Legislature(2023 - 2024)DAVIS 106
04/25/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB109 | |
| HB110 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 109 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 110 | TELECONFERENCED | |
| += | HJR 7 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
April 25, 2023
6:32 p.m.
MEMBERS PRESENT
Representative Ben Carpenter, Chair
Representative Jamie Allard
Representative Tom McKay
Representative Kevin McCabe
Representative Cathy Tilton
Representative Andrew Gray
Representative Cliff Groh
OTHER LEGISLATORS PRESENT
Representative Dan Ortiz
Representative Will Stapp
Representative Julie Coulombe
Representative Dan Saddler
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 109
"An Act reducing the corporate net income tax rate; and
providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 110
"An Act relating to the Alaska permanent fund; relating to
permanent fund dividends and the dividend fund; transferring the
dividend program from the Department of Revenue to the Alaska
Permanent Fund Corporation; relating to the duties of the
Department of Revenue; relating to the duties of the Alaska
Permanent Fund Corporation; and providing for an effective
date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 109
SHORT TITLE: REDUCE CORP. NET INCOME TAX RATE
SPONSOR(s): REPRESENTATIVE(s) CARPENTER
03/13/23 (H) READ THE FIRST TIME - REFERRALS
03/13/23 (H) W&M, FIN
03/22/23 (H) W&M AT 6:00 PM DAVIS 106
03/22/23 (H) Scheduled but Not Heard
03/27/23 (H) W&M AT 6:00 PM DAVIS 106
03/27/23 (H) Heard & Held
03/27/23 (H) MINUTE(W&M)
04/12/23 (H) W&M AT 6:00 PM DAVIS 106
04/12/23 (H) Heard & Held
04/12/23 (H) MINUTE(W&M)
04/25/23 (H) W&M AT 6:00 PM DAVIS 106
BILL: HB 110
SHORT TITLE: PERM FUND; XFER DIVIDEND PROG TO APFC
SPONSOR(s): REPRESENTATIVE(s) CARPENTER
03/13/23 (H) READ THE FIRST TIME - REFERRALS
03/13/23 (H) W&M, FIN
03/27/23 (H) W&M AT 6:00 PM DAVIS 106
03/27/23 (H) Scheduled but Not Heard
03/29/23 (H) W&M AT 6:00 PM DAVIS 106
03/29/23 (H) Heard & Held
03/29/23 (H) MINUTE(W&M)
04/24/23 (H) W&M AT 6:00 PM DAVIS 106
04/24/23 (H) Heard & Held
04/24/23 (H) MINUTE(W&M)
04/25/23 (H) W&M AT 6:00 PM DAVIS 106
WITNESS REGISTER
ALLEN STRAH, representing self
Eagle River, Alaska
POSITION STATEMENT: Testified in opposition to HB 109.
DAVID LESLIE, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 109.
PHILLIP MOSER, representing self
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 109.
PETER VAN FLEIN, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 109.
KENDRA BROUSSARD, Staff
Representative Ben Carpenter
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 110, Version R, on behalf of
Representative Carpenter, prime sponsor.
EMILY NAUMAN, Director
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
110, Version R.
DEVEN MITCHELL, CEO
Alaska Permanent Fund Corporation
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
110, Version R.
ACTION NARRATIVE
6:32:06 PM
CHAIR BEN CARPENTER called the House Special Committee on Ways
and Means meeting to order at 6:32 p.m. Representatives McCabe,
Gray, Groh, and Carpenter were present at the call to order.
Representatives Allard, McKay, and Tilton arrived as the meeting
was in progress.
HB 109-REDUCE CORP. NET INCOME TAX RATE
6:32:54 PM
CHAIR CARPENTER announced that the first order of business would
be HOUSE BILL NO. 109, "An Act reducing the corporate net income
tax rate; and providing for an effective date."
6:33:09 PM
CHAIR CARPENTER opened public testimony on HB 109.
