Legislature(2007 - 2008)SENATE FINANCE 532

02/22/2008 09:00 AM FINANCE

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Heard & Held
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                  SENATE FINANCE COMMITTEE                                                                                      
                     February 22, 2008                                                                                          
                         9:09 a.m.                                                                                              
CALL TO ORDER                                                                                                                 
Co-Chair  Bert Stedman  called the  Senate Finance  Committee                                                                   
meeting to order at 9:09:06 AM                                                                                                
MEMBERS PRESENT                                                                                                               
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Kim Elton                                                                                                               
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
Senator Fred Dyson                                                                                                              
MEMBERS ABSENT                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Charlie Huggins, Vice-Chair                                                                                             
ALSO PRESENT                                                                                                                  
Frank  Richards, Deputy  Commissioner  of  Highways &  Public                                                                   
Facilities,   Department   of   Transportation   and   Public                                                                   
Facilities; Greg Winegar, Director,  Division of Investments,                                                                   
Department of Department of Commerce,  Community and Economic                                                                   
Development; Mike  Stedman, Director of Operations,  Wings of                                                                   
Alaska and Vice  President, Alaska Air  Carriers Association;                                                                   
Representative  John Coghill,  Sponsor;  Guy Bell,  Assistant                                                                   
Commissioner   and  Director,   Division  of   Administrative                                                                   
Services,  Department  of Labor  and  Workforce  Development;                                                                   
Chris   Harmon,  International   Brotherhood  of   Electrical                                                                   
Workers,  Juneau;   Robert  Cesar,  Apprentice   Electrician,                                                                   
International Brotherhood of Electrical  Workers, Juneau; Tom                                                                   
Brice, Alaska  District Council of Laborers,  Juneau; Barbara                                                                   
Huff  Tuckness,  Director  of  Legislative  and  Governmental                                                                   
Affairs, Teamsters Local 959;  Senator Johnny Ellis, Sponsor;                                                                   
Max  Hensley,  Staff,  Senator Johnny  Ellis;  Bob  Crockett,                                                                   
Board  Member, Alaska  Film  Group; Debra  Schildt,  Founding                                                                   
Member,  Board Member,  Alaska  Film Group;  Kate Tesar,  Pro                                                                   
Bono  Lobbyist, Alaska  Film Group;  Dan Stickle,  Economist,                                                                   
Department of Revenue.                                                                                                          
PRESENT VIA TELECONFERENCE                                                                                                    
Jere  Hayslett,   Project  Manager,  Surveillance   Broadcast                                                                   
Services &  Capstone Program,  Federal Aviation  Association;                                                                   
Leonard Kirk, University of Alaska;  Wilfred Ryan, Alaska Air                                                                   
Carriers   Association;   Ann   Williams,   Human   Resources                                                                   
Administrator  &  Training  Coordinator,   Klebs  Mechanical,                                                                   
Inc.,  Anchorage; Jeannine  Provost,  Grants Manager,  Alaska                                                                   
Laborers   Training   School;   Rebecca   Logan,   President,                                                                   
Associated Builders and Contractors of Alaska.                                                                                  
SB 230    "An Act  establishing the  division of film  in the                                                                   
          Department  of  Commerce, Community,  and  Economic                                                                   
          Development;   and  creating  a   transferable  tax                                                                   
          credit   applicable  to  certain   film  production                                                                   
          expenditures incurred in the state."                                                                                  
          SB 230 was HEARD & HELD in Committee for further                                                                      
SB 249    "An Act  establishing the Alaska  capstone avionics                                                                   
          revolving loan  fund and relating to  the fund; and                                                                   
          providing for an effective date."                                                                                     
          SB 249 was HEARD & HELD in Committee for further                                                                      
HB 61     "An Act relating to tax credits for cash                                                                              
          contributions  by taxpayers  that are accepted  for                                                                   
          certain educational  purposes, including vocational                                                                   
          education  programs  and courses  at the  secondary                                                                   
          school  level;  and   providing  for  an  effective                                                                   
          HB 61 was SCHEDULED but not HEARD.                                                                                    
HB 226    "An  Act repealing  the  termination  of the  state                                                                   
          training and employment  program; and providing for                                                                   
          an effective date."                                                                                                   
          HB 226 was HEARD & HELD in Committee for further                                                                      
SENATE BILL NO. 249                                                                                                           
     "An Act establishing the Alaska capstone avionics                                                                          
     revolving loan fund and relating to the fund; and                                                                          
     providing for an effective date."                                                                                          
Co-Chair Stedman  introduced the initial hearing  for SB 249,                                                                   
sponsored by the Governor.                                                                                                      
FRANK  RICHARDS, DEPUTY  COMMISSIONER  OF  HIGHWAYS &  PUBLIC                                                                   
FACILITIES,   DEPARTMENT   OF   TRANSPORTATION   AND   PUBLIC                                                                   
FACILITIES,  explained that  SB 249 would  create the  Alaska                                                                   
Capstone Avionics  Revolving Loan Fund within  the Department                                                                   
of Commerce, Community and Economic  Development (DCCED). The                                                                   
purpose of the project is to increase  the safety of aviation                                                                   
transportation within Alaska by  providing low interest loans                                                                   
for  the  purchase  and  installation  of  Capstone  avionics                                                                   
equipment.  Capstone  avionics  is  the  next  generation  of                                                                   
technology and will improve both  flight safety and community                                                                   
access  in  Alaska.  The  technology   is  called  "Automatic                                                                   
Dependent   Surveillance-Broadcast"    (ADS-B)   and   allows                                                                   
