Legislature(1993 - 1994)
03/12/1994 10:05 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE March 12, 1994 10:05 a.m. TAPES SFC-94, #28, Side 2 (000-end) SFC-94, #30, Side 1 (000-575) SFC-94, #30, Side 2 (575-105) CALL TO ORDER Co-chair Drue Pearce convened the meeting at approximately 10:05 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Jacko, Kerttula, and Sharp were present. Senators Kelly and Rieger arrived soon after the meeting began. ALSO ATTENDING: Senator Randy Phillips; Representative Pat Carney; Dean Guaneli, Assistant Attorney General, Criminal Division, Dept. of Law; Albert Alvarez, Vice President, University Relations, Alaska Pacific University; Larry Meyers, Director, Income and Excise Tax Division, Dept. of Revenue; John Talley, Financial Examiner, Division of Insurance, Dept. of Commerce and Economic Development; Keith Kelton, Director, Division of Facility Construction and Operation, Dept. of Environmental Conservation; Crystal Smith, Alaska Municipal League; Reed Stoops, Lobbyist, Alaska Air Carriers Association; Shirley Armstrong, aide to Senator Randy Phillips; Carol Carroll, aide to Senator Kerttula; Terry Ottness, aide to Senator Taylor; and aides to committee members and other members of the legislature. ALSO PARTICIPATING VIA TELECONFERENCE: Patrick Wilson, Chairman, Canned Salmon Classic - Petersburg Harold Jones, City Council Member - Bethel Carrie Williams, City Manager, St. Mary's - Anchorage Tim Troll, City Administrator/City Attorney Sand Point, Alaska - Anchorage SUMMARY INFORMATION SB 26 - LEGISLATIVE SESSIONS TO BE IN ANCHORAGE Testimony was presented by Senator Randy Phillips and his aide, Shirley Armstrong. The bill was REPORTED OUT of committee without recommendation and subsequently accompanied by an updated packet of 19 fiscal notes. SB 225 - INSURANCE TAX CREDIT:GIFTS TO COLLEGES Testimony was presented by Albert Alvarez, John Tally, and Carol Carroll, aide to Senator Kerttula. CSSB 255 (HES) was then REPORTED OUT of committee with a "do pass" recommendation, a zero fiscal note from the Dept. of Revenue, and a fiscal note from the Dept. of Commerce and Economic Development showing a revenue reduction of ($900.0) SB 251 - COMM'L FISH LOANS FOR CERTAIN OBLIGATIONS Amendment No. 1 by Senator Kelly was presented and adopted. CSSB 251 (Fin) was then REPORTED OUT of committee with individual recommendations accompanied by a zero fiscal note from the Dept. of Commerce and Economic Development. SB 261 - NO MUNICIPAL SALES TAXES ON AIR CARRIERS Teleconference testimony was provided by Harold Jones, Carrie Williams, and Tim Troll and by Crystal Smith, Larry Meyers, and Reed Stoops in Juneau. CSSB 261 (Fin) was REPORTED OUT of committee without recommendation, accompanied by zero fiscal notes from the Dept. of Community and Regional Affairs and Dept. of Transportation and Public Facilities as well as a municipal fiscal note from the Dept. of Community and Regional Affairs indicating minimal revenue loss. SB 276 - CRIMINAL JUSTICE INFORMATION Discussion was had with Dean Guaneli. A draft CSSB 276 (Fin), K version, was presented and adopted. Amendments No. 1 and No. 2, presented by the Dept. of Law, were also adopted. The bill was subsequently HELD in committee pending the drafting of language permitting legislative access to criminal justice information. SB 294 - PETERSBURG CANNED SALMON CLASSIC Teleconference testimony was provided by Patrick Wilson from Petersburg. Terry Ottness, aide to Senator Taylor, also spoke to the bill. The bill was REPORTED OUT of committee with a "do pass" recommendation and a zero fiscal note from the Dept. of Revenue. SB 330 - WATER QUALITY FUNDS AND GRANTS Testimony was presented by Keith Kelton. Amendment No. 3, proposed by Senator Rieger, was adopted. CSSB 330 (Fin) was then REPORTED OUT of committee with a "do pass" recommendation and a zero fiscal note from Dept. of Environmental Conservation. SB 360 - APPROP: AMEND FY 94 PUBLIC ASSISTANCE Draft legislation was approved for introduction as Senate Finance Committee legislation. It was subsequently numbered SB 360. SB 225 INSURANCE TAX CREDIT:GIFTS TO COLLEGES An Act relating to credits against certain insurance taxes for contributions to certain educational institutions; and providing for an effective date. Co-chair Pearce directed that SB 225 be brought on for discussion and referenced the Senate HESS Committee Substitute for the bill. Senator Kerttula, sponsor of the legislation, noted that private institutions statewide relieve a substantial taxpayer burden. He explained that the proposed bill would extend tax credits for contributions to private educational institutions to the insurance industry. CAROL CARROLL, aide to Senator Kerttula, reiterated that SB 225 would extend an existing tax credit to title companies and insurance companies. Those entities were left out of prior legislation providing for the credit because they do not pay corporate income tax. They do, however, pay a tax on their premiums. Since tax provisions relating to premiums were not amended when tax credit legislation was passed, insurance companies are unable to avail themselves of the credit. SB 225 would allow them to do so. It limits the credit to 50% of the first $100.0 and 100% of the second $100.0. Credit is further limited to 50% if the total tax liability is less than $150.0. In 1993, the Dept. of Revenue provided $533.0 in tax credits to qualifying corporations that donated to educational institutions. AL ALVAREZ, Vice President, University Relations, Alaska Pacific University, came before committee urging support for the bill. He reiterated that insurance companies were inadvertently not included in earlier legislation allowing for the tax credit because they pay taxes under a separate section of the tax code. The tax credit has provided