6:33:41 PM
ALLEN STRAH, representing self, expressed the opinion that the
bill is "offensive," because the state would be leveraging
Alaskans with the lost revenue from the corporate tax cuts. He
said that, until oil subsidies are eliminated, there should be
no talk of taxing citizens of the state. He argued that a sales
tax would be a regressive tax on residents, while a progressive
income tax would be more reasonable, as with this option
everyone who makes a living in Alaska would be paying their
share.
6:36:13 PM
DAVID LESLIE, representing self, expressed the opinion that the
idea of proposing tax cuts to corporations while the poor pay
[sales] tax is "offensive" to the residents of the state. He
argued that such a tax would have huge implications for the
Alaska native community, especially those who live in rural
areas. He suggested that there could also be financial
implications for women and the LGBTQ community. He opined that
the tax has the largest implications for the most marginalized
groups in Alaska.
6:38:19 PM
PHILLIP MOSER, representing self, expressed the opinion that the
proposed tax would impact those who live in conditions where
every cent counts. He pointed out that in the first ten years
of the Willow Project the state will be going into further
deficit because of the tax credits associated with the project.
6:40:03 PM
PETER VAN FLEIN, representing self, stated that a sales tax is
the most regressive and expensive form of tax, especially to
Alaskans, as it is punitive to rural residents. He added that
this would require a new state department. He explained that
such a tax would be expensive for businesses to implement. He
argued that corporations already do not pay enough income tax,
yet they are the most intensive users of infrastructure. He
suggested that the greatest gain to the state budget would be to
repeal Senate Bill 21 [passed during the Twenty-Eighth Alaska
State Legislature].
6:41:53 PM
The committee took an at-ease from 6:41 p.m. to 6:49 p.m.
6:49:21 PM
CHAIR CARPENTER, after ascertaining that there was no one else
who wished to testify, closed public testimony on HB 109. He
announced that HB 109 was held over.
HB 110-PERM FUND; XFER DIVIDEND PROG TO APFC
[Contains discussion of HJR 7.]
6:49:44 PM
CHAIR CARPENTER announced that the final order of business would
be HOUSE BILL NO. 110, "An Act relating to the Alaska permanent
fund; relating to permanent fund dividends and the dividend
fund; transferring the dividend program from the Department of
Revenue to the Alaska Permanent Fund Corporation; relating to
the duties of the Department of Revenue; relating to the duties
of the Alaska Permanent Fund Corporation; and providing for an
effective date."
6:50:01 PM
REPRESENTATIVE MCCABE moved to adopt the proposed committee
substitute (CS) for HB 110, labeled, 33-LS0371\R, Nauman,
4/24/23 ("Version R"), as a working document.
6:50:09 PM
REPRESENTATIVE MCCABE objected for the purpose of discussion.
6:50:34 PM
KENDRA BROUSSARD, Staff, Representative Ben Carpenter, Alaska
State Legislature, on behalf of Representative Carpenter, prime
sponsor, read the explanation of changes of Version R [included
in the committee packet], which read as follows [original
punctuation provided]:
New Title has the following words removed,"
transferring the dividend program from the Department
of Revenue to the Alaska Permanent Fund Corporation;"
The CS deletes Sections 2-23, 26-28, 35-45 from HB 110
Section 1
Intent section with no change from HB 110.
Section 2
Section 24 from HB 110.
Section 3
Section 25 from HB 110.
Section 4
Section 29 from HB 110.
Section 5
Section 30 from HB 110.
Section 6
Section 31 from HB 110.
Section 7
Section 32 from HB 110.
Section 8
Section 33 from HB 110.
Section 9
Section 34 from HB 110.
Section 10
Adds new sections to AS 37.13 to establish the
dividend fund as a separate fund in the permanent fund
corporation. The dividend fund shall be administered
and invested by the permanent fund board and will
retain any unexpended balances.
Creates a restorative justice account in the dividend
fund. The executive director shall transfer from the
dividend fund to this account the amount of dividend
individuals who have been convicted of a felony would
otherwise receive.
