Legislature(2013 - 2014)SENATE FINANCE 532
03/28/2013 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB22 | |
| SB83 | |
| SB57 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 22 | TELECONFERENCED | |
| *+ | SB 83 | TELECONFERENCED | |
| + | SB 57 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 28, 2013
9:05 a.m.
9:05:58 AM
CALL TO ORDER
Vice-Chair Fairclough called the Senate Finance Committee
meeting to order at 9:05 a.m.
MEMBERS PRESENT
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
Senator Pete Kelly, Co-Chair
ALSO PRESENT
Christine Marasigan, Staff, Senator Kevin Meyer; Senator
Peter Micciche, Sponsor; Idonna Peiper Nelson, CFO and
Partner, Principle Davis Constructors and Engineers Inc.;
Tim Lamkin, Staff, Senator Gary Stevens; Amy Lujan,
Executive Director, Alaska Association of School Business
Officials; Bruce Johnson, Executive Director, Alaska
Council of School Administrators..
PRESENT VIA TELECONFERENCE
John Mackinnon, Executive Director, Associated General
Contractors of Alaska, Anchorage; Deena Paramo,
Superintendent, Mat-Su Borough School District, Mat-Su;
Luke Fulp, Chief Business Officer, Mat-Su Borough School
District, Mat-Su; Dave Jones, Assistant Superintendent,
Kenai Peninsula Borough School District, Kenai..
SUMMARY
SB 22 CRIMES; VICTIMS; CHILD ABUSE AND NEGLECT
CSSB 22(FIN) was REPORTED out of committee with a
"do pass" recommendation and with a previously
published zero fiscal note: FN7(DHS), a
previously published indeterminate fiscal note:
FN5(ADM), a previously published zero fiscal
note: FN2(DPS), an indeterminate fiscal note from
the Department of Administration, an zero fiscal
note from the Department of Law, an indeterminate
fiscal note from the Department of Corrections, a
zero fiscal note from the Department of Public
Safety, and an indeterminate fiscal note from the
Alaska Court System.
SB 57 LITERACY, PUPIL TRANSP, TEACHER NOTICES
SB 57 was HEARD and HELD in committee for further
consideration.
SB 83 INTEREST ON CORPORATION INCOME TAX
SB 83 was REPORTED out of Committee with a "do
pass" recommendation and with a new indeterminate
fiscal note from the Department of Revenue.
[BSW1]
[Secretary Note: The audio was unrecoverable from the start
of the meeting at 9:05:58 until the AT EASE at 9:08:51.]
SENATE BILL NO. 22
"An Act relating to the commencement of actions for
felony sex trafficking and felony human trafficking;
relating to the crime of sexual assault; relating to
the crime of unlawful contact; relating to forfeiture
for certain crimes involving prostitution; relating to
the time in which to commence certain prosecutions;
relating to release for violation of a condition of
release in connection with a crime involving domestic
violence; relating to interception of private
communications for certain sex trafficking or human
trafficking offenses; relating to use of evidence of
sexual conduct concerning victims of certain crimes;
relating to procedures for granting immunity to a
witness in a criminal proceeding; relating to
consideration at sentencing of the effect of a crime
on the victim; relating to the time to make an
application for credit for time served in detention in
a treatment program or while in other custody;
relating to suspending imposition of sentence for sex
trafficking; relating to consecutive sentences for
convictions of certain crimes involving child
pornography or indecent materials to minors; relating
to the referral of sexual felonies to a three-judge
panel; relating to the definition of 'sexual felony'
for sentencing and probation for conviction of certain
crimes; relating to the definition of "sex offense"
regarding sex offender registration; relating to
protective orders for stalking and sexual assault and
for a crime involving domestic violence; relating to
the definition of 'victim counseling centers' for
disclosure of certain communications concerning sexual
assault or domestic violence; relating to violent
crimes compensation; relating to certain information
in retention election of judges concerning sentencing
of persons convicted of felonies; relating to
remission of sentences for certain sexual felony
offenders; relating to the subpoena power of the
attorney general in cases involving the use of an
Internet service account; relating to reasonable
efforts in child-in-need-of-aid cases involving sexual
abuse or sex offender registration; relating to
mandatory reporting by athletic coaches of child abuse
or neglect; making conforming amendments; amending
Rules 16, 32.1(b)(1), and 32.2(a), Alaska Rules of
Criminal Procedure, Rule 404(b), Alaska Rules of
Evidence, and Rule 216, Alaska Rules of Appellate
Procedure; and providing for an effective date."