equipped aircraft to interact  with ground infrastructure and                                                                   
satellite   stations  to   provide   pilots  with   essential                                                                   
information,  including: exact  location,  airspeed, rate  of                                                                   
accent and descent,  surrounding terrain, other  aircraft and                                                                   
real time weather. The Federal  Aviation Administration (FAA)                                                                   
sponsored the technology and tested it in rural Alaska.                                                                         
Mr. Richards  stressed  that the aircraft  equipped  with the                                                                   
new avionics experienced  a 47% reduction in  accidents and a                                                                   
33%  reduction in  fatalities. He  said FAA  wants to  expand                                                                   
this  technology  statewide  and  has funding  to  build  the                                                                   
necessary infrastructure.  The FAA  has determined  that over                                                                   
4,000 aircraft need to be equipped  with the avionics. Senate                                                                   
Bill 249  creates a low-interest  loan program  through DCCED                                                                   
for aircraft owners  unable to shoulder the  initial purchase                                                                   
cost  out-of-pocket. He  emphasized  that  the Department  of                                                                   
Transportation and Public Facilities supports SB 249.                                                                           
9:13:43 AM                                                                                                                    
GREG WINEGAR,  DIRECTOR, DIVISION OF INVESTMENTS,  DEPARTMENT                                                                   
OF COMMERCE,  COMMUNITY AND  ECONOMIC DEVELOPMENT,  described                                                                   
the  loan  program.   He  explained  that  the   Division  of                                                                   
Investments has been administering  state loan programs since                                                                   
the  early  1970s  and has  experience,  expertise  and  loan                                                                   
related infrastructure  in place to successfully  operate the                                                                   
program proposed by SB 249. Many  of the provisions contained                                                                   
in the bill were patterned after  other programs administered                                                                   
by the Division.                                                                                                                
Mr.  Winegar  explained  that   the  loan  fund  would  allow                                                                   
aircraft owners who log a substantial  number of flight hours                                                                   
in  Alaska to  purchase and  install  the necessary  Capstone                                                                   
avionics. The  program would be  set up as a  revolving fund.                                                                   
Repayments into  the fund would  finance loans  to additional                                                                   
participants and the operating costs of the program.                                                                            
Mr. Winegar said SB 249 stipulates  that the program can loan                                                                   
up to 80% of  the cost to purchase and install  the avionics,                                                                   
the interest rate  cannot be less than four  percent, and the                                                                   
term may not  exceed ten years. He described  an average loan                                                                   
for  the program  of $12,000,  which would  mean payments  of                                                                   
approximately  $122   each  month  or  $1480   annually.  The                                                                   
Division's goal was to provide  loan terms that resulted in a                                                                   
manageable   repayment  plan   for  aircraft  owners,   while                                                                   
providing  sufficient cash  flow to  cover expenses,  provide                                                                   
loans  to future  participants,  and  return  capital to  the                                                                   
General Fund (GF).                                                                                                              
Mr. Winegar  referred to the  fiscal note, which  capitalizes                                                                   
the loan fund  with a $4.8 million appropriation.  The amount                                                                   
would allow the  Division to provide approximately  400 loans                                                                   
during the  first year  and around  60 additional loans  each                                                                   
year thereafter.  The program would sunset in  2020, at which                                                                   
time the  money in the  fund as well  as all future  earnings                                                                   
would revert  back to  the GF. Senate  Bill 249 requests  two                                                                   
positions,  one loan officer  and one  loan closer  to handle                                                                   
the  increased  workload;  however, the  positions  would  be                                                                   
filled  only if  loan  demands  required them.  The  Division                                                                   
plans to absorb accounting-related work.                                                                                        
9:15:29 AM                                                                                                                    
Senator Olson  wondered if  the State  would save search  and                                                                   
rescue  money that  would not  be needed because  of the  new                                                                   
technology. Mr. Richards thought there would be savings.                                                                        
9:16:13 AM                                                                                                                    
Senator Thomas  noticed that the  fund would be  available to                                                                   
individuals,  corporations, limited  liability  partnerships,                                                                   
and so on. He understood the cost  to equip an aircraft would                                                                   
be in the  range of $15,000  to $25,000 and wondered  if this                                                                   
was for  small planes  and small  carriers rather than  large                                                                   
9:17:01 AM                                                                                                                    
Mr. Winegar  answered  that the  loan program  is set up  for                                                                   
commercial  operators to  have access  to the funds.  Senator                                                                   
Thomas was concerned  that the funds in the  program would be                                                                   
available  to larger  carriers  that would  be  more able  to                                                                   
afford the  avionics. Mr.  Winegar replied  that the  loan is                                                                   
first-come,  first-served,   and  would  be   for  commercial                                                                   
carriers or individual, private pilots.                                                                                         
9:18:27 AM                                                                                                                    
Senator Elton wondered  if the loan fund would  be accessible                                                                   
to people  who have already  installed the Capstone  avionics                                                                   
and are  paying off a loan  at a higher percentage  rate. Mr.                                                                   
Richards   thought   that   would   be   determined   through                                                                   
regulations.  In other programs,  most loans  are set  up for                                                                   
new loans, although  there are provisions to  pay off interim                                                                   
Senator  Elton wondered  if the  loan would  be available  to                                                                   