a significant amount toward long-term financial health of Alaska Pacific. Added revenue from the insurance industry would be most beneficial. Senator Kelly asked how receipts from tax credits are budgeted by the University of Alaska. Co-chair Frank voiced his understanding they would be included in the budget under "other . . . receipts." Discussion of donations to the University of Alaska followed. Carol Carroll referenced a University position paper indicating that the University raised "close to $12 million over the past two years." Senator Kerttula attested to differences in the cost of course offerings between the University and Alaska Pacific, and spoke to need for continued private sector comparison as a means of measuring University of Alaska performance. In response to a question from Senator Kelly, Mr. Alvarez advised that Alaska Pacific received "close to $900.0" from existing tax credits. He further advised that momentum generated by the credit creates a springboard for other gifts. Senator Sharp asked how many non-profit, public/private two or four-year accredited schools in Alaska would qualify for the credit, besides the University and Alaska Pacific. Senator Kerttula noted Sheldon Jackson. The credit is presently limited to those three institutions. Co-chair Frank inquired concerning the number of corporations receiving the credit. Mr. Alvarez advised of five gifts--three from the oil industry and two from other sources. Alaska Pacific has twice that number of prospects in terms of companies that are "ready to give." LARRY MEYERS, Director, Income and Excise Tax Division, Dept. of Revenue, next came before committee. Co-chair Frank renewed questions concerning the number of taxpayers involved in the credit. Mr. Meyers explained that, for FY 93, the department received $142 million from oil and gas corporations and other potentially eligible corporations. When oil and gas tax payments are deducted, approximately $25 million remains. He said he would provide figures on corporate involvement. Senator Sharp voiced concern that should an individual income tax be reinstated in the future, individuals will be treated much differently than corporations in terms of tax credits for gifts to educational institutions. JOHN TALLY, Financial Examiner, Division of Insurance, Dept. of Commerce and Economic Development, briefly came before committee. He explained that 1,200 to 1,400 insurance companies pay premium taxes. Co-chair Frank pointed to the ($900.0) fiscal note from the department and voiced his understanding that if universities are aggressive in seeking contributions, the note could be substantially higher. Mr. Tally concurred. Co-chair Frank asked for a breakdown of premium tax payments made by insurance companies. He voiced support for Universities but noted need to understand the potential for draining the treasury. Mr. Tally agreed to provide the information. Senator Sharp inquired regarding expenditures from foundations. Co-chair Frank voiced his understanding that moneys expended by the University of Alaska would flow through the budget process. Senator Kelly stressed need for accountability of those moneys. Co-chair Frank attested to his understanding that the earlier mentioned $12 million went into a fund, and only the interest therefrom is expendable. Co-chair Pearce asked if contributions resulting in tax credits are required to accrue to the University of Alaska foundation. Both Senator Kerttula and Carol Carroll advised that they did not know. No representatives of the University were present to speak to the issue. Senator Kelly again stressed need to know how the money is accounted for by the University. Senator Kerttula MOVED that CSSB 225 (HESS) pass from committee with individual recommendations. He told members he would procure the information sought by Senator Kelly and provide it prior to floor action on the bill. Co-chair Frank pointed to the University position paper indicating that the majority of the funds would accrue to endowments to provide benefits to student "far into the future." No objection having been raised, CSSB 225 (HESS) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Revenue and a note from the Dept. of Commerce and Economic Development showing revenue reductions of ($900.0). Co- chairs Pearce and Frank and Senators Kelly, Kerttula, and Rieger signed the committee report with a "do pass" recommendation. Senators Jacko and Sharp signed "no rec." SENATE BILL NO. 26 An Act relating to the location of the convening of the legislature in regular session; and providing for an effective date. Co-chair Pearce directed that SB 26 be brought on for discussion and further directed attention to packets of fiscal notes which she indicated were drafted by staff from the sponsor's office in conjunction with Senate Finance Committee staff. SENATOR RANDY PHILLIPS, sponsor of the legislation, came before committee. He explained that fiscal notes total approximately $500.0 for state agencies and $3.4 million for the legislature for the first year. Over the succeeding five years, those notes decrease. Senator Phillips said that in preparing agency fiscal notes, he asked each department how much was spent during the 1993 session for travel out of town. That provides a comparison of how much traveling is done while the legislature is in Juneau. He then suggested that if the legislature were to move to Anchorage, fiscal notes originally submitted by agencies would be reduced. Senator Phillips explained that the bill would move only the legislature from Juneau "closer to home for all of us around this table . . . , in Anchorage." Senator Phillips further pointed to need to review travel amounts for all state agencies. He noted that the actual for FY 93 was "almost $39 million." Travel for FY 94 is authorized