Legislature(2001 - 2002)
03/14/2002 09:41 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 14, 2002
9:41 AM
TAPES
SFC-02 # 31, Side A
SFC 02 # 31, Side B
SFC 02 # 32, Side A
CALL TO ORDER
Co-Chair Dave Donley convened the meeting at approximately 9:41 AM.
PRESENT
Senator Dave Donley, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Loren Leman
Senator Gary Wilken
Senator Alan Austerman
Senator Lyman Hoffman
Senator Donald Olson
Also Attending: ROXANNE STEWART, Legislative Liaison, Department
of Administration; DEB DAVIDSON, staff to Co-Chair Donley; BUTCH
TANGNEY, Instructor, Techniques Of Alcohol Management, and
Employee, Odem Corporation; LARRY PERSILY, Deputy Commissioner,
Department of Revenue; ELMER LINDSTROM, Deputy Commissioner,
Department of Health and Social Services; HOWARD SCAMAN [spelling
unverified], Council on Alcohol Abuse and Public Safety; MATT
FELIX, National Council on Alcoholism; PAM WATTS, Executive
Director, Advisory Board on Alcoholism and Drug Abuse; PAM LABOLLE,
President, Alaska State Chamber of Commerce; CINDY CASHEN,
Volunteer, Mothers Against Drunk Driving, and victim of drunk
driving; JULIE CRAFT, Director of Member Services, Alaska Municipal
League
Attending via Teleconference: From Fairbanks: PAUL LYLE, State
Employee 18 years; PAM HARTNELL, State Employee; JOHN ATHENS, State
Employee; JONI ATHENS, State Employee; JONI ELLSWORTH, Ivory Jack's
Restaurant; LARRY HACKENMILLER; DICK ELLSWORTH, Cabaret, Hotel and
Restaurant Retail Association; THOMAS BARTELS, Facility Manager,
Odem Corporation; From Anchorage: MARLA GREENSTEIN, Executive
Director, Alaska Commission on Judicial Conduct; JEFF JESSEE,
Executive Director, Mental Health Trust Authority, Department of
Revenue; DELISA CULPEPPER, President, Alaska Public Health
Association, and Chair, Dime a Drink Coalition; PAT SENNER,
President, Alaska Nurses Association; SHAWN DIXON, representing,
Hilton Anchorage, and, Alaska Hotel and Lodging; JOAN DIAMOND,
Member, Dime a Drink Coalition, and parent of two teenagers; CHRIS
ANDERSON, Operating Partner, Glacier Brew House and Restaurant
Orso; KATHY BOGGS-GRAY, managing a grant for AKEELA on economic
interventions, and, Member, Dime a Drink Coalition; LOWELL SHINN,
President, Brown Jug, and President, Anchorage, Cabaret, Hotel and
Restaurant Retail Association; BOB BAILEY, Operations Manager,
Alaska Distributors; JOEL KADARACH, Employee, Odem Company; KAREN
ROGINA, Chair, Alaska Hospitality Alliance; DON GRASSEE, General
Manager, K&L Distributors; CAROL JACKSON, Credit Manager, K&L
Distributors; TODD RICHARDSON, Employee, K&L Distributors; BILL
ADINT, Wine Manager, K&L Distributors; JEFF CARTER, Fairbanks
Branch Manager, K&L Distributors; BRIEN CAU, Employee, K&L
Distributors; DAVID SCOTT, Employee, K&L Distributors; JOHN PATTEE,
Owner, Gas Light, and The Avenue; From Mat-Su: MIKE LOHMAN,
representing, Hot Shots and Cinnamon's Wasilla Bar; From Homer:
LEONARD WELLS, Bar Owner; From Kenai: GARY SUPERMAN, Hunger Hut;
CHRYSTAL SCHOENROCK, 4Lands Bar and Liquor; GEORGE TIPTON,
President, Alaska State Cabaret, Hotel and Restaurant Retail
Association (CHARR), and 40-year Alaska Resident; From Off-net:
KAC'E MCDOWELL, Executive Director, Alaska Cabaret, Hotel and
Restaurant Retail Association
SUMMARY INFORMATION
SB 180-STATE EMPLOYEE PAY DIFFERENTIALS
The Committee heard from the Department of Administration and state
employees. A committee substitute was adopted and the bill moved
from Committee.
SB 291-SUPPLEMENTAL APPROPRIATIONS: FAST TRACK
The Committee adopted a committee substitute and held the bill in
Committee.