non-Alaskan residents,  such as a big game  guide who resides                                                                   
in another  state.  Mr. Richards  responded that  eligibility                                                                   
relates not  to residency but  to the number of  flight hours                                                                   
logged in Alaska.  The number of flight hours  required would                                                                   
be  determined by  regulation.  Senator  Elton wondered  what                                                                   
"substantial percentage" of flight  hours in the state meant.                                                                   
Mr. Richards guessed the number would be 90%.                                                                                   
9:20:27 AM                                                                                                                    
Mr. Winegar  explained that there  are about 10,000  aircraft                                                                   
in  Alaska, of  which  6,500-7,000  are operable.  FAA  chose                                                                   
4,000 as the number  of aircraft that they felt  needed to be                                                                   
equipped  because those  aircraft represented  around 90%  of                                                                   
the flight hours logged in the state.                                                                                           
Senator Elton  referred to the  provision regarding  the loan                                                                   
term of ten years and wondered  if it were possible to extend                                                                   
the term  of the  loan. Mr.  Richards replied  that there  is                                                                   
some flexibility.                                                                                                               
9:23:21 AM                                                                                                                    
MIKE STEDMAN, DIRECTOR OF OPERATIONS,  WINGS OF ALASKA; VICE-                                                                   
PRESIDENT,  ALASKA AIR  CARRRIERS  ASSOCIATION, testified  in                                                                   
support  of 249. He  spoke as  a pilot  with thirty  years of                                                                   
experience in  Alaska. He piloted  24 of those  years without                                                                   
Capstone  avionics.  He  described  the  safety  benefits  of                                                                   
having  an  aircraft  equipped   with  the  avionics.  Before                                                                   
Capstone was  available, there was an accident  approximately                                                                   
every 29  days in the  Yukon-Kuskokwim Delta.  More recently,                                                                   
there  was a  29  month  period between  accidents.  Capstone                                                                   
enhances situational  awareness substantially.  He emphasized                                                                   
the importance  of real  time weather  information.  Wings of                                                                   
Alaska currently has 12 airplanes  with the equipment and the                                                                   
pilots fully embrace it.                                                                                                        
9:26:25 AM                                                                                                                    
Mr. Stedman  demonstrated what  a pilot  sees in an  airplane                                                                   
equipped  with Capstone  avionics. He  projected onto  a drop                                                                   
screen  in  the  Committee  room   what  currently  operating                                                                   
aircraft  could  see.  Green,   moving  diamonds  showed  the                                                                   
position  of   aircraft  in  the   area.  The   program  gave                                                                   
identification,  altitude,  and   relative  position  of  the                                                                   
different aircraft.                                                                                                             
9:30:45 AM                                                                                                                    
Co-Chair  Stedman  asked if  there  had  been a  decrease  in                                                                   
accidents  and fatalities  in other areas  around the  state.                                                                   
Mr. Stedman said generally yes,  although data is still being                                                                   
collected. Co-Chair  Stedman asked  if the industry  supports                                                                   
the amount  of allocation and  the time frame  recommended by                                                                   
SB  249. Mr.  Stedman  thought  the proposed  revolving  loan                                                                   
program is a good start. He explained  that Alaska would need                                                                   
to equip  4,000 within  five years  to get  the full  funding                                                                   
from FAA.                                                                                                                       
Senator Thomas wondered if the  appropriation were sufficient                                                                   
to cover  equipping 4,000 planes.  Mr. Stedman  answered that                                                                   
the amount would  cover approximately 90 airplanes  the first                                                                   
year.  Over the five  years the  amount would  be around  $34                                                                   
million to equip 4,000 planes.                                                                                                  
Co-Chair  Stedman  asked  for  an  overview  of  the  federal                                                                   
government's  participation.  Mr.  Stedman replied  that  the                                                                   
federal government  has committed $497 million  to this point                                                                   
and if  Alaska does not equip  4,000 planes, $187  million of                                                                   
that will be lost.                                                                                                              
9:33:19 AM                                                                                                                    
JERE  HAYSLETT,   PROJECT  MANAGER,  SURVEILLANCE   BROADCAST                                                                   
SERVICES   AND   CAPSTONE   PROGRAM,   FAA   (TESTIFIED   VIA                                                                   
TELECONFERENCE),   clarified   that  FAA   currently  has   a                                                                   
commitment of  $493 million for infrastructure.  If the 4,000                                                                   
aircraft  are not  equipped  in five  years,  FAA would  only                                                                   
commit to $306 million.                                                                                                         
9:34:51 AM                                                                                                                    
Senator  Olson  wondered  how  far  off  shore  the  Capstone                                                                   
coverage went. Mr.  Stedman thought it went  around 30 miles,                                                                   
although it depends on the altitude  of the aircraft. Senator                                                                   
Olson  asked how  rapidly the  data is  updated. Mr.  Stedman                                                                   
replied that the information is real time.                                                                                      
Senator  Olson  wondered what  kind  of commitment  has  been                                                                   
secured  from the  general  aviation community.  Mr.  Stedman                                                                   
said the Alaska  Airmen's Association has conducted  a survey                                                                   
to see how many aircraft owners  would equip their planes and                                                                   
how  much they  would  be willing  to pay  for  it. There  is                                                                   
general support.                                                                                                                
Senator Elton  asked if  the Air  Carriers Association  had a                                                                   
position regarding  whether re-financing should  be available                                                                   
for  aircraft that  already have  the system,  or should  the                                                                   
