Legislature(2017 - 2018)SENATE FINANCE 532

04/26/2018 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 135 SCHOOL CONSTRUCTION GRANT PROGRAM TELECONFERENCED
Heard & Held
+= HB 150 PAY, ALLOWANCES, BENEFITS FOR MILITIA MEM TELECONFERENCED
Heard & Held
+= HB 233 EXTEND EDUCATION TAX CREDITS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      April 26, 2018                                                                                            
                         9:11 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:11:32 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  MacKinnon  called  the  Senate  Finance  Committee                                                                    
meeting to order at 9:11 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Click Bishop, Vice-Chair                                                                                                
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Gary Stevens                                                                                                            
Senator Natasha von Imhof                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Juli  Lucky, Staff,  Senator Anna  MacKinnon; Representative                                                                    
John  Lincoln,  Sponsor;  Tim  Mearig,  Facilities  Manager,                                                                    
Department of Education and  Early Development; Dr. Annmarie                                                                    
O'Brien,  Superintendent,  Northwest Arctic  Borough  School                                                                    
District;   Representative  Chris   Tuck,  Sponsor;   Kendra                                                                    
Kloster,  Staff,  Representative   Chris  Tuck;  Ken  Alper,                                                                    
Director, Tax  Division, Department of Revenue;  Mike Satre,                                                                    
Manager, Government  Relations and Community  Affairs, Hecla                                                                    
Greens Creek Mine.                                                                                                              
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Brian Duffy,  Director, Administrative  Services, Department                                                                    
of Military  and Veterans Affairs,  JBER; Bob  Doehl, Deputy                                                                    
Commissioner, Department  of Military and  Veterans Affairs,                                                                    
JBER; Col.  John James, Department of  Military and Veterans                                                                    
Affairs, JBER; Susan Foley,  President, University of Alaska                                                                    
Foundation,  Anchorage;  Doug Walrath,  Director,  Northwest                                                                    
Career and  Technical Center, Nome;  Dr. Brad  Harris, Self,                                                                    
Anchorage; Tommy Sheridan, Silver Bay Seafoods, Cordova.                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
CSHB 135(EDC) am                                                                                                                
     SCHOOL CONSTRUCTION GRANT PROGRAM                                                                                          
                                                                                                                                
     CSHB 135(EDC)  am was HEARD  and HELD in  committee for                                                                    
     further consideration.                                                                                                     
                                                                                                                                
HB 150-PAY, ALLOWANCES, BENEFITS FOR MILITIA MEM                                                                                
                                                                                                                                
     HB 150 was HEARD and HELD in committee for further                                                                         
     consideration.                                                                                                             
                                                                                                                                
CSHB 233(FIN) am                                                                                                                
     EXTEND EDUCATION TAX CREDITS                                                                                               
                                                                                                                                
     CSHB 233(FIN) am was HEARD and HELD in committee for                                                                       
     further consideration.                                                                                                     
                                                                                                                                
                                                                                                                                
CS FOR HOUSE BILL NO. 135(EDC) am                                                                                             
                                                                                                                                
     "An Act relating to school district participation in                                                                       
     the school construction grant program."                                                                                    
                                                                                                                                
9:12:28 AM                                                                                                                    
                                                                                                                                
9:12:44 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:13:03 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  MacKinnon informed  that public  testimony on  the                                                                    
capital budget would be at 1:30pm.                                                                                              
                                                                                                                                
[Vice-Chair  Bishop  made  a  motion  to  adopt  a  CS,  but                                                                    
incorrectly  listed  the bill  draft  number.  It was  later                                                                    
corrected.]                                                                                                                     
                                                                                                                                
JULI  LUCKY, STAFF,  SENATOR ANNA  MACKINNON, informed  that                                                                    
the  draft number  the Vice-Chair  Bishop  had dictated  was                                                                    
incorrect due to a typographical error.                                                                                         
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute  for   CSHB  135(FIN),  Work   Draft  30-LS0549\J                                                                    
(Laffen, 4/19/18).                                                                                                              
                                                                                                                                