at $44.5 million. He suggested that too much is spent on travel in light of the state's audio-visual teleconference system. Questions arose regarding figures set forth for both DOTPF and University travel. Co-chair Frank suggested that if travel costs were examined on a per employee bases, the legislature might not "look so good by comparison." Co-chair Pearce concurred. Co-chair Pearce requested a breakdown of the $3.4 fiscal note for the legislature. SHIRLEY ARMSTRONG, aide to Senator Phillips, came before committee. She directed attention to the original $4.8 million note from Legislative Affairs. In preparing the reduced note, $680.4 in moving expenses for staff was deleted as was $1.4 million for renovating the existing capitol building for occupancy by other agencies. The savings accruing from consolidation of leases was not used as an offset because the legislature does not, at this time, know whether agencies would move into the existing capitol building if it is not renovated to suit their purposes. Fiscal note costs for a new communications system and lease costs for a building in Anchorage appear to be reasonable. The largest cost is the Anchorage lease. Senator Kerttula remarked that the legislature should own its own building if it is to move. Senator Phillips advised there would be no problem "getting somebody to build a building for the legislature." Co-chair Pearce called for additional testimony on the bill. None was forthcoming. Senator Jacko MOVED that SB 26 pass from committee with individual recommendations. SB 26 was REPORTED OUT of committee. Senator Sharp signed the committee report with a "do pass" recommendation. Co-chair Frank and Senators Jacko, Kelly, and Rieger signed "no rec." Senator Kerttula signed "No rec., Needs amend to Wasilla." Co-chair Pearce did not sign. NOTE - Although the bill was reported out of committee this date and transmitted to Rules, accompanying fiscal notes were not released until March 30, 1994. The following notes were then attached: Gov. (All) $ 173.7 Gov. (Ex.Office) $ 76.6 Gov. (OMB) 97.1 DOA 37.4 DC&ED 28.4 DC&RA 9.9 DOC 0 DEC 18.0 DOE 25.9 DF&G 17.3 DH&SS 52.0 DOLabor 10.1 DOLaw 13.0 DMVA 8.2 DPS 23.6 DOR 25.9 DOTPF 28.4 LAA $3,398.0 SENATE BILL NO. 330 An Act relating to water quality enhancement, water supply, wastewater, and solid waste grants; the Alaska clean water fund; the establishment of the Alaska clean water account, the Alaska drinking water fund, and the Alaska drinking water account; and providing for an effective date. Co-chair Pearce directed that SB 330 be brought on for discussion and referenced the zero fiscal note from the Dept. of Environmental Conservation, a sponsor statement from Senator Halford, a sectional analysis, and letters of support from the City of Hoonah and the Dept. of Environmental Conservation. She further observed that the bill was introduced at the request of the department. KEITH KELTON, Director, Division of Facility Construction and Operation, Dept. of Environmental Conservation, came before committee. End: SFC-94, #28, Side 2 Begin: SFC-94, #30, Side 1 He explained that the bill amends two statutes: one relates to grants and the other to loans. Changes to matching grants are included in the first five sections of the bill. The program currently provides assistance for construction of water and sewage treatment plants and solid waste facilities for incorporated communities. First class and larger communities have typically availed themselves of the program. Proposed amendments would: 1. Make it easier for smaller incorporated communities to receive assistance. 2. Clean up archaic provisions in statutes enacted in 1972 and amended many times hence. As originally drafted, the matching grants program was intended to match a federal grant program from EPA. That program is no longer available. The federal program provided 75% funding. Statutes required that the balance be spilt 50/50 between state and local governments. Since the federal program no longer exists, there is no reason for the statutory provisions. The department has found, over the past several years, that the 50/50 requirement led communities to seek total state funding rather than applying for federal dollars. The proposed statutory change eliminates the federal clause and allows communities to match as much state money with as much federal money as they can acquire. There would thus be no disincentive to obtain federal dollars. Mr. Kelton explained that smaller communities with populations of 1,000 to 5,000 have not availed themselves of the program, although many have "real sanitation needs." For communities below 1,000, the village safe water program provides funding, and communities with populations greater than 5,000 generally do not have problems with the local match. Communities that fall within those ranges have been unable to finance facilities. The department is thus proposing a change in funding relationships to more closely parallel the Governor's matching grants program. Instead of 50% state participation, the level would be 85% for communities of 1,000 and 30% state participation for communities between 1,000 and 5,000. For communities over 5,000, the status quo is maintained. Changes to loan statutes, involve an addition to the current program. Present statutes allow the department to take advantage of an EPA loan program which is 85% capitalized by the federal government. These loans are for wastewater facilities only, and a fund of approximately $60 million is available for capitalization. Three bills, now pending in Congress, would establish a parallel program for drinking water. Through changes in the proposed bill, the department is attempting to "get ahead of the federal program authorization . . . ." The bill seeks to establish a state loan program so that