priority  be to  add equipment  to  additional aircraft  that                                                                   
have  none.  Mr.  Stedman thought  that  the  more  airplanes                                                                   
equipped the better.                                                                                                            
9:38:51 AM                                                                                                                    
Senator  Olson pointed  out that  he did not  see letters  of                                                                   
support from the Alaska Airmen's  Association and wondered if                                                                   
the program  would be more  attractive if the  loan structure                                                                   
was better.   Mr.  Stedman thought it  would be difficult  to                                                                   
equip 4,000  air planes within  five years and  any incentive                                                                   
to help the general aviation pilot would help immensely.                                                                        
9:40:13 AM                                                                                                                    
Senator  Dyson realized  how prohibitive  it was for  general                                                                   
aviation  pilots   to  carry   insurance,  and   wondered  if                                                                   
insurance  carriers would  drop rates  for aircraft  equipped                                                                   
with avionics. Mr. Stedman thought  that as the accident rate                                                                   
went  down, premiums  would go  down as  well. Senator  Dyson                                                                   
asked if  the insurance  carriers would  only respond  to the                                                                   
accident rate. Mr. Stedman did not know.                                                                                        
9:41:44 AM                                                                                                                    
LEONARD   KIRK,   UNIVERSITY   OF   ALASKA   (TESTIFIED   VIA                                                                   
TELECONFERENCE),  spoke in  support of  SB 249.  He said  the                                                                   
University  of  Alaska  (UA)  has been  part  of  the  safety                                                                   
evaluation  of the  Capstone system  in the  Yukon-Kuskoskwim                                                                   
Delta.  The  University  has  also  been  involved  in  pilot                                                                   
Mr.  Kirk answered  Senator Olson's  question  about how  far                                                                   
ADS-B  reaches:  approximately  120 nautical  miles  line-of-                                                                   
sight. A ground-based transceiver  located at Sitka could see                                                                   
an  aircraft  120 miles  out  over  the  ocean. He  said  the                                                                   
information is updated every second.                                                                                            
WILFRED RYAN, ALASKA AIR CARRIERS  ASSOCIATION (TESTIFIED VIA                                                                   
TELECONFERENCE),  spoke in favor of  HB 249 and  gave further                                                                   
answers to  Committee members'  questions. Regarding  Senator                                                                   
Elton's  question about  the position  of the Association  on                                                                   
refinancing, he said the official  position is that operators                                                                   
should have the opportunity to  refinance their equipment. He                                                                   
added that the  Alaska Airmen's Association does  support the                                                                   
program fully.  He said  there has  been approximately  a 20%                                                                   
reduction in insurance rates since the program's inception.                                                                     
9:46:15 AM                                                                                                                    
Mr. Ryan said Alaska has been  on the forefront with research                                                                   
and development  for the ADS-B  program. Currently  Alaska is                                                                   
competing  against  the  rest  of  the  nation  in  receiving                                                                   
ground-based transceivers.                                                                                                      
Mr. Ryan  gave testimony in  support of SB 249,  representing                                                                   
the  Alaska Air  Carriers  Association,  the Alaska  Airmen's                                                                   
Association and the Alaska Aviation  Safety Foundation. These                                                                   
groups represent  nearly all commercial and  general aviation                                                                   
constituents in  Alaska. Because more  than 90% of  Alaska is                                                                   
accessible  only  by air,  Alaska  has the  highest  aviation                                                                   
accident  rate  in  the  nation.   The  expedited  state-wide                                                                   
implementation  of  proven Capstone  safety  technologies  is                                                                   
essential for the future of flying  safety. During a ten year                                                                   
period  from 1997  to  2006, there  were  124 fatal  aviation                                                                   
crashes in Alaska. Many of these  pilots were mid-career. The                                                                   
National  Institute for  Occupational Safety  and Health  has                                                                   
determined  that based  on their annual  salaries, the  total                                                                   
loss in earnings exceeded $226 million.                                                                                         
9:49:41 AM                                                                                                                    
Mr.  Ryan  noted  that  the  five-year  plan  includes  4,000                                                                   
Alaskan-based   aircraft,  approximately   1,000   commercial                                                                   
aircraft  and 3,000  general  aviation  aircraft. The  safety                                                                   
incentive program  will enable  Alaskan operators  to install                                                                   
the  safety   equipment.  Once  implemented   statewide,  FAA                                                                   
anticipates  a   33%  reduction  in  fatal   accidents,  more                                                                   
effective search and rescue operations,  and a public benefit                                                                   
of approximately $824 million over the next 27 years.                                                                           
9:51:34 AM                                                                                                                    
Senator  Olson asked  if Mr. Ryan  could think  of any  other                                                                   
incentives the  State could use  to entice people to  use the                                                                   
program. Mr. Ryan  thought it would be  extremely challenging                                                                   
to  bring  the  general aviation  group  into  the  incentive                                                                   
program. Research  has indicated that the population  is only                                                                   
willing to spend  about $2,500 each to equip  their airplane,                                                                   
and  the  avionics   package  costs  about   $12,000.  Alaska                                                                   
Airmen's   Association  currently   has   about  180   people                                                                   
interested in the program, but  feel it would be difficult to                                                                   
attract  3,000  equippers  from the  general  aviation  group                                                                   
unless there is financial incentive.                                                                                            
9:52:44 AM                                                                                                                    
PUBLIC TESTIMONY CLOSED.                                                                                                        