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
                                                                                                                                
Ms.  Lucky spoke  to the  bill.  She related  that the  bill                                                                    
version before the committee included  changes to Sections 2                                                                    
and  3 that  applied a  different approach  but honored  the                                                                    
initial concept  of the bill.  She said that  the three-year                                                                    
timeframe had been  kept in place and an  extension had been                                                                    
added for good cause. She  noted a technical change had been                                                                    
made to  the applicability  language, a citation  that would                                                                    
span statute AS 14.11.008 through AS 14.11.020.                                                                                 
                                                                                                                                
9:16:27 AM                                                                                                                    
                                                                                                                                
Senator Olson  spoke to  Section 2.  He asked  whether there                                                                    
was a specific time applied to the extension period.                                                                            
                                                                                                                                
Ms.  Lucky answered  in the  affirmative. She  reported that                                                                    
there had  been a concern  conveyed that putting a  limit on                                                                    
the extension  could result in  the need to  change statute.                                                                    
She  said  that allowing  the  department  the authority  to                                                                    
determine the  appropriate course of action  had been deemed                                                                    
the appropriate approach to the issue.                                                                                          
                                                                                                                                
Senator  Olson  asked  what  the   sponsor  thought  of  the                                                                    
changes.                                                                                                                        
                                                                                                                                
Ms. Lucky  believed that the  sponsor was supportive  of the                                                                    
changes. She  reiterated that the 3-year  timeframe had been                                                                    
in the original bill.                                                                                                           
                                                                                                                                
Senator  Stevens thought  the CS  made sense.  He questioned                                                                    
the definition  of 'good cause'  and wondered if  there were                                                                    
parameters from the department.                                                                                                 
                                                                                                                                
Ms. Lucky stated that the issue would be discussed further.                                                                     
                                                                                                                                
9:18:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHN LINCOLN, SPONSOR,  stated that he was in                                                                    
support of the CS.                                                                                                              
                                                                                                                                
9:18:50 AM                                                                                                                    
                                                                                                                                
Senator Stevens  restated his question about  the definition                                                                    
of  'good   cause'  and  parameters  as   developed  by  the                                                                    
department.                                                                                                                     
                                                                                                                                
TIM MEARIG, FACILITIES MANAGER,  DEPARTMENT OF EDUCATION AND                                                                    
EARLY DEVELOPMENT, shared that the  need for the funds would                                                                    
be matched up with the  project's timeline. He said that the                                                                    
timeline may need  to be adjusted to  match the environment;                                                                    
the definition of 'good cause'  would reflect when the money                                                                    
was needed to accomplish the project.                                                                                           
                                                                                                                                
9:20:05 AM                                                                                                                    
                                                                                                                                
Senator Stevens  voiced concern that an  expression of 'good                                                                    
cause' could lead to an indefinite extension.                                                                                   
                                                                                                                                
Mr. Mearig  informed that  participatory share  amounts that                                                                    
were  required to  accomplish the  work on  a project,  as a                                                                    
project moved forward, and  contract agreements were entered                                                                    
into,  obligations  were  made  that those  funds  would  be                                                                    
available for the  payment of contracts. He  said that there                                                                    
had  never been  an instance  where the  participating share                                                                    
had not been provided.                                                                                                          
                                                                                                                                
9:21:02 AM                                                                                                                    
                                                                                                                                
Senator Olson understood  that "good cause' would  be at the                                                                    
subjective discretion of the commissioner.                                                                                      
                                                                                                                                
Mr. Mearig thought  there would need to be  an evaluation of                                                                    
the  project, and  whether  it  satisfied the  participating                                                                    
share. He  admitted that it  would be at  the commissioner's                                                                    
discretion  whether and  extension  was  needed to  properly                                                                    
support a project.                                                                                                              
                                                                                                                                
Senator Olson asked whether there  had been a time where the                                                                    
issue of  'good cause' had  not allowed an  extension within                                                                    
the department.                                                                                                                 
                                                                                                                                
Mr.  Mearig   explained  that  under  current   statute  the                                                                    
department had been unable to offer any extensions.                                                                             
                                                                                                                                
