Mines that                                                               
were permitted  at $400  gold and built  with the  expectation of                                                               
$400  gold lost  a lot  of  money when  gold dropped  to $250  an                                                               
ounce.   Therefore, mines in the  state lost money and  thus [one                                                               
would expect]  that net profit  taxes wouldn't provide  the state                                                               
much money.   However, as gold prices recover,  he predicted that                                                               
the  mining  license  tax  and  the  corporate  income  tax  will                                                               
recover.   He predicted  that 2004  would provide  better returns                                                               
than earlier  years.  Mr.  Loeffler highlighted that mining  is a                                                               
relatively  small industry  with  less than  3,000 employees  and                                                               
really  only  four [sizable]  mines  in  operation.   The  mining                                                               
industry  as a  whole pays  municipalities and  the state  on the                                                               
order of  about $5,000  per employee.   The large  mines probably                                                               
pay close to double or more  per employee.  The aforementioned is                                                               
paid in good  years and bad years because the  real focus and the                                                               
fiscal structure of  the mining industry has been  to ensure that                                                               
they support the local municipalities  in which they operate.  He                                                               
opined that the  mining industry does a good job  of that in high                                                               
and low prices.                                                                                                                 
                                                                                                                                
9:37:27 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON inquired  as to  the average  metal prices                                                               
for 2004.                                                                                                                       
                                                                                                                                
MR. LOEFFLER  informed the committee  that today gold  prices are                                                               
roughly $434 per ounce.                                                                                                         
                                                                                                                                
9:38:29 AM                                                                                                                    
                                                                                                                                
RICH HEIG, General Manager, Greens  Creek Operation, informed the                                                               
committee that he is representing  the Alaska Miners' Association                                                               
and the Council  of Alaska Producers.  As  mentioned earlier, the                                                               
mining industry is  a small industry with only  four major mines.                                                               
However,  it's  an  exciting  industry, he  said.    The  present                                                               
administration,  the  legislature,  and the  regulatory  agencies                                                               
have  done much  to support  the growth  of natural  resources in                                                               
Alaska.   He highlighted the  streamlining of the  permit process                                                               
that has  occurred in recent years.   The existence of  the large                                                               
mine permit  process in  one agency has  done much  to streamline                                                               
the  process.   In  fact,  the permitting  of  the tailings  pond                                                               
expansion for the Greens Creek Mine  is an example of a situation                                                               
in which  the streamlined  permitting process  worked.   Mr. Heig                                                               
highlighted that metal prices are  high and future mines will add                                                               
revenue in  the form of  taxes and jobs.   He explained  that the                                                               
mining industry  isn't a high  return industry, with a  5 percent                                                               
rate  of  return.    Furthermore,   the  mining  industry  is  an                                                               
extremely capital intensive industry.   For example, Greens Creek                                                               
Mine, Inc.,  spent over $130  million before production  and $360                                                               
million in capital  work since the beginning of  production.  Mr.                                                               
Heig pointed  out that there is  a lack of infrastructure  in the                                                               
state, and  therefore the industry  may spend funds to  build its                                                               
own  infrastructure   while  other   states  already   have  that                                                               
infrastructure.    He  echoed  earlier  testimony  regarding  the                                                               
cyclical nature  of mining, and added  that the hope is  that the                                                               
past two year's of high prices  continue as China grows and India                                                               
possibly follows.   With regard to  profitability, he highlighted                                                               
that Greens Creek has only  been profitable seven of its fourteen                                                               
years  of  existence.  The  mining  industry,  he  mentioned,  is                                                               
willing to pay its fair share of  taxes in the state and has paid                                                               
$700,000 in property taxes.   For the mining industry to consider                                                               
developing its operations  in Alaska, there needs to  be a stable                                                               
tax  climate.   Since the  profits  aren't always  there and  the                                                               
industry  faces capital  intensive  high operating  costs, a  net                                                               
profits tax is the best option, he opined.                                                                                      
                                                                                                                                
9:44:19 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   ROKEBERG    inquired   as   to    how   Alaska's                                                               
environmental  standards   compare  internationally.     He  also                                                               
inquired as to the cost impact of those standards.                                                                              
                                                                                                                                