The legislature may appropriate amounts from the
restorative justice account to the crime victim
compensation fund, the office of victim's rights, and
grants to nonprofit organizations, department of
corrections according to percentage laid out in this
section.
Section 10 also adds a new section for the payment of
dividends. Each year, the corporation shall pay a
permanent fund dividend to each eligible individual.
The amount of the dividend is determined by the
commissioner of revenue and shall be paid by December
31 of each year.
The board shall transfer every year to the department
of revenue amounts that are taken out of the dividend
by law, including the dividend raffle.
Section 10 creates a new section under the corporation
that requires information received by the corporation
related to the permanent fund dividend to be
confidential.
Section 11
Adds definitions.
Section 12
Conforming language to direct dividend payment to the
estate of an eligible person.
Section 13
Conforming language to direct dividend payments to
claimants of levies, garnishments, or other remedies
of debt.
Section 14
Conforming language to direct dividend payment to the
estate of an eligible person.
Section 15
Conforming language resulting from moving the dividend
fund from the department of revenue to the permanent
fund corporation.
Section 16
Conforming language resulting from moving the dividend
fund from the department to the corporation.
Section 17
Adds a new section requiring the department of revenue
to provide the corporation all information necessary
for the corporation to distribute funds from the
dividend fund.
Section 18
Allows the department of revenue to disclose
confidential information the permanent fund
corporation for executing the [payment of the
dividend.
Section 19
Conforming language resulting from moving the dividend
fund from the department to the corporation.
Sections 20-22
Adds definitions.
Section 23
Conforming language resulting from moving the dividend
fund from the department to the corporation.
Section 24
Repeals requirements of the department of revenue no
longer pertinent.
Section 25
Transition section similar to Section 46 from HB 110.
Section 26
Section 47 from HB 110 that provides a July 1, 2024
effective date.
6:55:02 PM
REPRESENTATIVE GRAY inquired if Section 10, which covers the
creation of a restorative justice account, is new.
CHAIR CARPENTER answered that a restorative justice account
already exists; however, Version R would move it to the Alaska
Permanent Fund Corporation (APFC).
6:56:06 PM
REPRESENTATIVE GROH requested an explanation of the numerous
sections which were removed from the previous version.
CHAIR CARPENTER answered that the intent of Version R is to
simplify the bill, as it proposes to move a portion of the
permanent fund program to APFC. He stated that some of the
functions of the permanent fund program would remain with the
Department of Revenue (DOR). He asked Ms. Nauman which portions
of the program would be functionally transferred to APFC.
6:57:21 PM
EMILY NAUMAN, Director, Legislative Legal Services, Legislative
Affairs Agency, explained that the prior version of the proposed
legislation would have transferred the entire PFD (permanent
fund dividend) program from DOR to APFC. She said that Version
R would transfer the responsibility of issuing the check from
DOR to APFC.
CHAIR CARPENTER questioned which agency would determine the
dividend amount.
MS. NAUMAN answered that the amount of the dividend is currently
determined by the legislature by appropriation. She explained
that the calculation of what goes out to residents is made by
DOR, and Version R would keep the department as the entity to
make this calculation, while the payment would be handled by
APFC.
6:59:44 PM
REPRESENTATIVE GROH questioned whether there would be a new
fiscal note.
CHAIR CARPENTER responded in the affirmative. He explained that
since the entire program is not being moved, there would need to
be a new fiscal note, and once developed it would be available
to the committee. In response to a follow-up question, he
explained the rationale is that the intent of Version R is to
provide the statute which HJR 7 would point to, and this would
determine how the PFD is paid and how the government's portions
of earnings would be paid. It would also help the dedication of
funds be insulated from the legislature and the political
process.
REPRESENTATIVE GROH questioned what DOR's responsibilities would
be.
CHAIR CARPENTER answered that some of the information DOR uses,
like personal information, would have to be coordinated with
other departments. He said this would make the eligibility
determination process easier to maintain, if it stays within
DOR, rather than moving it to APFC.