SB 347-ALCOHOLIC BEVERAGE TAX
The Committee heard from the sponsor, the Department of Revenue and
the Department of Health and Social Services and public testimony
was taken. The bill was held in Committee.
SENATE BILL NO. 180
"An Act implementing pay differentials based on geographic
areas for certain state employees and for members of the
Alaska State Defense Force; and providing for an effective
date."
This was the second hearing for this bill in the Senate Finance
Committee. This bill was reported from Committee at the previous
hearing.
Co-Chair Donley noted this bill was referred back to the Senate
Finance Committee after further consideration. He referenced a
proposed committee substitute that accommodates employees not
currently covered by the new geographic pay differential standards.
He explained the committee substitute "grandfathers" these
employees into the proposed program.
Senator Ward moved to adopt CS SB 180, 22-LS0324\O, as a working
draft.
There was no objection and the committee substitute was ADOPTED.
PAUL LYLE, State Employee 18 years, testified via teleconference
from Fairbanks in support of the committee substitute as it
supports those who have made a commitment to the state.
PAM HARTNELL, State Employee, testified via teleconference from
Fairbanks in support of the grandfather clause contained in the
committee substitute, saying it benefits long-term professionals
who work for the state.
JOHN ATHENS, State Employee, testified via teleconference from
Fairbanks to reiterate the previous testifiers and support the
committee substitute.
JONI ATHENS, State Employee, testified via teleconference from
Fairbanks in support of the committee substitute.
Senator Austerman noted the geographic pay differential system was
first established according to election districts and asked how the
current redistricting efforts correlate to this legislation and
whether there is a provision in the committee substitute addressing
this.
Co-Chair Donley explained the geographic pay differential system
was first established shortly after statehood, using the original
election districts in place in 1961. He noted that as the pay
system has been updated, the 1961 election district boundaries have
been retained for this purpose. He said the committee substitute
also applies to the original boundaries, as did the original
version of the bill introduced by the Governor.
ROXANNE STEWART, Legislative Liaison, Department of Administration,
affirmed.
Senator Wilken spoke on behalf of Co-Chair Kelly and Senator
Therriault that this committee substitute is a fairer system that
does not detriment the 71 families that would have been adversely
impacted by the original version of this bill. However, he noted
the committee substitute does make structural changes necessary to
provide a fairer pay system across the state.
Senator Wilken offered a motion to report CS SB 180 (FIN) from
Committee.
The bill MOVED from Committee without objection.
At EASE 9:49 AM /9:50 AM
Senator Wilken moved to rescind the Committee's action in reporting
the bill from Committee.
Without objection the action was RESCINDED. The bill was before the
Committee.
Senator Wilken offered a motion to report CS SB 180 (FIN) from
Committee with forthcoming fiscal notes from the Alaska Court
System and all agencies.
There was no objection and the bill MOVED from Committee.
SENATE BILL NO. 291
"An Act making supplemental and other appropriations; amending
appropriations; and providing for an effective date."
DEB DAVIDSON, staff to Co-Chair Donley, outlined the Budget Request
Units (BRU) items that were contained in the original bill but are
not included in a proposed committee substitute. She listed those
items according to the bill section in the original bill as
follows.
Section 2(b)
Department of Environmental Conservation
International Trade & Business Development
International Trade and Business Endowment - replace
unrealized FY 02 Investment Earnings - Fund Source Change
$230,400 general funds
Section 4(b)
Department of Health and Social Services
Subsidized Adoptions & Guardianship
Formula program caseload growth
$2,529,600 general funds
Ms. Davidson relayed this BRU also relates to a Foster Care
Services BRU, which is included in the Governor's regular
supplemental budget. Therefore, she said, it was determined the two
items should be considered together and this BRU was removed from
the proposed fast track budget supplemental committee substitute.
Section 6
Department of Military and Veterans Affairs
Disaster Planning & Control
Costs to maintain 24-hour State Emergency Coordination Center
(SECC), the agency that coordinates all federal, state and
local jurisdictional responses associated with any disaster or
event.
Ms. Davidson informed this BRU was omitted from the proposed
committee substitute after consultation with the Department of
Military and Veterans Affairs budget subcommittee, whereby the
subcommittee had been assured the amount originally appropriated
would be sufficient.