when the federal authorization is available, the department will be able to utilize federal moneys. Mr. Kelton described the importance of drinking water loans in relation to federal requirements for surface water treatment. Federal law requires all surface water sources to receive filtration. Due to that law, a number of "very expensive treatment systems" are required. Localities (Unalaska, Kodiak, and Cordova were cited as examples) where seafood processors use surface water will incur a "tremendous cost." The proposed loan program will provide communities low interest loans, at 2/3 of the municipal bond index (about 4%), capitalized 80% by the federal government. Senator Rieger directed attention to existing law set forth at page 3, line 16, of the bill and referenced language allowing use of the clean water fund for "guaranteeing a public agency debt obligation." He then voiced need to substitute other wording for "guaranteeing" to more clearly indicate that clean water assets may be used as security for debt obligation. The Senator voiced concern that existing language might infer an obligation of the state. Mr. Kelton advised that while the language has been in effect since 1987 and no problems have arisen, he would have no objection to a change. Senator Rieger then MOVED for adoption of the following amendment: Page 3, Line 16: delete "guaranteeing or" insert "collateral or for" Co-chair Pearce called for a show of hands. The motion CARRIED unanimously, and the amendment was ADOPTED. Senator Sharp asked how the proposed new drinking water fund would interplay with the existing clean water program. Mr. Kelton explained that there is no correlation between the first five sections of the bill (relating to grants) and the new loan program in remaining bill provisions. There is no interplay between the two; one does not provide a match for the other. Co-chair Pearce called for additional testimony or discussion. None was forthcoming. Senator Kerttula MOVED that CSSB 330 (Fin) pass from committee with individual recommendations. No objection having been raised, CSSB 330 (Fin) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Environmental Conservation. All members signed the committee report with a "do pass" recommendation with the exception of Senator Kelly who was absent from the meeting. SENATE BILL NO. 294 An Act relating to canned salmon classics; and providing for an effective date. TERRY OTTNESS, aide to Senator Taylor, came before committee. He explained that the legislation was introduced at the request of the Petersburg Chamber of Commerce. Last year, the chamber implemented a canned salmon classic whereby the person who most closely guessed the number of cases of salmon packed by Petersburg canneries won a prize. Receipts from the classic fund the prize, chamber operations, and a student scholarship. Current regulations establish a 50-cent per-ticket limit for special draw raffles. The proposed legislation would permit the Petersburg Chamber of Commerce to raise the ticket price for the canned salmon classic to $2.00, and allow the classic to join other state-sanctioned lotteries such as the Nenana Ice Classic. Tickets would be sold throughout Southeast. The proposal is supported by other Southeast Alaska communities and the Alaska Trollers' Association. PATRICK WILSON, Chairman, Canned Salmon Classic, next testified via teleconference from Petersburg. He explained that the classic is intended to focus attention on the community of Petersburg and raise moneys for promotion and scholarships. The classic was successful in its first year. The plan for this year is to expand into ten other communities. The City of Petersburg has received permission from those communities to do so. An October seafood fest was organized in conjunction with the classic, and 300 to 400 people participated. Local canneries are very supportive of the classic which has focused awareness on the seafood industry. The Alaska Seafood Marketing Institute was helpful in providing pamphlets and brochures, containing recipes, for public distribution. Co-chair Pearce called for additional testimony on the bill. None was forthcoming. Senator Kerttula MOVED for passage of SB 294 with individual recommendations. No objection having been raised, SB 294 was REPORTED OUT of committee with a zero fiscal note from the Dept. of Revenue. All members signed the committee report with a "do pass" recommendation with the exception of Senator Jacko who was absent from the meeting and did not sign. SENATE BILL NO. 261 An Act relating to municipal sales and use taxes involving air carriers; and providing for an effective date. Co-chair Pearce directed that SB 261 be brought on for discussion and referenced the Senate Community and Regional Affairs Committee Substitute; sponsor statement; fiscal notes; opposition papers from the Alaska Municipal League, Haines Borough, and City of St. Mary's; a position paper by the air carriers in support of the bill; and information from both the FAA and U.S. Dept. of Transportation. The Co- chair further directed attention to a work draft committee substitute (8-LS156\R, Cook, 3/11/94), proposed by Senator Sharp, as well as a proposed letter of intent. Senator Sharp MOVED for adoption of CSSB 261 (Fin), "R" version, for discussion purposes. No objection having been raised, the "R" version of CSSB 261 (Fin) was ADOPTED. Senator Sharp explained that CSSB 261 (Fin) adds the word "air" before transportation in title language at page 1, line 1, and within the body of the bill at line 10. That ensures that the legislation addresses air transportation rather than auxiliary transportation provided by an air carrier on the ground. The new draft also adds subsection (b) to the previously included (e) under 49 U.S.C. App 1513. That section reassures that