REPRESENTATIVE GROH expressed the understanding that HB 110 and
HJR 7 would "dovetail" with each other. He asked what would
happen if HJR 7 passed but HB 110 did not.
CHAIR CARPENTER answered that HJR 7, as drafted, would point to
a statute to determine the draws from the permanent fund, as
well as what the income source would be. He said that if HB 110
did not pass, then HJR 7 would refer to the current existing
statute. He asked Ms. Nauman to provide further explanation.
7:06:18 PM
REPRESENTATIVE GROH reiterated his question.
MS. NAUMAN concurred with Chair Carpenter. She stated that the
current law describes the transfer of funds to and from the
dividend fund, and this would remain in place; however, it would
be considered a "transfer" rather than an "appropriation." She
explained that current statutes would cause the PFD to be paid
automatically without an annual appropriation, but it would
still be paid through the formula in current statute, AS
37.13.145.
CHAIR CARPENTER said that the one obvious difference between the
status quo and HRJ 7 is that, with the status quo funds are not
transferred, but the legislature appropriates funds. He asked
Ms. Nauman about this point.
7:08:54 PM
MS. NAUMAN explained that Wielechowski v. Alaska, 403 P.3d 1141,
(2017), made certain that current statutes are subject to
appropriation. She offered her understanding that,
historically, the movement of money has always happened with an
appropriation, and HJR 7 would change this, but not HB 110,
Version R. She said the system of PFDs through appropriations
would stay the same, even if Version R is adopted.
CHAIR CARPENTER expressed the understanding the Wielechowski v.
Alaska case requires that transfers are appropriations; however,
under HJR 7, the fund would be dedicated, and this would be a
transfer.
MS. NAUMAN concurred.
7:11:06 PM
REPRESENTATIVE GRAY commented that HB 110, Version R, would
require a movement of responsibilities to APFC. He questioned
the effect of Version R on the cost.
CHAIR CARPENTER responded that the fiscal note would answer this
question.
7:11:58 PM
The committee took an at-ease from 7:11 p.m. to 7:12 p.m.
7:12:24 PM
REPRESENTATIVE GROH asked whether Mr. Mitchell has reviewed
Version R.
DEVEN MITCHELL, CEO, Alaska Permanent Fund Corporation, answered
that the work draft, Version R, has been reviewed; however, the
fiscal impact would still need to be determined. He stated that
even though it is a simplification, it would not entail the full
removal of the PFD program from DOR and into APFC. He pointed
out the requirement that APFC obtain from DOR the eligible
applicant list to distribute the PFDs. He said this creates
complexities because PFD payments are related to prior year PFD
applications, and eligibility determinations are made throughout
the fiscal year. He expressed the understanding that some of
the distribution process is outsourced by DOR, some is in-house,
and some of it relies on a proprietary data system. He said
APFC would need to integrate this work into its programs, which
is different because currently APFC does not have a payment
distribution system; therefore, it will take time to determine
the fiscal impact.
REPRESENTATIVE GROH questioned the possible operational impact
of Version R, as it relates to the corporation's mission to
invest the permanent fund. He questioned whether this would
change if APFC is also in charge of distributing PFDs.
MR. MITCHELL responded this would not impact existing
operations; however, resources would be required to implement
the proposed legislation.
7:17:49 PM
REPRESENTATIVE GRAY expressed the understanding that without a
constitutional amendment the legislature would still appropriate
the fund; therefore, the PFD is not protected. Furthermore,
with a constitutional amendment, all the money would be left
with DOR to issue PFDs, as it is currently being protected by
the constitution. He theorized that without an amendment, the
money would not be protected.
MS. NAUMAN answered that he is correct in the assumption that,
without an amendment, no matter where the dividend appropriation
statute structure is, this amount will ultimately be subject to
appropriation every year by the legislature. She said that
Version R would move the dividend fund out of DOR and into APFC,
as well as the administrative task of paying out PFDs, and this
would happen regardless of whether a constitutional amendment is
adopted. She explained that if legislation like HJR 7 passes,
the transfer of funding for dividends would happen subject to
statute, so even if it appears to be not subject to an
appropriation, it would still be somewhat under the control of
the legislature, in that the legislature can change statute and
change the amount or the way the distribution amount is
calculated.