Section 7
Department of Natural Resources
CIP
Scope change for SLA 97, ch. 50, Sec. 15(k), page 9, line 13 -
from: prepare and administer the Kalgin Island II, Caribou
Hills, S. Ninilchik-Dome View, South Ninilchik Block timber
sales in Kenai Peninsula, to: Kenai Peninsula to reduce risks
from wildfire.
Ms. Davidson stated it has been learned that non-general funds
could be used for Kenai Peninsula wildfire efforts. She stated it
was decided to therefore omit this item from the fast track
supplemental to allow additional time to research other fund
sources.
Senator Ward asked what the non-general fund sources could be.
Senator Leman shared that two fund sources could be used for a
portion of this budget item. He listed "Section 319" and "Section
106" funds derived from the federal Clean Water Act. He gave
reseeding and replanting as portions of the project that could be
undertaken using federal funds.
Senator Ward asked the percentage of the general funds available
for reallocation if the federal funds are utilized.
Senator Leman estimated up to $200,000 of the over $300,000 amount
in question.
Section 8
Governor
Elections
Costs for printing and mailing a Primary Election Voter
Education Guide in time to explain the new law (shifted from
FY 03 budget which will be amended)
$25,000
Section 9(a)
Department of Community and Economic Development
Power Cost Equalization & Rural Electrification Fund
Technical correction to add the inadvertently omitted FY 02
appropriation from the Power Cost Equalization Endowment fund
to the Power Cost Equalization and Rural Electrification Fund
$7,062,200 PCE EF
Section 9(b)
Department of Community and Economic Development
Power Cost Equalization & Rural Electrification Fund
Fully fund the statutory formula in the PCE statute. Cost
increase is due to higher fuel costs.
$1,100,000 general fund
Section 9(c)
Department of Community and Economic Development
Power Cost Equalization
Fully fund PCE statute. Increase Department of Education and
Early Development to higher fuel costs.
$1,100,000 PCE funds
Section 9(d)(1)
Department of Community and Economic Development
Power Cost Equalization
Delete sufficient authorization from FY 02 to pay FY 01 late
bills.
-$56,800 PCE funds
Section 9(d)(2)
Department of Community and Economic Development
Power Cost Equalization
Add authorization to pay power cost equalization program FY 01
late bills.
$56,800 PCE funds
Ms. Davidson commented that subsections (d)(1) and (2) were more
appropriately a ratification as the funds were expended in FY 01
using FY 02 funds.
Section 10 (b)
Department of Transportation and Public Facilities
Northern Region CIP
Chandalare Maintenance Station Replacement Design Costs (SDPR
from NTSC)
$456,800 Statutory Designated Program Receipts.
Ms. Davidson explained this amount would be from the bond issuance
of the Northern Tobacco Securitization Corporation. She stated that
in reviewing the request it has been anticipated that approximately
$3.9 million general funds, plus $840,000 federal funds would be
required to complete the project. She noted the proposed FY 03
capital budget contains a request for approximately $1 million for
snow equipment removal. In addition, she pointed out, SB 262
allocates further funding for this project. She stated that with
the absence of a specific budget request for actual construction of
this facility, funding for the design costs is not a fast track
item.
Senator Hoffman asked the affects of the omission of Section 9 from
the Administration.
Co-Chair Donley noted this bill would not be moved from Committee
at this time and that the Power Cost Equalization funding would be
discussed with members of the House Finance Committee.
Senator Leman moved to adopt CS SB 291, 22-GS2102\F as a working
draft.
Senator Hoffman objected, as funding for the Power Cost
Equalization program was not included.
A roll call was taken on the motion.
IN FAVOR: Senator Wilken, Senator Austerman, Senator Leman, Senator
Ward and Co-Chair Donley
OPPOSED: Senator Hoffman and Senator Olson
ABSENT: Senator Green and Co-Chair Kelly
The motion PASSED (5-2-2)
The committee substitute was ADOPTED as a working draft.
MARLA GREENSTEIN, Executive Director, Alaska Commission on Judicial
Conduct, testified via teleconference from Anchorage that she is
available to answer questions.
Co-Chair Donley ordered the bill HELD in Committee.
SENATE BILL NO. 347
"An Act relating to taxation."
Co-Chair Donley stated this legislation increases the tax on
alcohol and removes the existing statutory prohibition on local
governments from adopting a sales tax rate for alcohol that is
different then for other items. He noted these are recommendations
of the Governor's Alcohol Policy Committee task force as well as
"many blue ribbon panels and groups on alcohol related issues for
many years."