Senator Bishop MOVED to ADOPT the proposed committee
substitute for SB 22, Work Draft 28-GS1587\P (Strabaugh,
3/25/13) as a working document.
Vice-Chair Fairclough OBJECTED for the purpose of
discussion.
CHRISTINE MARASIGAN, STAFF, SENATOR KEVIN MEYER, explained
the changes in the new committee substitute (CS). She
reported that on ppage[BSW2] 19, lines 4 to 5 beginning with
"or," and ending in "duties," and lines 22 to 31, and all
of Section 37 were deleted from the previous version. In
addition, on ppage 20, line 2 the words "or volunteer" was
removed. She noted that the changes were made in
consultation with the Department of Law.
Vice-Chair Fairclough WITHDREW her OBJECTION. There being
NO further OBJECTION, Work Draft 28-GS1587\P was ADOPTED.
Senator Bishop MOVED to REPORT CSSB 22(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSSB 22(FIN) was REPORTED out of committee with a "do pass"
recommendation and with a previously published zero fiscal
note FN7 (DHS), a previously published indeterminate fiscal
note FN5 (ADM), a previously published zero fiscal note FN2
(DPS), a new indeterminate fiscal note from the Department
of Administration, a new zero fiscal note from the
Department of Law, a new indeterminate fiscal note from the
Department of Corrections, a new zero fiscal note from the
Department of Public Safety, and a new indeterminate fiscal
note from the Alaska Court System.
9:08:51 AM
AT EASE
9:12:52 AM
RECONVENED
Vice-Chair Fairclough commented that there were some
technical difficulties with the meeting's audio feed and
that the earlier portion of the meeting had not been
recorded. She reported that the committee substitute for SB
22, Work Draft 28-GS1587\P had been adopted and moved from
committee.
SENATE BILL NO. 83
"An Act relating to the corporation income tax; and
relating to the computation of interest under the
look-back method applicable to long-term contracts in
the Internal Revenue Code."
9:14:08 AM
Senator Bishop MOVED to ADOPT the proposed committee
substitute for SB 83, Work Draft 28-LS0634\U (Bullock,
3/27/13) as a working document. There being NO OBJECTION,
it was so ordered.
CHRISTINE MARASIGAN, STAFF, SENATOR KEVIN MEYER, discussed
the change in the CS. She noted that on ppage 1, line 11
the retroactive effective date was changed to January 1,
2013.
SENATOR PETER MICCICHE, SPONSOR, read from a prepared
statement. He explained the legislation. He communicated
that in addition to its focus on corporate income tax, the
bill was about fairness and simplicity. He detailed that
currently for state and federal corporate income tax
purposes contractors undertaking large multi-year projects
such as highways, schools, and universities were required
to estimate their total profit on a project and to pay
income tax on the portion of the project completed in a
given tax year. He stated that it was impossible to predict
in the first year of the project what the actual cost or
profit would be. Upon completion of the project and once
the profit amount had been determined, the contractor filed
look-back taxes (an amended return). A contractor either
owed additional taxes or received a refund based on whether
the profit had been over or under estimated; interest was
owed on the additional taxes due.
Senator Micciche relayed that although the Internal Revenue
Service (IRS) code had a specific provision for over and
under payments of estimated taxes for the multi-year
projects, existing state laws considered the payments
delinquent and applied an 11 percent interest rate. The
state made no distinction between its system of estimating
taxes based on a contractor's best knowledge and a tax
payer who did not make a timely filing. He believed there
should be a distinction between a tax penalty on delinquent
taxes and an amended return. Conversely, the bill would tie
the interest rate to a recognized index as opposed to the
11 percent interest currently paid by the state and
contractors in the current outdated system.