municipalities may continue to charge property taxes, income taxes, franchise taxes, and sales and use taxes on the sale of associated goods and services provided by air carriers. It further reassures that the right of municipalities or other political subdivisions that own or operate airports to levy or collect reasonable rental charges, landing fees, or other service charges from aircraft operators is not infringed upon. The Senator spoke to past efforts to tax passenger fares and freight in intrastate commerce. The intent of federal legislation, as evidenced in recent court rulings, is that that is not allowable. The proposed bill clarifies federal law. Senator Sharp further noted deletion of the retroactive clause from previous versions of the bill and advised that CSSB 261 (Fin) would become effective immediately. Senator Kelly referenced information from the Haines Borough indicating that the borough applies a sales tax on intrastate freight. He then asked if the bill would impact ability to continue to collect the tax. Senator Sharp concurred that it would. He reiterated that the purpose of federal legislation is to ensure that regional areas do not add costs within their particular area that would be transferred outside the region in terms of freight and passenger service. Senator Kelly pointed to language within the position paper stating that the FAA Act of 1958 does not prohibit municipalities from assessing the sales tax. Senator Sharp advised that federal law is clear. He suggested that if the Haines sale tax is challenged, the borough might face return of tax moneys. Such a tax tips the economic balance of shipping freight and passengers between locales on federally certificated airlines. Senator Kelly voiced discomfort over "stripping" the tax from the borough. CRYSTAL SMITH, Alaska Municipal League, came before committee in opposition to the bill. She refuted comments that the bill merely clarifies federal law. Statements embodied in correspondence from general counsel, U.S. Department of Transportation, and court rulings indicate that the proposed bill would go beyond federal law in prohibiting municipalities from levying a sales tax on the carriage of freight. Ms. Smith directed attention to language within the League position paper and noted comments by Alaska Superior Court Judge Jonathan M. Link in Homer Air vs. Kenai Peninsula Borough et al. The preliminary ruling indicates that Section 1513 of the Federal Aviation Act does not prohibit sales tax on the transportation of freight. Ms. Smith noted instances where municipalities have attempted to impose such a tax and were told by air carriers that the tax was contrary to federal law. Given the financial resources of a small municipality versus the air carriers, the municipalities have, in most cases, backed down. However, the Haines Borough is successfully levying a tax, based on opinions from city attorneys, per information from the FAA, that the tax is allowed under federal law. The situation at St. Mary's whereby the city seeks to place a sales tax on shipments of raw fish through the local airport brought this issue to the fore. Air carriers are fighting the tax which would provide approximately $100.0 in revenue to the city. The city is presently negotiating with air carriers. Passage of the proposed bill would render the issue moot. Ms. Smith reiterated opposition to the bill, advised that issues surrounding freight are not clear, and requested that the matter remain open. She acknowledged that fiscal notes evidence little impact. The proposed bill involves "one of those prospective things where you're cutting off an option for municipalities to impose a tax that might help them in times of other declining resource situations." Senator Sharp asked if information from the Alaska Municipal League was made known to House members furthering similar legislation. He also asked that he be provided information from the FAA (evidencing that the Haines tax is legal) and inquired concerning how much revenue had been collected up to this time. Ms. Smith explained that she spoke with the city clerk and treasurer prior to consideration of the bill in the House. She acknowledged that she did not, at that time, have anything in writing from the Haines Borough. She further referenced correspondence from the FAA to the City of Yakutat and from the U.S. Department of Transportation to counsel for a number of small municipalities indicating that "taxes on the intrastate air carriage of property are permissible." Senator Rieger asked if all commercial air carriers are federally certificated. Senator Sharp voiced his understanding that federal law applies to all federally certificated airlines and those operating under FAA regulations. That would include "everybody that has a commercial license." HAROLD JONES, City Council Member, next testified via teleconference from Bethel. He voiced opposition to the bill and support for the position taken by the Alaska Municipal League. Bethel is considering an ordinance for a use tax on alcohol. Air freight is the only means by which alcohol, sold in Anchorage and elsewhere, is brought into Bethel. While the tax will be upon the consumer, the city is reviewing the possibility of having the air carrier collect the tax for remission to the city. Bethel spends approximately $1.4 million on its police department each year. The town of 5,000 is the hub village for 25,000 people. The tax base consists of a 5% sales tax. The proposed use tax would help offset some of the losses in revenue from the state. The city is looking specifically at a use tax on alcohol because it is the cause of many problems. Since the airlines are bringing alcohol into Bethel, it seems logical to have them collect the tax on those who ship it. Senator Rieger asked if the city