Co-Chair   Stedman   reminded    the   Committee   that   the                                                                   
implementation  of SB  249  would open  up  another fund.  He                                                                   
wanted  to critically  look at  the $120,000  for travel  and                                                                   
supplies in the fiscal note.                                                                                                    
SB  249  was   HEARD  and  HELD  in  Committee   for  further                                                                   
AT EASE        9:54:15 AM                                                                                                       
RECONVENE      10:04:05 AM                                                                                                    
HOUSE BILL NO. 226                                                                                                            
     "An Act repealing the termination of the state training                                                                    
     and employment program; and providing for an effective                                                                     
10:04:56 AM                                                                                                                   
REPRESENTATIVE  JOHN  COGHILL,  SPONSOR, introduced  HB  226,                                                                   
related to the State Training  and Employment Program (STEP).                                                                   
This  program puts  unemployment  insurance  (UI) money  into                                                                   
grant capacity  to train and re-train workers  within Alaska.                                                                   
The current version  of the bill would sunset  the program in                                                                   
2018 and requires the Department  of Labor (DOL) to provide a                                                                   
review  of the program.  The review  will look  at union  and                                                                   
non-union    entities,   publish    a    report   and    make                                                                   
Representative Coghill  explained that DOL has set  up a task                                                                   
force to  develop the  report to be  presented to  the Alaska                                                                   
Legislature  in early  2009. He expressed  his confidence  in                                                                   
the Department. The program is  designed for workers who have                                                                   
paid  into UI  and who  cannot afford  to pay  for their  own                                                                   
training or re-training.                                                                                                        
10:08:21 AM                                                                                                                   
Representative Coghill  wanted workers to have  access to the                                                                   
program  as it  effectively  helps to  get  young people  and                                                                   
hard-to-place people  back into  the workforce. He  said that                                                                   
the grant process currently is  very complex. The process has                                                                   
been  streamlined this  year.  He recommended  extending  the                                                                   
program out to 2018 with an annual review.                                                                                      
10:10:26 AM                                                                                                                   
Co-Chair Stedman  referred to  an audit  made of the  program                                                                   
and asked  if the  issues brought  up in  the audit  had been                                                                   
resolved.  Representative Coghill  replied  there were  still                                                                   
issues with  the grant process.  The Commissioner of  DOL has                                                                   
begun to  deal with  the issues  by changing the  application                                                                   
process and how allocations are made.                                                                                           
10:11:25 AM                                                                                                                   
GUY BELL,  ASSISTANT COMMISSIONER  AND DIRECTOR,  DIVISION OF                                                                   
ADMINISTRATIVE  SERVICES, DEPARTMENT  OF LABOR AND  WORKFORCE                                                                   
DEVELOPMENT, spoke in support  of HB 226. He said the program                                                                   
has demonstrated  success for  over 19  years and has  served                                                                   
over 23,000 Alaskans. The program  is evaluated annually. The                                                                   
most recent report  indicates that more than  94% of trainees                                                                   
were employed  within  12 months of  receiving the  training.                                                                   
Those people  earned over $71  million in the  year following                                                                   
their training,  an increase of  35% over their  pre-training                                                                   
earnings.  Over 90% of  2003 participants  were still  Alaska                                                                   
residents  in  2006.  The Department  supports  the  on-going                                                                   
annual  review which has  begun, supervised  by David  Stone,                                                                   
the  Deputy  Commissioner  of  the Department  of  Labor  and                                                                   
Workforce Development.                                                                                                          
10:14:19 AM                                                                                                                   
ANN  WILLIAMS,  HUMAN RESOURSES  ADMINISTRATOR  AND  TRAINING                                                                   
COORDINATOR,   KLEBS   MECHANICAL   INC.   (KMI),   ANCHORAGE                                                                   
(TESTIFIED  VIA TELECONFERENCE),  spoke in  opposition  to HB                                                                   
226. She  emphasized that unless  there are major  revisions,                                                                   
KMI would  like to see STEP  sunset. She gave an  overview of                                                                   
KMI experience with the program.  They partnered with another                                                                   
business to provide  joint job training for  approximately 80                                                                   
underemployed and  potentially at-risk construction  workers.                                                                   
The vision was to achieve stable  employment of a diverse and                                                                   
well-trained  local construction  force.  The  program was  a                                                                   
Ms. Williams  said their  experience with the  administration                                                                   
of the program was not as successful.  The requirements for a                                                                   
private  employer were  a  burden. She  listed  restrictions,                                                                   
especially removal of payment for instructor fees.                                                                              
10:18:05 AM                                                                                                                   
Ms. Williams  believed that  KMI was one  of the  few private                                                                   
employers  who  received  a  STEP   grant.  Immediately  upon                                                                   
completion,   the   grant  program   was   restructured   and                                                                   
effectively  eliminated  the possibility  of  future  private                                                                   
employer funding.  She said  it is  well understood  that the                                                                   
STEP grant  program has  allocated the  vast majority  of its                                                                   
training  money  to  organized   labor  while  purporting  to                                                                   
provide  training opportunities  to  any  Alaskan with  need.                                                                   
STEP is  funded by the UI  contributions of all  Alaskans and                                                                   
should be accessible to all.                                                                                                    
10:19:24 AM                                                                                                                   