Senator Micciche expounded that the bill corrected the
interest issue, simplified the process for contractors, and
adopted the IRS bulletin rates for look-back taxes on long-
term projects allowing contractors and the state to use the
same interest pay schedules for state taxes as the federal
system. Currently the interest rate was 2 percent for under
payments when the profit had been underestimated and over
payments when the state owed money in the amount of $10,000
or less; interest was currently levied at 0.5 percent on
amounts greater than $10,000. The rate fluctuated and was
published quarterly. The CS specified the tax policy bullet
would be in effect for the 2013 calendar tax year. He
communicated that the bill would primarily impact Alaska C
corporation contractors, lenders, and surety bonding
companies; it would ultimately allow for greater cash flow
that would be reinvested in Alaska's communities. He
pointed to several letters of support (copy on file) from
general contractors, the Association of General
Contractors, bankers, public accountants, surety or bonding
brokers, and other. He opined that the legislation was
beneficial for the state, private sector businesses, and
Alaskans and it was an issue of fairness.
Senator Olson asked whether there was any opposition to the
bill. Senator Micciche was not aware of anyone who opposed
the modernization of the state's interest rates.
Senator Olson inquired about the administration's position.
Senator Micciche responded that he could not speak for the
administration, but believed the Department of Revenue
(DOR) was in support of the bill.
9:19:30 AM
Vice-Chair Fairclough OPENED public testimony.
IDONNA PEIPER NELSON, CFO AND PARTNER, PRINCIPLE DAVIS
CONSTRUCTORS AND ENGINEERS INC., spoke in support of SB 83.
She believed that the issue was not previously addressed
due to the complexity of the issue. She stated that the
interest rate was assessed on a tax that was difficult for
the taxpayer to understand or was even aware of. She
explained that a large contractor was defined by the
federal government as a contractor bringing in $10 million
or more per year in revenue; most contractors fell into
that category. When a contractor began a fixed-fee job,
they did not know exactly how profitable it would be; risk
was reduced as the project progressed and more became known
about exact costs. Typically contractors started out with
conservative cost estimates; each year the contractor's
current estimate was applied to the amount of revenue they
had and taxes were paid on the total amount.
Ms. Nelson communicated that the legislation would allow
contractors to pay taxes retroactively once actual costs
were known. The objective was to make everyone "whole." She
detailed that if a contractor was not conservative in the
early years of a project they would lose the respect of
their banker, bonding company, shareholders, and others
involved in the project. She furthered that because taxes
were paid and income was reported based on estimates, it
was crucial that estimates were conservative and that a
gain was shown by the project's end. She stated that a good
contractor would always have look-back taxes and an ethical
contractor always paid taxes owed on time. She stressed
that Davis Constructors was never delinquent in its tax
payments. She opined that the high interest rate intended
to deter companies from making late tax payments was fairly
insulting.
Ms. Nelson continued to discuss the company's work and its
contribution to the state. She conveyed that any additional
profits that would result from decreased interest on look-
back taxes would flow back into the business. She discussed
that federal rates charged on look-back taxes were designed
to recognize that the factor was out of the contractors'
control. Under the circumstance, the federal government
allowed businesses to pay the same interest rate that it
paid a tax payer who had overpaid taxes. She relayed that
an unethical contractor could technically make interest
money from the federal and state governments by
overestimating its ultimate profits.
9:28:11 AM
JOHN MACKINNON, EXECUTIVE DIRECTOR, ASSOCIATED GENERAL
CONTRACTORS OF ALASKA, ANCHORAGE (via teleconference),
spoke in support of SB 83. He emphasized that the bill
would bring the interest rate on the taxes due in-line with
current rates and would fluctuate with the federal rate,
which could change quarterly. The bill would separate the
look-back provision and interest on the taxes from other
sections of the code that were considered delinquent taxes.
He stressed that the taxes due were a result of an amended
return and were not delinquent. He believed the bill helped
level the playing field for C corporations and other types
of corporations.
Vice-Chair Fairclough CLOSED public testimony.
Vice-Chair Fairclough addressed the indeterminate zero
fiscal note from DOR. She pointed to the analysis on page 2
of the fiscal note, which point out, which indicated that
approximately 50 percent of the corporations in Alaska
would qualify. Changes in revenues were indeterminate.
Co-Chair Meyer supported the legislation. He MOVED to
REPORT CSSB 83(FIN) out of committee with individual
recommendations and the accompanying fiscal note. There
being NO OBJECTION, it was so ordered.