assesses dockage fees for water transportation into Bethel. Mr. Jones advised that the port is a state facility. He added that the city imposes wharfage and dockage fees. Senator Rieger suggested that a similar fee be levied at the airport. Mr. Jones said the city intends to tax the product rather than the freight. There is concern that the proposed bill will prevent collection of the use tax. Mr. Jones noted that the state has "complete jurisdiction over our airport;" the city is not involved. Senator Sharp voiced concern over selective taxation of a particular commodity. He then asked what would prevent other communities from levying a similar tax. As an example, he asked what would happen should Anchorage levy a 5% sales tax on all freight leaving the municipality. The prime purpose of the bill is to prevent one region from jeopardizing the economic shipment of freight to another region within the state or between states. That is the thrust of federal legislation. CARRIE WILLIAMS, former City Manager of St. Mary's, next spoke via teleconference from Anchorage. She voiced concern over lost revenues to bush communities resulting from prohibiting sales and use taxes. Speaking specifically on behalf of St. Mary's, Ms. Williams noted past receipt of raw fish taxes from fisheries in the area. Those revenues have now been lost. Rural communities have had to maintain police departments and roads and have nominal revenues. St. Mary's has a $2.5 million budget. Loss of ability to tax freight service on the 5,200 tons of raw fish shipped out of the community would total $88.0. The contention is that use of the airport for shipment is a basic service of the community. A small roadhouse, restaurant, and lodging facility pay a sales tax. Airlines derive a benefit from revenues. Just as ground taxi service is a taxable entity in St. Mary's, air taxi operations and freight should also be taxed. There is no distinction between that and wharfage fees for use of the dock. Ms. Williams observed that in discussion with air carriers, the carriers are not able to adequately defend the fact that intrastate trade is tax exempt. City attorneys have not found referenced cases particularly adequate in defense of carrier contentions. Bush communities are asking that they be allowed to tax, at local rates, sales of services out of their communities. The tax at St. Mary's is intended to recoup lost raw fish tax revenues and cover the impact on airports and community services. TIM TROLL, City Administrator/City Attorney, Sand Point, Alaska, next testified via teleconference from Anchorage. He voiced support for the position of the Alaska Municipal League. He reference a recent Anchorage Daily News article which indicates need for the proposed legislation to avoid potential litigation brought by the fact that city administrators "are always looking at this area as a possible source of new revenue." Mr. Troll suggested that the legislation would lead to more litigation because it will create a "whole new area of state jurisprudence as to exactly what was meant and how extensive this particular provision would go." Will it prohibit Bethel from levying a use tax on alcohol imported into the community? Mr. Troll suggested that if the position of air carriers is that the proposed bill merely makes clear what is already clear in federal law that freight service is exempt, perhaps the bill should simply state: Notwithstanding other provisions of law, a municipality may not levy or collect a tax or fee on the transportation of individuals or goods by a federally certificated air carrier, except to the extent allowed by 49 U.S.C., Sec. 1513 (b). Subsection (b) is the language communities claim authorizes state and political subdivisions to "at least look at the area of freight as a possible source of taxation." Mr. Troll suggested that action on CSSB 261 (Fin) would result in passage of bad law and special interest legislation. It would further restrict municipalities that are receiving less from the state and being told to be more responsible locally. Mr. Toll suggested that the legislature review methods to even the tax load rather than pass bad legislation. He noted that most states have a state sales tax which alleviates the problem of intrastate taxes among communities. A level playing field might include a state tax that is shared back with municipalities. That would be precluded if the proposed bill is passed. End: SFC-94, #30, Side 1 Begin: SFC-94, #30, Side 2 REED STOOPS next came before committee on behalf of the Alaska Air Carriers Association. He voiced support for the legislation. He explained that while federal law is clear as to what is and is not taxable in commercial aviation, the benefit of the proposed bill is to avoid additional litigation. Mr. Stoops directed attention to correspondence to and from the U.S. Department of Transportation. He noted language in October 2, 1986, correspondence from the department indicating that taxes on passengers and interstate freight are not permissible. That is intended to prohibit regulation of interstate commerce--a normal federal preemption. Further, federal taxes on those services accrue to the federal airport trust fund, and trust funds are returned to states for airport improvements. Alaska is a beneficiary of the system. The state actually collects more in trust funds than it pays in taxes. The only area that general counsel indicated might be eligible for taxation is intrastate air freight. Subsequent to the correspondence, the circuit court in Florida ruled that intrastate air cargo is also exempt from taxation. Federal law is clear. Litigation costs for both municipalities and air carriers should be avoided. The proposed bill would be beneficial to that end. Speaking to the situation at Haines, Mr. Stoops observed