BUTCH TANGNEY, Instructor, Techniques Of Alcohol Management, and
Employee, Odem Corporation, testified in Juneau in opposition to
the tax. He stated the "ten cents a drink" slogan is a deception as
the cost to the consumer would be higher. He explained the sales
process between the imposition of the tax when the alcohol enters
the state, and the product's final destination to a consumer. He
stated the distributors and retail businesses operate from the
profits produced in the mark-up of beverage alcohol they purchase
themselves. He remarked this bill would actually double the cost of
some alcohol products.
LARRY PERSILY, Deputy Commissioner, Department of Revenue,
testified in Juneau, to request that if the Legislature were to
increase the alcohol excise tax, that it impose a "floor" or
inventory tax so the higher tax would be collected on inventory. He
said this would prevent businesses from stockpiling alcohol at the
old tax rate and selling the product with the higher rate
calculated into the sale price.
Mr. Persily next noted that state statute currently does not
address importation of alcoholic beverages into the state for
personal consumption. He gave wine clubs as an example of groups
purchasing larger quantities from an out-of-state distributor for
the personal consumption of its members. He informed the state is
unable to collect taxes for these importations, and that if this
legislation passed it should apply the tax to these consumers as
well. He pointed out tobacco consumers must pay tax on tobacco
products imported into the state for personal use.
Co-Chair Donley requested the witness provide suggested statutory
language for these provisions.
Senator Leman asked for information related to the alcohol tax rate
and assessment method of other states compared to that of Alaska.
He commented the system in place in Alaska is "almost archaic" in
that it has not been adjusted for 18 years.
Mr. Persily responded that all others states levy the tax based on
volume. He noted that in addition, some states impose an additional
tax based on value. He listed Alaska's tax is 35 cents per gallon
for beer, compared to the highest rate of the State of Hawaii at 92
cents per gallon. He said the Alaska tax rate for wine is 85 cents,
and the State of Florida, at $2.25 per gallon, has the highest wine
tax. He continued that the hard alcohol tax in Alaska is $5.60 per
gallon compared to $6.50 in the State of Florida.
Senator Leman clarified the Alaska tax is based on alcohol content,
while not all other states calculate using this method.
Senator Wilken shared he used to be a member of a wine club and
dropped out because of high freight costs. He asked if the
bureaucracy required to enforce a tax on alcohol importation would
be worth the effort, given the small number of people who import
alcohol for personal consumption.
Mr. Persily responded enforcement would rely on self-reporting. He
stated the policy call is on the issue of fairness to distributors
who do business in Alaska.
Senator Wilken asked how a tax would be collected on these personal
consumption importations.
Mr. Persily predicted a form would be available and publicized
requesting consumers to voluntarily pay a tax. He admitted not all
shipments would be reported.
Senator Olson asked about the expenses of monitoring and collecting
the alcohol tax.
Mr. Persily referenced the Department of Revenue fiscal note, which
requests one new position since the Department currently does not
have a full-time employee assigned to alcohol tax enforcement. He
surmised it would be cost effective to annually expend $69,000 to
ensure proper administration, given the approximately $30 million
the increased tax would generate annually.
Senator Olson commented it seemed somewhat optimistic from a
business standpoint that only $69,000 would be spend to administer
the tax.
Mr. Persily stated the tax increase would only entail changing the
percentage of the existing tax. The new position, he stated, would
more than pay for itself.
Senator Olson asked how much additional revenue would be generated
from expanding this tax to include personal consumption
importations.
Mr. Persily predicted the out of state purchases would increase,
but noted the new position would oversee enforcement for all
alcohol purchases.
ELMER LINDSTROM, Deputy Commissioner, Department of Health and
Social Services testified in Juneau that unlike the Department of
Revenue, which is in the tax collection business, the Department of
Health and Social Services is in the human services business. As
such, he stressed, there is no factor with greater impact to the
Department of Health and Social Services then alcohol abuse. He
stated it affects virtually every aspect of the programs the
Department administers. He emphasized the cost of alcohol abuse to
the state is "hundreds of millions of dollars".
Mr. Lindstrom spoke of welfare reform and the relationship of
substance abuse to those recipients who have been unable to leave
the program. He also noted alcohol abuse is one of the main reasons
children are removed from their families. A significant amount of
costs incurred in juvenile justice efforts are due to substance
abuse as well, he said.