CSSB 83(FIN) was REPORTED out of committee with a "do pass"
recommendation and with a new indeterminate fiscal note
from the Department of Revenue.
9:31:57 AM
AT EASE
9:36:17 AM
RECONVENED
SENATE BILL NO. 57
"An Act relating to parental involvement in education;
adjusting pupil transportation funding; amending the
time required for employers to give tenured teachers
notification of their nonretention; and providing for
an effective date."
TIM LAMKIN, STAFF, SENATOR GARY STEVENS, spoke to the
legislation. He related that the bill accomplished three
objectives. The first objective contained in Section 1 of
the legislation encouraged increased parental involvement
in developing children's reading skills. Under the state's
direction, the school districts would publish information
regarding the importance of parental involvement in
developing reading skills in kindergarten through third
grade. The second section and objective of the bill
involved pupil transportation. The legislation realigned
the funding for pupil transportation by annually matching
the Consumer Price Index (CPI) for Anchorage. He explained
that the school districts contracted with transportation
providers. The contracts contained a 3 percent adjustment
for inflation according to the Anchorage CPI. Currently,
the state provided a 1.5 percent annual adjustment for
pupil transportation funding for the next two years. Most
districts were forced to subsidize pupil transportation
costs at the expense of education programs. He indicated
that the third objective found in Section 3 was referred to
as the "pink slip" section. He pointed out that
historically March 16 was established as an arbitrary date
to provide notification of layoff or retention. Section 3
moved the notification date forward to May 15th when school
districts funding levels were known. He added that Section
4 of the legislation repealed the current pupil
transportation funding provisions. Lastly, Section 5
allowed existing contracts with teachers and faculty to
expire before the legislation took effect.
Senator Hoffman inquired why the bill used Anchorage as the
CPI base and wondered whether there were other indexes for
higher costs areas. Mr. Lamkin related that other indexes
existed but that using the Anchorage CPI was a "policy
call." Senator Hoffman thought that it would be fair to
consider a higher index for Fairbanks and other high index
areas of the state.
Senator Bishop inquired about the difference in the CPI
between Fairbanks and Anchorage. Mr. Lamkin offered to
provide the information.
Co-Chair Meyer cited Section 3 and inquired whether the
provision only applied to tenured teachers. Mr. Lamkin
confirmed that Section 3 only applied to tenured teachers.
He added that subsection (b) of the statute referred to
non-tenured teachers which required notification by the end
of the school year.
Co-Chair Meyer wondered why the bill was structured with
two separate notification dates. Mr. Lamkin replied that
notification was a policy decision which was established
many years ago.
Vice-Chair Fairclough speculated that due to the nature of
tenure, a tenured position deserved as much layoff
notification as possible[BSW3].
Senator Olson remarked that the March 15th date offered as
much notification as possible, which was more helpful to a
person facing a layoff. Vice-Chair Fairclough ascertained
that the pink slips were issued before the budget cycle for
the state was completed and the school districts funding
levels were known.
Mr. Lamkin concurred. He added that unnecessarily issuing
pink slips caused teacher stress that could affect the
classroom. He voiced that it was a matter of fairness and
transparency.
Senator Dunleavy commented that things were done backward
from the school districts' point of view. He noted that the
districts were legally compelled to enter into contracts
before budgets were known. He believed the change placed
the notifications in line with the budget process.
9:44:50 AM
Co-Chair Meyer relayed that he had heard comments on
Section 2 of the bill on both sides of the issue. Indexing
was not a typical budget practice and might set an
unwelcome precedent. The alternative of dealing with pupil
transportation increases each year was also not ideal. He
preferred supporting the legislation.
Mr. Lamkin communicated that the issue was a policy
question. He pointed out that the cost was real. He
deferred to school district financial officers for further
discussion.
Senator Hoffman believed that in this particular case, the
additional expenses would "diminish" classroom funding and
was the core of the argument.
Vice-Chair Fairclough OPENED public testimony.