that the fiscal note from the Dept. of Community and Regional Affairs indicates nominal collection of tax. The air cargo tax is not being paid by one or two of the three carriers into Haines. By virtue of the Florida decision, the tax could easily be overturned. Mr. Stoops voiced his understanding that the City of Bethel seeks to levy a tax on alcohol coming into the community. He noted that Anchorage sales taxes would cover the sale at the point of origin, and air freight taxes are prohibited by law. It would thus not be appropriate for the air carrier to collect the proposed tax. Addressing comments by the city administer of Sand Point, Mr. Stoops suggested that the bill is written as suggested. It specifically references municipal taxation under "113(b)." That was at the suggestion of the Alaska Municipal League. Federal Code section "113(b)" speaks to areas in which municipal or state taxes can be collected. It is not the intent to deny municipal collection of legal taxes such as landing fees, fuel flowage fees, fees on airline meals, or fees on indirect services. Mr. Stoops reiterated that it is not the intent to deprive municipalities of collection of legal taxes under federal law. Mr. Stoops advised that federal certificates referred to in the legislation encompass Part 101 certificates for scheduled air carriers and Part 135 certificates for air charter operations. Crystal Smith again came before committee on behalf of the Alaska Municipal League. She referenced February 5, 1993, correspondence from general counsel at the U.S. Department of Transportation and noted that it was issued subsequent to the Florida decision. It reiterates the position that a state tax and, by extension, a municipal tax may be levied on intrastate transportation of air property. The issue is not as clear cut as air carriers would have one believe. Senators Rieger and Kerttula requested copies of the 1993 correspondence. Co-chair Pearce called for additional discussion of the bill. None was forthcoming. She then queried members regarding disposition. Senator Sharp MOVED for adoption of the proposed letter of intent, advising that it clarifies that the intent of the bill is to "make state law exemptions for what the federal law states." No objection having been raised, the letter of intent was ADOPTED. Senator Sharp then MOVED that CSSB 261 (Fin) pass from committee with individual recommendations, accompanied by the letter of intent and three fiscal notes. Co-chair Pearce called for a show of hands. The motion carried with only Senator Jacko objecting. CSSB 261 (Fin) was REPORTED OUT of committee with the Senate Finance letter of intent, zero fiscal notes from the Dept. of Transportation and Public Facilities and Dept. of Community and Regional Affairs, and a municipal fiscal note from the Dept. of Community and Regional Affairs indicating minimal loss. Senator Sharp signed the committee report with a "do pass" recommendation. Co-chairs Pearce and Frank and Senators Kelly, Kerttula, and Rieger signed "no rec." Senator Jacko signed "Do not pass." SENATE BILL NO. 251 An Act relating to the commercial fishing revolving loan fund and the fisheries enhancement revolving loan fund. Senator Kelly explained that the subcommittee considering SB 251 met and wishes to propose an amendment that would place a three-year sunset on ability to borrow money for payments of taxes. Co-chair Pearce voiced OBJECTION for discussion purposes and advised of her understanding the Senate Labor and Commerce version to which the amendment would apply no longer contains provisions relating to child support. Members concurred. Senator Jacko explained that the bill presently provides for loans for IRS payments, refrigeration, and refinancing of existing loans from conventional institutions to provide longer-term state loans with lower interest rates. He further advised that CSSB 251 (L&C) capped loans for tax purposes at $30.0. Co-chair Pearce REMOVED her OBJECTION to Amendment No. 1. She then called for objections to adoption. No objection having been raised, Amendment No. 1 was ADOPTED. Senator Kelly MOVED for passage of CSSB 251 (Fin) with individual recommendations. No objection having been raised, CSSB 251 (Fin) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Commerce and Economic Development. Senators Jacko, Kelly, and Sharp signed the committee report with a "do pass" recommendation. Co-chair Pearce and Senators Kerttula and Rieger signed "no recommendation." Co-chair Frank was absent from the meeting and did not sign. SENATE BILL NO. 276 An Act relating to criminal justice information; providing procedural requirements for obtaining certain criminal justice information; and providing for an effective date. Co-chair Pearce directed that SB 276 be brought on for discussion. Senator Rieger explained that the bill deals with disclosure of criminal justice information. Section 1 sets forth the following intent: It is the intent of the legislature that the department administer the provisions of this chapter in a manner that protects victims of crime, allows the proper administration of justice, and avoids vigilantism. The bill seeks to allow appropriate disclosure of information for proper purposes but would not allow disclosure to those who merely intend to engage in harassment. Directing attention to page 2, line 17, Senator Rieger attested to a prior requirement that the board meet every six months, plus as often as necessary. Subsection (c) provides shorter and cleaner language stating that the board shall meet at lease once every six months. An earlier requirement for an annual report was removed from the bill. Senator Rieger next referenced page 8, line 15, and noted addition of the word "specifically" to language relating to provision of information for enforcement of or for