Mr. Lindstrom distributed a handout: Waiting in line for Treatment
[copy on file] showing that at any given time there is
approximately "$7.5 million in unmet treatment need in Alaska".
HOWARD SCAMAN [spelling unverified], Council on Alcohol Abuse and
Public Safety, testified in Juneau his organization advises clergy
groups. He stated it is invalid to compare alcohol taxes against
other states. He argued that increasing the tax would not result in
residents driving to Whitehorse, Yukon Territory, Canada to
purchase alcohol. He disagreed an increase would double the cost of
the product.
Senator Wilken clarified that if ten cents were added "at the
warehouse" the increase would be imbedded in the retailer's
investment in the product. He continued if the retailer's profit
margin were then based on the cost, the actual increase would be 15
cents a drink.
Mr. Scaman agreed and elaborated the retailer would make more money
and sell less product, which is the goal of his organization.
MATT FELIX, National Council on Alcoholism, testified in Juneau
about the organization and his work with treatment of alcohol
abuse. He spoke to the funding sources of the organization and the
services they provide. He remarked that an increase in the tax
would not adversely impact the beverage industry. He noted alcohol
is less expensive then milk or soda.
Senator Olson asked what information the witness had to show that
the alcohol industry is healthy.
Mr. Felix cited information that none have filed bankruptcy, sales
taxes are paid, and liquor licenses are consistently renewed.
PAM WATTS, Executive Director, Advisory Board on Alcoholism and
Drug Abuse, testified in Juneau and referred to the McDowell Report
on the Economic Costs of Alcohol and Other Drugs in Alaska, Phase
II [copy on file]. She pointed out the last excise tax on alcohol
increase was implemented in 1983. She cited the estimated cost of
the negative consequences of alcohol to all Alaskans on an annual
basis is currently $453 million in direct and indirect costs. She
stressed that direct costs are in excess of $140 million annually.
She qualified that this information is based on national
information but stressed that because Alaska has a higher rate of
alcohol abuse, these figures are conservative.
Ms. Watts spoke to increased sanctions and accountability for
individuals involved in alcohol related crimes and noted these
increase the cost to the state as well.
SFC 02 # 31, Side B 10:30 AM
Ms. Watts continued that this legislation recognizes the impact of
these costs would be born by the state and communities.
Senator Leman asked if the assessment of the direct and indirect
cost of alcohol included a value placed on the loss of human life.
Ms. Watts affirmed as loss of life was considered a loss of
productivity.
Senator Hoffman asked if the witness had information regarding
reduced consumption as a result of increased cost. If not, he asked
why the revenues are not used to offset the costs of consumption.
Ms. Watts replied the issue is complicated. She noted revenue
dedication is prohibited, although she hoped that funds generated
from this tax increase would be utilized to offset the costs of
abuse.
Senator Hoffman commented that the tax could be increased and yet
the health and related problems could remain.
JONI ELLSWORTH, Ivory Jack's Restaurant, testified via
teleconference from Fairbanks that this bill is "going against one
industry alone." She pointed out that raising the alcohol tax would
not change drinking habits.
MIKE LOHMAN, representing, Hot Shots and Cinnamon's Wasilla Bar,
testified via teleconference from Mat-Su that this tax is unfair to
those who responsibly consume alcohol and would do nothing to stop
those who hurt society through overindulgence. He stated it would
impact his business and the entire food and beverage industry. He
stressed jobs would be lost. He suggested a "reasonable increase"
if such an increase is determined necessary.
LEONARD WELLS, Bar Owner, testified via teleconference from Homer
that he is "primarily opposed" to the bill on a personal basis,
because he does not approve of the state dictating how local taxes
could be levied.
GARY SUPERMAN, Hunger Hut, testified via teleconference from Kenai
that he has spoken against similar legislation and was disappointed
to see the issue reappear. He spoke of the inability to accurately
document the correlation between consumption and abuse. He stressed
the need to require individuals to be responsible for their
behavior. He warned that "the little guy" would be impacted the
most by this tax increase and predicted that small distributors
would be out-placed by corporate
CHRYSTAL SCHOENROCK, 4Lands Bar and Liquor, testified via
teleconference from Kenai in agreement that the small operators
would be impacted the most. She suggested this increase would
require small businesses to become "bootleggers". She talked about
underage consumption and the unreasonable burden placed on
operators.
Senator Leman noted the witness supported a "reasonable tax
increase" and asked what that would be.