Senator Olson  queried how  disagreements would  be resolved                                                                    
between  school  districts  and  the  department  about  the                                                                    
definition of 'good cause.'                                                                                                     
                                                                                                                                
Mr. Mearig did  not anticipate a lot of  disagreement on the                                                                    
matter.  He said  that  if a  determination  were made  that                                                                    
limited  the funding  due to  a district  there were  appeal                                                                    
processes under regualtion for the district to pursue.                                                                          
                                                                                                                                
9:23:33 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
                                                                                                                                
9:23:59 AM                                                                                                                    
                                                                                                                                
Representative Lincoln  stated that the bill  would amend AS                                                                    
14.11.008  to  provide  the   Department  of  Education  the                                                                    
discretion to  extend the deadline  for school  districts to                                                                    
secure  the   match  requirement  for   school  construction                                                                    
projects, only  if the  district could  show good  cause for                                                                    
the extension.   He said  that the Northwest  Arctic Borough                                                                    
School District was close to  meeting, but would not meet, a                                                                    
June  29, 2018  deadline to  secure  the local  share for  a                                                                    
replacement of the  K-12 school in Kivalina.  He stated that                                                                    
state funds  for the school  were appropriated in  2015, and                                                                    
the statute  currently required the school  district to come                                                                    
up with the local match within  3 years. He relayed that the                                                                    
Northwest  Arctic  Borough  had shown  great  leadership  in                                                                    
recent years  as they worked  through negotiations  with the                                                                    
borough's  primary  funding source,  the  Red  Dog Mine.  He                                                                    
stated that  the new  funding agreement  had been  signed in                                                                    
May 2017, the borough would  use revenue from that agreement                                                                    
to secure and re-pay bonding  to provide the local match for                                                                    
Kivalina School. He shared that  in March of 2018 the Alaska                                                                    
Municipal  Bond  Bank  Authority approved  the  issuance  of                                                                    
$12.7 million  in bonds  on behalf of  the borough  to fully                                                                    
cover the  local match  for the school,  but the  bonds were                                                                    
contingent  of funding  being secured  for the  road to  the                                                                    
school. He said that the  construction site was 8 miles from                                                                    
Kivalina, on  solid ground  that was  safe from  the erosion                                                                    
that threatened  the town; the  road was essential  to bring                                                                    
in construction materials and labor  to the site, as well as                                                                    
to provide an emergency  evacuation route for the residents.                                                                    
He related that the  Department of Transportation and Public                                                                    
Facilitates   had  issued   a  final   environmental  impact                                                                    
statement on the road in  January 2018, which found that the                                                                    
road posed  no significant  environmental impacts.  He added                                                                    
that officials  from the  United States  Military Innovation                                                                    
Readiness  Training Program  had expressed  interest in  the                                                                    
bridge portion  of the project.  He lamented  that sometimes                                                                    
the calendar could work  against projects, particularly ones                                                                    
that  were  complicated   by  logistical  and  environmental                                                                    
circumstance.                                                                                                                   
                                                                                                                                
9:27:03 AM                                                                                                                    
                                                                                                                                
Senator  Stevens  wondered  whether   the  sponsor  had  any                                                                    
concerns  that  the  definition  of  'good  cause'  was  not                                                                    
defined in the bill.                                                                                                            
                                                                                                                                
Representative Lincoln replied that  he had a slight concern                                                                    
but  believed that  the overall  intent  of the  legislation                                                                    
outweighed  any  concern.  He  believed  that  the  projects                                                                    
encompassed by the bill were good projects.                                                                                     
                                                                                                                                
Senator Micciche supported the legislation as written.                                                                          
                                                                                                                                
Vice-Chair Bishop  understood that the  Environmental Impact                                                                    
Statement  (EIS)  for the  Kivalina  school  build had  been                                                                    
completed by DOT&PF.                                                                                                            
                                                                                                                                
Representative Lincoln  informed the committee that  the EIS                                                                    
for the road was issued in January 2018.                                                                                        
                                                                                                                                