AMY LUJAN, EXECUTIVE DIRECTOR, ALASKA ASSOCIATION OF SCHOOL
BUSINESS OFFICIALS, spoke in favor of SB 57. She offered
that the Anchorage CPI was the standard for contracts,
recommended by the Department of Education and Early
Development (DEED) statewide. Contracts in Fairbanks and
even Nome use the Anchorage CPI. The costs were real and
increasing. Authorizing the Anchorage CPI budget increase
keeps pace with the actual cost. She discussed Section 3
and agreed with the comments of Senator Dunleavy. She
mentioned the unnecessary stress caused by issuance of the
premature notification and keeping the pink slips in line
with the state and municipal budget processes.
Senator Olson inquired whether it would be fairer to use a
higher CPI. Ms. Lujan reminded the committee that the
contracts were based on the Anchorage CPI and was the
standard.
Senator Olson suggested moving the notification date up to
May 1, which corresponds to the boroughs budgets. Ms. Lujan
observed that the dates vary according to the borough and
opined that May 15 might be a safer date.
DEENA PARAMO, SUPERINTENDENT, MAT-SU BOROUGH SCHOOL
DISTRICT, MAT-SU (via teleconference), spoke in support of
SB 57. She referenced increased parental involvement and
related that tools and resources made available to parents
enriched education. She restated that all school district's
contracts were based on the Anchorage CPI. She shared that
when school districts budgets were developed "global big
picture thinking" was balanced with financial realities.
She believed that the current factor of 1.5 percent was not
sufficient to fully support pupil transportation costs. She
based that assessment on the 's Anchorage CPI's 2.6
percent five--year average. The funding shortfall reduced
instruction funding. She stated that the Matanuska-Susitna
borough school district was preparing to subsidize
transportation funding with its general fund at $1.5
million in FY 2014 with impacts to classroom instruction
funding. The amount was the equivalent to 15 teacher
positions. The bill reduced the shortfall by approximately
$500 thousand.
Ms. Paramo turned to non-retention notification. She
related that under the year to year funding structure
enacted (HB 273) by the state in 2008, funding levels were
not known before statutorily mandated timelines required
contract renewal and non-retention notification. She
relayed the Matanuska-Susitna Borough School District's
support of the notification date change and furthered that
the contract dates should be changed as well. The
Matanuska-Susitna Borough School District thought that the
timeline was a "prudent and responsible fiscal policy." She
thanked the committee and urged for support of the
legislation.
9:56:08 AM
Senator Hoffman inquired how Mat-Su derived the $1.5
million figure which contrasted with the DEED fiscal note
FN2 (EED).
LUKE FULP, CHIEF BUSINESS OFFICER, MAT-SU BOROUGH SCHOOL
DISTRICT, MAT-SU (via teleconference), replied that he was
not certain how the fiscal note was developed. He stated
that the borough developed the budget using the CPI five--
year average of 2.6 percent in relation to the 1.5 percent
increase instituted in SB 182 last year.
DAVE JONES, ASSISTANT SUPERINTENDENT, Kenai Peninsula
BOROUGH SCHOOL DISTRICT, KENAI (via teleconference),
testified in support of SB 57. He concurred with all of the
previous testimony. He added that DEED's standardization of
school district contracts to the Anchorage CPI was an
attempt to rein in costs and attract more contractors. The
increase to the Anchorage CPI in SB 57 helped stabilize
transportation funding; not at the expense of education
funding. He discussed the notification issue. He related
that the current system left teachers to wonder whether
they had a job and the district in the situation that they
will find another job and not be available if their jobs
were retained.
Senator Dunleavy commented that the May 15th date was
minimal in light of the possibility that the legislature
could end in special session on any given year.
BRUCE JOHNSON, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, supported the legislation. He shared that
school districts took lying off teachers and school
district employees seriously. He agreed with Mr. Jones and
did not want to lose teachers who sought and gained other
employment due to premature notification. Rural districts
commonly issued contracts to staff in February, especially
in schools with high turnover in order to develop
recruitment strategies for the next year. Most of the
teachers were issued contracts well before the May 15th
deadline. He appreciated the flexibility of the later date
and believed it was more advantageous to have a stable
employment force.
Vice-Chair Fairclough CLOSED public testimony.
SB 57 was HEARD and HELD in committee for further
consideration.
10:05:35 AM
ADJOURNMENT
The meeting was adjourned at 10:05 a.m.