Ms. Schoenrock answered 25 to 50 percent rather than the 300
percent this legislation would impose.
GEORGE TIPTON, President, Alaska State Cabaret, Hotel and
Restaurant Retail Association (CHARR), and 40-year Alaska Resident,
testified via teleconference from Ketchikan in opposition to the
legislation. He said that this legislation allows local governments
to impose the same tax and because two local governments oversee
the Ketchikan area, this could result in triple tax in his
community. He stressed the need to make budget cuts.
JEFF JESSEE, Executive Director, Mental Health Trust Authority,
Department of Revenue, testified via teleconference from Anchorage
that he has researched the issue of an alcohol tax. He disagreed
this increase would result in a much higher cost to the consumer,
as nothing prevents the industry from separating the tax from other
product costs. He argued that business practices should not dictate
state policy. He gave examples of other industries successfully
implementing surcharges, including airlines incorporating increased
fuel costs and airport landing fees into ticket prices.
Mr. Jessee next countered the statements that this tax unfairly
targets one industry. He expressed that every Alaskan pays for the
consequences of alcohol abuse.
Mr. Jessee disagreed jobs would be lost. He remarked, "the industry
has to decide which argument we're using; either people won't
change their drinking patterns and there won't be a reduction in
consumption, or there will." He continued that if jobs are an
issue, then the jobs continually lost in the treatment industry
because of insurance increases and grant reductions, must be
considered. He asked if the intent is to protect jobs that
contribute to the problem or those that help solve the problem.
DELISA CULPEPPER, President, Alaska Public Health Association, and
Chair, Dime a Drink Coalition, testified via teleconference from
Anchorage and referenced written information submitted [copy on
file] She stressed that national and international research has
shown that alcohol taxes are the single most effective public
health method for decreasing the negative affects of alcohol. She
also countered the statements that the tax would not affect
consumption yet would adversely impact business.
PAT SENNER, President, Alaska Nurses Association, testified via
teleconference from Anchorage that the Association voted to support
an alcohol tax increase of at least a dime a drink. She talked
about experiences of nurses with patients suffering from the
effects of excessive alcohol consumption. She listed health and
social consequences of alcohol abuse. She asserted that the people
who drink the most should pay the most. She noted that although the
revenues from this tax could not be dedicated for a specific
purpose, the alcohol related costs to the state is significant and
these funds would offset those expenses regardless of how they are
appropriated. She questioned whether an increase in income tax
should be implemented to pay the costs of alcohol abuse in the
state.
SHAWN DIXON, representing, Hilton Anchorage, and, Alaska Hotel and
Lodging, testified via teleconference from Anchorage in opposition
to the bill because Alaskans already pay the highest alcohol tax in
the country and this legislation would "remove the ceiling"
preventing municipalities from taxing alcohol. He stated this
legislation places undue pressure on one industry for taxes that
would be deposited into the state's general fund.
JOAN DIAMOND, Member, Dime a Drink Coalition, and parent of two
teenagers, testified via teleconference from Anchorage that
although alcohol consumption is illegal for minors, it still occurs
partially because parents do not recognize the seriousness of the
consequences. She surmised this tax would reduce such consumption
because young people are "price sensitive". She listed the benefits
of reduced consumption in minors.
CHRIS ANDERSON, Operating Partner, Glacier Brew House and
Restaurant Orso, testified via teleconference from Anchorage, in
opposition to the bill although he does not oppose taxing alcohol.
He did not approve of addressing the state's budget by taxing only
one industry. He predicted this tax would result in approximately
$60,000 tax increase for his businesses. However, he stressed the
need for a comprehensive fiscal plan.
KATHY BOGGS-GRAY, managing a grant for AKEELA on economic
interventions, and, Member, Dime a Drink Coalition, testified via
teleconference from Anchorage, to remind there is clear and
overwhelming evidence that an increased alcohol price, particularly
for beer, has a significant impact on young people, who experience
a disproportionate share of alcohol related problems. She stated
that increased taxes have been shown to have a direct result in
reducing certain alcohol-related incidences among young people such
as automobile accidents and sexual assaults.
LOWELL SHINN, President, Brown Jug, and President, Anchorage,
Cabaret, Hotel and Restaurant Retail Association, testified via
teleconference from Anchorage that this tax would be unfair in
relationship to liquor taxes in the remainder of the United States.