JEANNINE PROVOST,  GRANTS MANAGER,  ALASKA LABORERS  TRAINING                                                                   
SCHOOL (ALTS) (TESTIFIED VIA TELECONFERENCE),  spoke in favor                                                                   
of  HB  226. She  spoke  about  the positive  impact  of  the                                                                   
program  on  the  construction   workforce.  Alaska  Laborers                                                                   
Training  School trains  about  300 people  per year  through                                                                   
STEP,   focusing   on   preparing  the   workforce   in   the                                                                   
construction  industry.  Outreach  includes  members  of  the                                                                   
union  as well  as other  Alaskans,  most of  whom come  from                                                                   
remote rural areas of the State.  Training requests come from                                                                   
village councils. Statistically  speaking, 50% or more of the                                                                   
individuals  served are  from minority  populations and  over                                                                   
45%  are  from  areas outside  of  Anchorage,  Fairbanks  and                                                                   
Juneau.  The program's  success  rate has  consistently  been                                                                   
above 87%.                                                                                                                      
10:22:09 AM                                                                                                                   
CHRIS   HARMON,  INTERNATIONAL   BROTHERHOOD  OF   ELECTRICAL                                                                   
WORKERS  (IBEW),  JUNEAU,  spoke  in  favor  of  HB  226  and                                                                   
described  how the  training  money helped  him.  He said  he                                                                   
would  not have  been  able  to complete  the  apprenticeship                                                                   
without the  grant, as he had  to be away from home  for five                                                                   
terms  of  7  weeks  each  for   8,000  hours  of  on-the-job                                                                   
Senator Thomas asked  about his training. Mr.  Harmon said he                                                                   
trained about 1400 hours in the  classroom in addition to the                                                                   
on-the-job training.  Co-Chair Stedman asked if  the training                                                                   
was beneficial.   Mr. Harmon  listed expenses.  Senator Olson                                                                   
asked  how  many people  are  affected  by the  program.  Mr.                                                                   
Harmon knew  of twenty  or so apprentices  in Juneau  who are                                                                   
recipients of the program.                                                                                                      
10:25:29 AM                                                                                                                   
ROBERT CESAR, APPRENTICE ELECTRITION,  IBEW, JUNEAU, spoke in                                                                   
favor of HB 226. Mr. Cesar, who  is a single father of an ill                                                                   
child, was  not able to receive  assistance from STEP  due to                                                                   
administrative  problems. He had  financial problems  and the                                                                   
STEP grant would  have been greatly beneficial.  He urged the                                                                   
Committee to extend the program.                                                                                                
Senator Dyson asked if he had  been asked to come and testify                                                                   
and if  he received help  preparing his testimony.  Mr. Cesar                                                                   
said it  was suggested he come  at an IBEW union  meeting and                                                                   
he was given help with preparation.                                                                                             
Senator  Elton  acknowledged  Mr.  Cesar's  struggle  as  the                                                                   
father of  a child with a  bone marrow transplant.  Mr. Cesar                                                                   
said Senator Elton and other Legislators had helped.                                                                            
10:29:49 AM                                                                                                                   
TOM  BRICE,  ALASKA DISTRICT  COUNCIL  OF  LABORERS,  JUNEAU,                                                                   
spoke in favor HB 226.                                                                                                          
Senator  Olson referred  to earlier testimony  that the  STEP                                                                   
program was only targeting special  interest groups and asked                                                                   
Mr. Brice's opinion. Mr. Brice  thought the doors are open to                                                                   
anyone who can show they have  a viable accounting system and                                                                   
can show they  are doing real training. He  cited a non-union                                                                   
program  that has  been successful.  His organization  trains                                                                   
both union and non-union individuals.                                                                                           
10:33:02 AM                                                                                                                   
BARBARA   HUFF  TUCKNESS,   DIRECTOR   OF  GOVERNMENTAL   AND                                                                   
LEGISLATIVE AFFAIRS,  TEAMSTERS LOCAL 959, spoke  in favor of                                                                   
HB 226. She said Teamsters Local  959 has both union and non-                                                                   
union  training  programs.  The progams  are  funded  through                                                                   
joint efforts  in negotiations with the employers  that Local                                                                   
959  has collective  bargaining  agreements  with. Local  959                                                                   
also attempts  to reach out to  employers that were  not part                                                                   
of the  collective  bargaining agreement.  The tech  engineer                                                                   
program, a  four-year apprentice  program for surveyors,  has                                                                   
spent  extra time  and  effort  reaching out  to  individuals                                                                   
around the State. The cost of  housing has been a major issue                                                                   
because  of the six-week  training program;  STEP funds  have                                                                   
helped with that.                                                                                                               
10:35:18 AM                                                                                                                   
REBECCA   LOGAN,    PRESIDENT,   ASSOCIATED    BUILDERS   AND                                                                   
CONTRACTORS OF  ALASKA (TESTIFIED VIA TELECONFERENCE),  spoke                                                                   
in support  of HB 226. She  pointed out the  discrepancies in                                                                   
the  program  reflected  in  previous  testimony:  a  private                                                                   
employer not  being able to  use funds for instructors  while                                                                   
individuals  use  the  same money  for  travel  and  housing.                                                                   
Associated Builders and Contractors  supports the program but                                                                   
urges some clean-up before the program is extended.                                                                             
10:36:49 AM                                                                                                                   
Co-Chair Stedman  asked Mr. Bell to address  concerns brought                                                                   
up in testimony.  He asked him to also have  the audit issues                                                                   
raised prepared for a future Committee meeting.                                                                                 
Mr. Bell  stated that DOL  uses a competitive  grant proposal                                                                   