Vice-Chair Bishop  supported the CS. He  offered comments on                                                                    
the road. He  noted that to build a road  in the state meant                                                                    
working  with numerous  regulatory  entities.  He said  that                                                                    
permitting  could  take up  to  6  years. He  believed  that                                                                    
common sense would prevail in  extension decisions for 'good                                                                    
cause' projects.                                                                                                                
                                                                                                                                
9:30:59 AM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon offered  a financial  concern about  how                                                                    
many  times  money  would  be held,  not  turning  over,  on                                                                    
projects that could be putting  people to work in the state.                                                                    
She spoke  to the issue  of Kivalina. She worried  about the                                                                    
timely  deployment of  assets. She  wondered how  many years                                                                    
was long enough for $70 million  to be sitting in an account                                                                    
and not benefitting students.                                                                                                   
                                                                                                                                
9:34:00 AM                                                                                                                    
                                                                                                                                
Mr. Mearig  thought Co-Chair MacKinnon raised  a great point                                                                    
about  executing  school projects  in  a  timely manner.  He                                                                    
noted  that delays  resulted in  project cost  increases. He                                                                    
thought the issues needed to  be examined by those in charge                                                                    
of the  projects. He  asserted that  districts were  keen to                                                                    
have projects put  in place. He thought the  ability to work                                                                    
with districts to keep projects  in motion was important. He                                                                    
did not  have an answer as  to how many extensions  would be                                                                    
undertaken for  an individual project.  He thought  that the                                                                    
description  of   need,  set  forth  by   the  district  for                                                                    
consideration of  a project by  the commissioner,  would set                                                                    
the parameters.                                                                                                                 
                                                                                                                                
9:35:46 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon asked Mr. Mearig  to provide in writing a                                                                    
definition of  'good cause.' She  said that  the legislature                                                                    
needed to  have some  knowledge of how  much money  would be                                                                    
was sitting in wait for  stalled projects that could be used                                                                    
elsewhere in education.                                                                                                         
                                                                                                                                
9:36:43 AM                                                                                                                    
                                                                                                                                
Co-Chair   MacKinnon  spoke   to  the   possible  delay   in                                                                    
construction  due to  the need  for a  road to  the building                                                                    
site. She  stressed that the  legislature had made  it clear                                                                    
that  the state  was not  going to  pay for  the road  to be                                                                    
built.                                                                                                                          
                                                                                                                                
Representative  Lincoln understood  that the  road would  be                                                                    
primarily  funded  by the  federal  government.  He cited  a                                                                    
specific  reason for  the delay  as the  establishment of  a                                                                    
funding agreement  between Red Dog  Mine and the  borough; a                                                                    
village infrastructure program  that would fund construction                                                                    
projects and bring additional funds to the state.                                                                               
                                                                                                                                
9:37:56 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon  asked whether  there was a  timeline for                                                                    
the  building of  the road.  She expressed  concern for  the                                                                    
students in Kivalina  who had been waiting  for their school                                                                    
to be built.  She asserted that her primary  focus in trying                                                                    
to help the project along was the students.                                                                                     
                                                                                                                                
Representative Lincoln shared  Co-Chair MacKinnon's feelings                                                                    
for  the people  and  students of  Kivalina.  He stated  the                                                                    
changing  climate and  increasing  severity  of storms  made                                                                    
investing  in  the current  location  would  not be  a  wise                                                                    
decision. He  said that  the students  were excited  for the                                                                    
prospect of  a new  school, rather  than renovating  the old                                                                    
school at  the current  site. He felt  that the  delay would                                                                    
result in a better outcome  for the community. He offered to                                                                    
provide a timeline at a later date.                                                                                             
                                                                                                                                
9:40:26 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon  asked for a  total cost  of construction                                                                    
and design of the road.                                                                                                         
                                                                                                                                
Co-Chair MacKinnon commented that  the committee was looking                                                                    
at the  Regional Educational  Attendance Area  (REAA) school                                                                    
list. She asked about  a study regarding standardized school                                                                    
construction.  She  emphasized that  it  was  her intent  to                                                                    
require  standardization of  building  design. She  wondered                                                                    
what the department  was going to do to reduce  the costs of                                                                    
building schools in the state.                                                                                                  
                                                                                                                                