He calculated Alaska would tax beer at 591 percent of the national
average, wine at 460 percent, and liquor at 508 percent. He spoke
to competition with out of state retailers, as this tax would
provide incentive for residents to, "look for other sources of
supply." He stated this tax increase would reduce consumption and
the state would not realize the predicted $30 million annual
revenue.
BOB BAILEY, Operations Manager, Alaska Distributors, testified via
teleconference from Anchorage that he strongly opposes a targeted
tax on a single industry because it is not part of a comprehensive
fiscal plan. He also opposed the amount of the tax increase, he
disagreed that Alaska currently has a low alcohol tax. He referred
to written testimony [copy on file] showing that Alaska has the
fifth highest liquor tax in the United States. He calculated this
tax would increase the cost of a bottle of spirits by over $2.53
and the cost of a case of beer by over $2.40 and place Alaska's
alcohol tax at over 500 percent of the national average. He pointed
out these figures do not include markups or margins.
Mr. Bailey warned this legislation also opens the door for
municipalities to tax alcohol at any level. This, he warned, could
detriment small businesses. He remarked that the industry has
stated it would support working together to find a comprehensive
solution to the state's fiscal problems so long as the plan is
broad-based and is limited to "reasonable levels of increases to
all involved."
Mr. Bailey informed he would submit additional written testimony
challenging the results of the aforementioned McDowell study.
JOEL KADARACH, Employee, Odem Company, testified via teleconference
from Anchorage that although he appreciated the complexity of the
state's fiscal situation, a 300 percent excise tax and a provision
to allow unlimited municipal sales taxes on alcoholic beverages is
not a reasonable component of any solution. He added it would not
address the alcohol abuse situation and would not impact the amount
of consumption.
KAREN ROGINA, Chair, Alaska Hospitality Alliance, testified via
teleconference from Anchorage in opposition of the tax increase.
She said that although Alaska does have a high percentage of
alcohol abuse, this tax would not reduce consumption. She noted the
increase in tobacco taxes has not reduced the tobacco related
health problems. She perceived the legislation as punitive against
the hospitality and visitor industries, which is the second-most
important private sector in Alaska's economy. She spoke to other
proposed legislation increasing the minimum wage and disallowing
tip credits, proposed legislation imposing a statewide head tax on
cruise ship passengers. She also stated the impacts of the
September 11, 2001 terrorism attacks have significantly increased
insurance rates and decreased visitor bookings. She requested the
Committee consider the industry at-large when making a decision on
SB 347.
DON GRASSEE, General Manager, K&L Distributors, testified via
teleconference from Anchorage to challenge earlier comments that
beer is cheaper then soda. He cited advertised prices for Budweiser
beer at $14.49 per case compared to Pepsi or Coke-Cola at $6.49. He
opposed the bill. He spoke to the collection of the alcohol tax for
personal consumption importation, asserting this discussion
indicates this practice would increase.
CAROL JACKSON, Credit Manager, K&L Distributors, testified via
teleconference from Anchorage that she was opposed to any dramatic
increase in the beverage alcohol tax. She informed that many of
this business' customers receive goods Cash On Delivery (C.O.D.)
and this increase would raise the cost of the average order by
$200. She surmised this legislation would be the "breaking point"
for many of the smaller "accounts", or businesses. She suggested
utilizing the funds generated from the existing tax for more
effective treatment programs.
TODD RICHARDSON, Employee, K&L Distributors, testified via
teleconference from Anchorage that this bill is an unfair burden on
the alcohol industry. He stated that smoking and drinking has been
declining while obesity has been increasing and the costs of
treating obesity related chronic health problems are higher.
BILL ADINT, Wine Manager, K&L Distributors, testified via
teleconference from Anchorage that he opposed the bill for the same
reasons previously stated and because it would triple the current
alcohol tax. He surmised the Legislature would not want Alaska to
have the highest alcohol tax in the country.
JEFF CARTER, Fairbanks Branch Manager, K&L Distributors, testified
via teleconference from Anchorage to list the proposed tax
increases for beer, from 79 cents to $3.20 per case; wine from 17
cents to 68 cents per bottle; and liquor, from $1.11 to $3.64 per
bottle. He stressed that alcohol taxes have little impact on
problem drinkers and these are the drinkers that cause the majority
of the state's alcohol related problems.
BRIEN CAU, Employee, K&L Distributors, testified via teleconference
from Anchorage in opposition to the bill because Alaska already
pays one of the highest taxes in the country and this increase
would triple the amount. He suggested Alaska adopt a comprehensive
fiscal plan to reduce waste and control spending.