REPRESENTATIVE GRAY expressed the opinion that the proposed
legislation would be needed to protect the money for dividends;
moreover, if the state only had the constitutional amendment,
but left the money at DOR, then the legislature could still use
this money.
MS. NAUMAN responded that this is incorrect. She explained that
the current statute still contains the word "transfer," and this
means the proposed legislation would not be required to
effectuate an automatic PFD.
REPRESENTATIVE GRAY asked that, if the state approves a
constitutional amendment which directs that PFDs must be paid by
formula, then it does not matter where the fund is, it must be
used for dividends.
MS. NAUMAN answered that this is correct, and she explained that
because at this point it would not matter whether the dividend
fund is housed in DOR or APFC, the money would be used in
accordance with the constitution.
7:21:47 PM
REPRESENTATIVE MCCABE commented that HJR 7 would require a PFD
be paid; however, it would not address the amount, as the
payment formula comes from statute. He suggested that, if the
legislature approves only HJR 7, then the money could still be
spent down, and the legislature could still use it. He
expressed the understanding that a formula was specifically not
put into the constitution.
CHAIR CARPENTER remarked that this question was more directed to
HJR 7, and not Version R, and the purpose of HJR 7 would be to
adopt a statute which would define what the PFD would be. He
explained that [under the provision of HJR 7] the PFDs would
come from the Earnings Reserve Account, and then the statute
would lay out that the fund could only be transferred, not
appropriated. He continued that the reserve account would be
moved out of the general fund to APFC; therefore, this would
take away the ability that the fund is appropriated; it would be
money which could only be moved by statute, which is not an
appropriation.
7:23:59 PM
REPRESENTATIVE MCCABE withdrew his objection.
7:24:04 PM
REPRESENTATIVE GRAY objected. He offered his understanding that
there needs to be a statute to determine a formula for the PFD.
He argued that, for the PFD money to be protected, there needs
to be a constitutional amendment. He said having APFC take over
the payment of PFDs would not achieve the goal of protecting the
money. He objected and argued that if the state wants to do a
50/50 percent of the market value (POMV) split, then it should
do it, but parts of Version R are unnecessary.
7:25:11 PM
The committee took an at-ease from 7:25 p.m. to 7:26 p.m.
7:26:22 PM
REPRESENTATIVE GRAY withdrew his objection.
7:26:31 PM
REPRESENTATIVE MCCABE relayed that the Fiscal Policy Working
Group suggested that everything should be moved together, and
the legislation should not be "cherry picked." He observed that
the committee is working on a complete fiscal policy, and it
will be difficult to move all the pieces together. He said that
the constitution would prohibit all the pieces being put in an
omnibus bill.
7:28:17 PM
CHAIR CARPENTER stated that the intention is not to rush an
agreement on Version R.
7:28:45 PM
CHAIR CARPENTER announced that there being no further objection,
Version R was before the committee as a working document.
7:29:08 PM
REPRESENTATIVE GROH stated that he has followed the work of the
Fiscal Policy Working Group and expressed the understanding that
the pieces of a fiscal plan would need to move together. He
continued that the argument over the PFD needs to end by
establishing a constitutional provision; however, the other risk
which must be addressed is the legislature's ability to overdraw
the fund. He explained that this is why he made comments during
the last meeting regarding HJR 9 being left behind. He
expressed the hope to see revenue measures on the House floor.
[HB 110 was held over.]
7:31:01 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
7:31 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 110 - New CS v. R Explanation of changes.pdf |
HW&M 4/25/2023 6:00:00 PM |
HB 110 |
| HB 110 - New CS v.R.pdf |
HW&M 4/25/2023 6:00:00 PM |
HB 110 |