Mr.  Mearig  responded  that the  department  had  supported                                                                    
standardized  school  design  for instances  where  multiple                                                                    
schools  of the  same size  and  type were  being build.  He                                                                    
pointed out  to the committee  that the first  three schools                                                                    
currently on the priority construction  list were of varying                                                                    
size  and construction  needs. He  said that  the department                                                                    
supported  standardized  components  and  was  working  with                                                                    
districts to actively pursue criteria  for school design and                                                                    
cost affective school construction.                                                                                             
                                                                                                                                
9:43:45 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman knew that the  Northwest Arctic had led the                                                                    
way in  trying to compress the  construction timeline, which                                                                    
ultimately  reduced  construction   costs.  He  thought  the                                                                    
concept  of 'design-build'  had been  proved to  the shorten                                                                    
construction  timeline and  save money.  He thought  that if                                                                    
the concept was  working in one region it should  be used in                                                                    
other regions.                                                                                                                  
                                                                                                                                
Mr. Mearig stated that  the department supported alternative                                                                    
project  delivery  methods.  He   relayed  that  there  were                                                                    
guidelines  for helping  districts to  determine when  those                                                                    
guidelines should be used. He  said that on other occasions,                                                                    
the timeline would allow for  a design to be fully developed                                                                    
and  then competitively  bid in  the  traditional sense.  He                                                                    
stated that the  department did not mandate  design build or                                                                    
other  alternative project  delivery  methods but  supported                                                                    
those methods  and worked  with each  district to  examine a                                                                    
project environment that  would result in the  best and most                                                                    
cost-effective project outcome.                                                                                                 
Co-Chair   Hoffman  thought   that  the   department  should                                                                    
encourage the  design-build concept.  He believed  that this                                                                    
would save the state money.                                                                                                     
                                                                                                                                
9:46:38 AM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon lamented  that  there  was $100  million                                                                    
dollars  in  one  district.  She praised  the  work  of  Mr.                                                                    
Mearig. She  stated that the legislature  had encouraged the                                                                    
department  to start  taking a  proactive  role in  leading,                                                                    
rather  than   following,  the  districts   in  construction                                                                    
alternatives.                                                                                                                   
                                                                                                                                
9:48:13 AM                                                                                                                    
                                                                                                                                
Representative  Lincoln appreciated  the conversation  about                                                                    
standardization and project cost  control and stated that it                                                                    
had been a prominent part of the Kivalina project.                                                                              
                                                                                                                                
Co-Chair MacKinnon asked about a Sectional Analysis.                                                                            
                                                                                                                                
9:49:11 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:50:06 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair MacKinnon OPENED public testimony.                                                                                     
                                                                                                                                
DR.  ANNMARIE  O'BRIEN,   SUPERINTENDENT,  NORTHWEST  ARCTIC                                                                    
BOROUGH SCHOOL DISTRICT,  spoke in support of  the bill. She                                                                    
discussed her  work history. She discussed  current statute,                                                                    
and  the  lack  of  a provision  for  the  consideration  of                                                                    
exceptional  circumstances  that  might  warrant  additional                                                                    
time to secure  a financial match. She  thought that without                                                                    
the  legislation, it  was  possible  that critically  needed                                                                    
school   projects  would   be   forced   to  forfeit   state                                                                    
appropriations.   She said that  the Kivalina project  was a                                                                    
perfect example of why the provision was needed.                                                                                
                                                                                                                                
9:53:29 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Bishop discussed  a  new zero  fiscal note  from                                                                    
Department of Commerce,  Community and Economic Development,                                                                    
OMB component 2737.                                                                                                             
                                                                                                                                
Co-Chair MacKinnon discussed housekeeping.                                                                                      
CSHB 135(EDC) am was HEARD and HELD in committee for                                                                            
further consideration.                                                                                                          
                                                                                                                                
9:55:07 AM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 150                                                                                                            
                                                                                                                                
     "An Act  relating to pay, allowances,  and benefits for                                                                    
     members of the organized militia."                                                                                         
                                                                                                                                