DAVID SCOTT, Employee, K&L Distributors, testified via
teleconference from Anchorage that this tax unfairly targets the
liquor industry. He noted the revenues would be deposited into the
state's general fund rather than "earmarked to any of the specific
problems" including alcohol abuse. He stated he was not opposed to
taxation, but remarked it must be more reasonable than a 300
percent increase. He agreed a comprehensible fiscal plan to control
state spending is necessary before new taxes are levied.
Senator Leman asked what tax increase would be reasonable.
Mr. Scott replied that a 25 to 50 percent increase would be
reasonable.
LARRY HACKENMILLER, Interior, Cabaret, Hotel and Restaurant Retail
Association, testified via teleconference from Fairbanks, in
opposition to the bill.
SFC 02 # 32, Side A 11:18 AM
Mr. Hackenmiller disagreed this tax increase would reduce minor
consumption and he spoke of young people considered old enough to
enlist in the military but not allowed to consume alcohol. He
predicted more young people would be killed fighting terrorism then
from alcohol abuse.
DICK ELLSWORTH testified via teleconference from Fairbanks that
anyone in support of this legislation should be ashamed, as it is
not a comprehensive fiscal plan. He stated the Legislation has done
nothing to address the deficit for three years. He challenged
finding a more generous industry then "bars".
PAM LABOLLE, President, Alaska State Chamber of Commerce, testified
in Juneau in opposition saying it singles out one industry without
addressing the overall fiscal situation. She stated that because
the revenues are deposited into the general fund, there is no
guarantee it would be used to address the impact of alcohol abuse
in the same manner revenues from the tobacco tax are not utilized
to address tobacco use.
JOHN PATTEE, Owner, Gas Light, and The Avenue, testified via
teleconference from Anchorage that the proposed tax is too high. He
disputed that ten cents a drink would increase his costs by more
than that amount. He spoke about the impact on jobs of this tax
increase, combined with the proposed minimum wage increase with no
tip credit, and the proposed cruise ship tax. He warned that many
small businesses would go out of business.
KAC'E MCDOWELL, Executive Director, Alaska Cabaret, Hotel and
Restaurant Retail Association, testified from an off-net site, that
the alcohol industry is not necessarily thriving. She stated that
several businesses have had to discontinue some or all operations
during the winter months. She stated the 300 percent proposed
increase is "outrageous" and that some smaller operators would be
unable to increase the sales price to account for the additional
cost, while larger operators would have adequate inventory to do
so. She asserted that server-training programs administered by the
Cabaret, Hotel and Restaurant Retail Association (CHARR) do more to
deter underage drinking and drunken driving then any other program
in Alaska. She noted the Association also contributes to other
successful programs and that many businesses would no longer
contribute if the tax increase were imposed.
THOMAS BARTELS, Facility Manager, Odem Corporation, testified via
teleconference from Fairbanks that this is a targeted tax for an
industry that is getting "a very bad rap". He predicted this
increase would mostly affect light to moderate drinkers and this
group would reduce consumption, which would reduce tax revenues.
CINDY CASHEN, Volunteer, Mothers Against Drunk Driving, and victim
of drunk driving, testified in Juneau, about the impacts on society
of alcohol abuse and the high cost and necessity of treatment. She
stated the state currently pays approximately $12 million for
treatment. She asserted that education and intervention is
necessary through schools, churches and community groups. She
pointed out that 80 percent of first-time convicted drunken driving
offenders do not re-offend because of strict sanctions. She
remarked that the estimated $30 million this increase would
generate is a small amount compared to the cost to victims of
alcohol abuse.
JULIE KRAFFT, Director of Member Services, Alaska Municipal League,
testified in Juneau, that the Alaska Municipal League and the
Alaska Conference of Mayors support an increase in alcohol tax as
part of the long-range fiscal plan. She pointed out that as
pressure increases on local sales and property taxes,
municipalities need additional tools to pay for public services.
She stressed that municipalities could not increase the local tax
without voter approval.
Senator Hoffman asked if the League would support an alcohol tax
alone if it were not part of a long-range fiscal plan.
Ms. Krafft answered yes.
Co-Chair Donley ordered the bill HELD in committee to await written
recommendations from the Department of Revenue.
ADJOURNMENT
Co-Chair Dave Donley adjourned the meeting at 11:38 AM
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