MR.  HEIG specified  that  Alaska's  environmental standards  are                                                               
similar  to  those in  other  areas.    However, speaking  as  an                                                               
operator,  the state's  environmental standards  are intense  and                                                               
more stringent than some other states.   With regard to the state                                                               
taking  over water  discharge,  he opined  that  the state  could                                                               
probably  handle  it  better than  the  Environmental  Protection                                                               
Agency.   Mr. Heig turned  to the Greens Creek  Mine specifically                                                               
and  related that  its operating  costs attributable  strictly to                                                               
adhering  to environmental  requirements  exceed  $2 million  per                                                               
year.   Mr. Heig specified  that the firm,  which is part  of the                                                               
Kennicott  Operations in  the  U.S.  and part  of  the Rio  Tinto                                                               
organization worldwide, does  operate internationally and because                                                               
of  its  size  and  desire  to  maintain  sustainability  in  the                                                               
industry,  one set  of environmental  standards are  administered                                                               
throughout the corporation.  Therefore,  those standards are more                                                               
stringent than the regulations in  developing countries and equal                                                               
the requirements elsewhere.                                                                                                     
                                                                                                                                
9:46:59 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG  commented  that  clearly  the  minerals                                                               
industry is a  commodity base.  In fact, all  of Alaska's natural                                                               
resources   are    commodity   driven   and    price   sensitive.                                                               
Furthermore,  environmental  controls  and other  constraints  on                                                               
business   impact   investment   decisions.      The   investment                                                               
environment  in  Alaska  for  minerals   sounds  similar  to  the                                                               
petroleum industry, he remarked.                                                                                                
                                                                                                                                
9:48:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON, referring to the  fact that Rio Tinto uses                                                               
the same standards  in other countries whether  they are required                                                               
or not, asked whether those countries appreciate that.                                                                          
                                                                                                                                
MR.  HEIG answered  that  he believes  those  other countries  do                                                               
[appreciate it and realize it].                                                                                                 
                                                                                                                                
REPRESENTATIVE WILSON asked if Mr.  Heig believes Rio Tinto would                                                               
be  able  to do  things  in  other  countries that  other  mining                                                               
companies won't because of the use of environmental standards.                                                                  
                                                                                                                                
MR. HEIG commented that Rio Tinto  would like to be the developer                                                               
of  choice.   In further  response to  Representative Wilson,  he                                                               
informed  the  committee  that  most  all  of  the  major  mining                                                               
companies operate in the same manner.                                                                                           
                                                                                                                                
9:49:46 AM                                                                                                                    
                                                                                                                                
MR. HEIG,  in response to  Representative Seaton,  confirmed that                                                               
Greens Creek  Mine is on  federal land.   In further  response to                                                               
Representative  Seaton,  he  said  that  net  island  royalty  is                                                               
essentially the same  as net smelter return.  He  noted that "we"                                                               
do pay the  7 percent state mining license tax  on federal lands.                                                               
The net  island return or net  smelter return is what  the forest                                                               
service would charge on extraction  of minerals not covered under                                                               
extra  lateral  rights,  which  is  based on  the  value  of  the                                                               
minerals similar to a net smelter return or profits tax.                                                                        
                                                                                                                                
9:51:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON surmised then that  the net island is based                                                               
on the gross price of the  minerals less certain expenses such as                                                               
smelter and  transportation.  If the  mine was on state  land, he                                                               
inquired as to  how the net island royalty that's  being paid now                                                               
to the federal  government would compare with what  would have to                                                               
be paid to the state.                                                                                                           
                                                                                                                                
MR.  HEIG specified  that  "we"  would still  pay  the 7  percent                                                               
mineral  license tax,  but because  it's  on federal  land the  3                                                               
percent additional tax wouldn't be  paid.  Therefore, whether the                                                               
net island  royalty tax  would be paid  depends upon  the mineral                                                               
prices.                                                                                                                         
                                                                                                                                
9:52:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  explained that he is  trying to understand                                                               
the state's  royalty share  on state lands  in comparison  to the                                                               
federal government's  royalties on production on  federal land in                                                               
Alaska.                                                                                                                         
                                                                                                                                
MR. HEIG  informed the committee  that Greens Creek has  not paid                                                               
any net  island royalty tax  to the  U.S. Forest Service  at this                                                               
point.                                                                                                                          
                                                                                                                                
CHAIR WEYHRAUCH announced that this  meeting will be continued at                                                               
a later date.                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Ways and Means meeting was adjourned at                                                                    
9:53:50 AM.                                                                                                                   

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