a purpose "specifically authorized by state or federal law." Earlier language referred to local, state, or federal law. New language deletes the local reference. Provisions dealing with release of information to the governor or to legislators have been removed. Information would no longer be provided to legislators simply because of their legislative status. Senator Kerttula asked if the judiciary committee would be able to obtain the information. Senator Rieger noted ability to access information for public purposes per subsections (6) and (7) at page 8. New language at page 8, lines 24 and 25, parallels an earlier floor amendment on HB 69. It provides that: (8) current offender information may be provided to a person for any purpose, except that information may not be released if the release of the information would unreasonably compromise the privacy of a minor or vulnerable adult. The intent is to protect both minors and adult victims. Senator Rieger next directed attention to addition of a definition for "complete" as set forth on page 12, lines 18 through 20. "And entered within 90 days" was added to make the intent of the definition clear. At page 15, line 6, the words "employed, appointed, or permitted person" were added to make a distinction between the person requesting the information and the person seeking employment. Senator Rieger then MOVED for adoption of the work draft (8- GS2005\K, Luckhaupt, 3/11/94) committee substitute for SB 276. Senate Kerttula stressed that both House and Senate Judiciary Committees should have access to criminal justice information. No objection having been raised, CSSB 276 (Fin), "K" version, was ADOPTED. Senator Rieger next directed attention to Amendment No. 1 and Amendment No. 2, both of which were requested by the Dept. of Law. DEAN GUANELI, Assistant Attorney General, Dept. of Law, came before committee. He explained that Amendment No. 1 constitute a transitional section needed to repeal a number of existing statutes (all or portions of which are incorporated in new statutes) but maintain current regulations and fee schedules until new regulations can be adopted for the statutory updates. Senator Rieger MOVED for adoption of Amendment No. 1. No objection having been raised, Amendment No. 1 was ADOPTED. Mr. Guaneli next spoke to need for Amendment No. 2. He explained that under the original version of the bill, mandatory fingerprinting requirements were intended to apply to adults or juveniles charged as adults. They were not to apply to juvenile delinquents. Language limiting application was dropped out of the bill. Amendment No. 2 should be incorporated within CSSB 276 (Fin) "K" at page 12, line 9. Senator Rieger MOVED for adoption of Amendment No. 2. No objection having been raised, Amendment No. 2 was ADOPTED. Senator Sharp directed attention to page 8, line 20, and voiced need to provide legislative judiciary committees access to criminal justice information. He then proposed to add "including legislative judiciary committees" between the words "research" and "subject." Co-chair Pearce questioned whether access should be limited to judiciary committees and suggested that language should perhaps refer to standing or special committees of the legislature. Discussion followed among members concerning the scope of access and which subsection legislative access would properly fall within. Senator Sharp voiced need to incorporate legislative access within generic research provisions. Co-chair Pearce queried members regarding support for legislative access. Senator Kerttula cautioned against restricting the legislature from "being a full and equal branch of government." He suggested that legislative access be restricted but not precluded. Co-chair Pearce remarked that if access is too restricted, a single chairman might be able to "thwart the will of the body in getting to information." Mr. Guaneli suggested that access be structured similar to legislative subpoena power. He advised he would undertake development of appropriate language, if the committee wished him to do so. Senator Kelly concurred in need for a deliberative process associated with access. Co-chair Pearce directed that Senators Kelly and Sharp work with Mr. Guaneli on development of language for committee review at the next meeting. SB 360 - COMMITTEE LEGISLATION FOR INTRODUCTION Co-chair Pearce directed attention to draft legislation proposed for introduction in the Senate. She explained that similar legislation was introduced in the House. That legislation has time constraints, hence need to introduce like legislation in the Senate for more expedient passage. In the FY 94 budget, the governor requested, and the legislature authorized, transfer of $1.6 million from the community developmental disabilities grant to medical assistance. Project Choice is a waiver program developed to finance care for individuals whose care was previously provided through DD grants. The transfer included authority, responsibility, and funding. However, implementation of Project Choice was substantially delayed. Only $400.0 of the $1.6 million has been used in FY 94. Representatives of the Key Campaign indicate that people have thus been caught without funding. The Dept. of Health and Social Services has only processed six waivers, and there is a waiting list of over 500. The proposed bill would move remaining moneys from medical assistance back to the DD grants to allow grantees to complete FY 94 operations. The legislation must be passed and signed by the governor before April 1 for grant funding to be available for the remainder of the fiscal year. Co-chair Pearce called for opposition. None was raised, and the bill was approved for introduction. It was subsequently numbered SB 360. ADJOURNMENT The meeting was adjourned at approximately 12:20 p.m.