process to receive and process  applications. The independent                                                                   
evaluation committee  does not evaluate on  a union/non-union                                                                   
basis  but  on  the overall  quality  of  the  proposal.  The                                                                   
distribution of grants over the  past years has been reviewed                                                                   
and presented  to the Legislature. The  Department recognizes                                                                   
the  criticisms  and  intends  to resolve  them.  He  invited                                                                   
critics  to  participate in  the  task  force that  is  being                                                                   
10:40:16 AM                                                                                                                   
Co-Chair Stedman  pointed out that  more work will  be needed                                                                   
on fiscal notes.                                                                                                                
HB  226  was   HEARD  and  HELD  in  Committee   for  further                                                                   
10:40:40 AM                                                                                                                   
HOUSE BILL NO. 61                                                                                                             
     "An Act relating  to tax credits for  cash contributions                                                                   
     by taxpayers  that are accepted for  certain educational                                                                   
     purposes,  including vocational  education programs  and                                                                   
     courses  at the  secondary school  level; and  providing                                                                   
     for an effective date."                                                                                                    
SB 61 was SCHEDULED but not HEARD.                                                                                              
SENATE BILL NO. 230                                                                                                           
     "An Act establishing the division of film in the                                                                           
     Department of Commerce, Community, and Economic                                                                            
     Development; and creating a transferable tax credit                                                                        
     applicable to certain film production expenditures                                                                         
     incurred in the state."                                                                                                    
SENATOR JOHNNY  ELLIS, SPONSOR, gave  an overview of  SB 230.                                                                   
He  described  the need  to  diversify Alaska's  economy  and                                                                   
thought SB 230 would make Alaska  competitive by creating the                                                                   
Alaska Film Incentive Program  and re-establishing the Alaska                                                                   
Film  Office.  Forty-five  other   states  have  active  film                                                                   
offices. Senate Bill 230 proposes  transferrable tax credits.                                                                   
The  plan is  built on  the successes  of  other states.  For                                                                   
example,  New Mexico  had $1.5  million in  film spending  in                                                                   
2001,  the year  they enacted  tax incentives.  In 2007,  the                                                                   
film industry spent $476 million in the New Mexico economy.                                                                     
Senator Ellis  listed films Alaska  has lost in  recent years                                                                   
that were  set in  Alaska but filmed  in other countries  and                                                                   
MAX  HENSLEY, STAFF,  SENATOR  JOHNNY ELLIS,  summarized  the                                                                   
sections of the bill.                                                                                                           
    · Sec. 1 authorizes the Department of Revenue and the                                                                       
      Department of Commerce, Community and Economic                                                                            
      Development to give tax credits to film producers for                                                                     
      qualified spending on qualified projects.                                                                                 
    · Sec. 2 establishes an Alaskan Film Office and the                                                                         
      administration   of   a   film   production   incentive                                                                   
      program.  Subsections direct  how  the Department  will                                                                   
      proceed  with  the film  industry  in relation  to  tax                                                                   
10:44:35 AM                                                                                                                   
Senator Ellis has  been encouraged by the amount  of business                                                                   
support the proposal has received.                                                                                              
Senator  Elton   referred  to  page  3,  line   5,  regarding                                                                   
productions that are now eligible.  He wondered what the bill                                                                   
meant by "current events programming."  Senator Ellis said he                                                                   
would get a specific definition.  Sports broadcasts would not                                                                   
be covered for the incentive,  but a show like "The Deadliest                                                                   
Catch" would be.                                                                                                                
Senator Elton wanted more information  regarding another type                                                                   
of non-eligible  production, "sexually  explicit conduct"  as                                                                   
defined in federal  law (page 3, line 16).  Senator Elton had                                                                   
the impression that the federal  definition was so broad that                                                                   
it would  disqualify many  projects. Senator Ellis  explained                                                                   
that  all states  use the  same  standard and  it has  worked                                                                   
well. Senator Elton said he was satisfied with that.                                                                            
Co-Chair Stedman referred to page  3, line 11, regarding non-                                                                   
eligible  sports events  or programs,  and  wondered if  dog-                                                                   
mushing  races would be  excluded. Mr.  Hensley replied  that                                                                   
the  definition  is  meant  to  exclude  live  broadcasts  of                                                                   
sporting events  such as ESPN  at the Great Alaska  Shootout.                                                                   
ESPN  already has  to come  to  Alaska to  cover that  event;                                                                   
there  is no  reason to  give them  additional incentives  to                                                                   
come. Mr.  Ellis added  that the bill  would allow  a special                                                                   
project  relating to  sled-dog  racing,  which would  promote                                                                   
Alaska, create jobs and bring money into the state.                                                                             
10:51:00 AM                                                                                                                   
BOB CROCKETT,  BOARD MEMBER, ALASKA  FILM GROUP  (AFG); DEBRA                                                                   
SCHILDT, FOUNDING MEMBER, BOARD  MEMBER, AFG; and KATE TESAR,                                                                   
PRO BONO  LOBBYIST,  AFG, spoke  in support  of SB 230.  They                                                                   
gave a PowerPoint  presentation (Copy on File).  Mr. Crockett                                                                   
pointed out  that a film  production can have  broad economic                                                                   
impact  in Alaska.  He explained  how  tax credit  incentives                                                                   
    · The production company applies for a credit.                                                                              
    · The film office approves production, issues a                                                                             
      preliminary certificate with estimated credit amount                                                                      
      which the company can use as collateral for loans,                                                                        
      financing, etc.                                                                                                           
    · The movie gets made.                                                                                                      
    · The production company submits a spending report                                                                          
      verified by Department of Commerce, Community and                                                                         
      Economic Development and an independent CPA.                                                                              
    · The film office issues a transferrable tax credit.                                                                        
    · The producer sells the credit to an Alaska corporate                                                                      
      tax payer, generally through a broker.                                                                                    
    · The taxpayer redeems the transferrable credit to                                                                          
      offset tax liability any time in the future.                                                                              
Ms. Schildt explained  that Canada has been  Alaska's biggest                                                                   
competitor.  From 2001-2005,  142 features  were produced  in                                                                   
Canada.  Canada  built  an  infrastructure  around  the  film                                                                   
industry.  She described films  that were  set in Alaska  and                                                                   
shot  in other  states  because  those states  had  incentive                                                                   
programs. Mr. Crockett discussed  a chart showing examples of                                                                   
how much money  can be spent on location by  television shows                                                                   
and films.  These projects create  high paying jobs  that can                                                                   
compare to  North Slope  jobs. Feature  films pay high  union                                                                   
rates; commercials  pay even higher. Ms. Tesar  described the                                                                   
film dynamic: Incentives attract  films, which in turn affect                                                                   
markets,  which help  build  infrastructure,  that employs  a                                                                   
larger labor force, and so on.                                                                                                  
10:58:39 AM                                                                                                                   
Senator Thomas asked  what the amount of tax  credit would be                                                                   
if  there were  $10  million spent  in  Alaska,  of which  $1                                                                   
million was  wages. Ms. Tesar  answered the tax  credit would                                                                   
be approximately 30% of that.                                                                                                   
10:59:45 AM                                                                                                                   
DAN STICKLE,  ECONOMIST, DEPARTMENT  OF REVENUE,  stated that                                                                   
the Department does not have an  official position on SB 230.                                                                   
He outlined the rates of the tax credit:                                                                                        
   · 30% of eligible production expenditures;                                                                                   
   · an additional 10% of Alaska wages;                                                                                         
   · an additional 2% for off-season filming; and                                                                               
   · an additional 2% for rural spending.                                                                                       
Mr. Stickle explained that the  tax credit would be available                                                                   
to film  production companies.  He said that most  production                                                                   
companies  are  limited liability  corporations  which  under                                                                   
State law are  not subject to corporate income  taxation. The                                                                   
Department sees that the tax credit  will be a subsidy of the                                                                   
film  industry.  If  Alaska  is able  to  attract  dozens  of                                                                   
feature films, the impact could be quite large.                                                                                 
11:02:10 AM                                                                                                                   
Co-Chair  Stedman wondered  what a  $100 credit,  just as  an                                                                   
example,  would go against.  Mr. Stickler  answered  that the                                                                   
credit would be  applicable to the corporate  income tax. The                                                                   
company that incurs the production  expenses, assuming it was                                                                   
a  limited  liability  corporation   and  did  not  have  the                                                                   
corporate income  tax liability, would  sell the credit  to a                                                                   
company that  does have a  corporate income tax  liability in                                                                   
the State.  Co-Chair Stedman  asked if  there were  limits on                                                                   
the credits.  Mr. Stickler  said there are  no limits  on the                                                                   
credits in SB 230.                                                                                                              
11:03:11 AM                                                                                                                   
Senator Olson  asked if  there were any  way to evaluate  the                                                                   
impact the investment  would have on the State.  Mr. Stickler                                                                   
said he  could not  predict that.  Senator Olson wondered  if                                                                   
tax credits  in general  have been  successful in the  state.                                                                   
Mr. Stickler said he would look into any specific credits.                                                                      
11:04:17 AM                                                                                                                   
Co-Chair   Stedman  asked   Mr.  Stickler   to  clarify   the                                                                   
difference between a credit and  an expense, using $100 as an                                                                   
example. Mr.  Stickler explained  that a  credit is  going to                                                                   
have a  much larger  effect on  revenues than  an expense.  A                                                                   
$100 expense  against an income  tax would reduce  net income                                                                   
by $100. A credit  applies directly to tax  liability. A $100                                                                   
credit  will   reduce  state   revenue  collections   on  the                                                                   
corporate income tax by $100, while an expense would reduce                                                                     
net income that gets apportioned to Alaska by $100.                                                                             
Co-Chair  Stedman added  that a  credit is  more powerful  by                                                                   
over ten times  with a 9.4% corporate income tax.  There is a                                                                   
substantial  difference  between  the ability  to  deduct  an                                                                   
amount or take it as a credit.                                                                                                  
11:06:08 AM                                                                                                                   
SB 230 was HEARD and HELD in Committee for further                                                                              
The meeting was adjourned at 11:06 AM.                                                                                          

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