9:55:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHRIS TUCK, SPONSOR, offered a Sponsor                                                                           
Statement:                                                                                                                      
                                                                                                                                
     House Bill  150 is part  of the ongoing efforts  by the                                                                    
     Alaska   State  Legislature   and  the   Department  of                                                                    
     Military and  Veterans' Affairs  to modernize  the 1955                                                                    
     Alaska  Military Code  by  providing statutory  changes                                                                    
     that will better serve our Alaska organized militia.                                                                       
                                                                                                                                
     House Bill 150 would  authorize the same pay, allowance                                                                    
     and  benefits for  the organized  militia whether  they                                                                    
     are called  into state active  duty by the  Governor or                                                                    
     Adjutant  General or  called to  service under  federal                                                                    
     active duty by the President.                                                                                              
                                                                                                                                
     The  current pay  system for  the organized  militia is                                                                    
     based  on  compensation  for  the  specific  duty  when                                                                    
     called  into active  state service.  Under the  federal                                                                    
     active duty,  service members are  paid based  on their                                                                    
     grade  and rank,  not  by the  specific  duty they  are                                                                    
     assigned to.                                                                                                               
                                                                                                                                
     The current  pay system is  not stable or  reliable for                                                                    
     our   organized  militia   and   creates  a   difficult                                                                    
     accounting   system  that   requires   many  hours   to                                                                    
     determine  each  member's  pay.  House  Bill  150  will                                                                    
     create a streamlined approach  to the accounting system                                                                    
     by aligning  the pay, allowances  and benefits  for the                                                                    
     Alaska organized militia whether  if called to state or                                                                    
     federal active duty.                                                                                                       
                                                                                                                                
     Our service  members deserve a reliable  pay structure,                                                                    
     regardless of where they are called to duty.                                                                               
                                                                                                                                
9:57:44 AM                                                                                                                    
                                                                                                                                
KENDRA KLOSTER,  STAFF, REPRESENTATIVE CHRIS  TUCK, reviewed                                                                    
the  sections of  the bill.  She said  that Section  1 would                                                                    
clarify  when  members  of the  organized  militia  were  in                                                                    
active state duty their wages  would mirror the wages of the                                                                    
federal  active  service.  Section  2 would  treat  all  the                                                                    
organized militia  as one entity  for a  compensation system                                                                    
and  would retain  eligibility for  travel allowances  under                                                                    
the state system.  Section 3 was the base  rate for worker's                                                                    
compensation  calculations. Section  4 specified  members of                                                                    
the Alaska  Naval Militia, Air  Guard, and Army  Guard would                                                                    
continue to  accrue benefits, paid into  the Alaska National                                                                    
Guard and  Naval Militia retirement system.  Section 5 would                                                                    
repeal  the  definition of  member  because  the langue  was                                                                    
redundant.                                                                                                                      
                                                                                                                                
9:58:57 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon OPENED public testimony.                                                                                     
                                                                                                                                
BRIAN DUFFY,  DIRECTOR, ADMINISTRATIVE  SERVICES, DEPARTMENT                                                                    
OF    MILITARY    AND    VETERANS   AFFAIRS,    JBER    (via                                                                    
teleconference), announced that he  was available to provide                                                                    
additional comments.                                                                                                            
                                                                                                                                
Senator von  Imhof looked at  an example  of a pay  grid for                                                                    
the 2015  Sockeye fire that  was prepared by  the Department                                                                    
of  Military  and  Veterans  Affairs  (copy  on  file).  She                                                                    
wondered whether  the biggest  savings, as  a result  of the                                                                    
legislation,  would be  the  administrative expense  because                                                                    
the  new system  would be  more streamlined.  She understood                                                                    
that the  pay would  vary on  whether the  federal alignment                                                                    
pay was  more or less  than the state hazard  pay, depending                                                                    
on the position.                                                                                                                
                                                                                                                                
Mr. Duffy agreed.                                                                                                               
                                                                                                                                
Co-Chair  MacKinnon asked  whether the  change would  affect                                                                    
state or federal pensions.                                                                                                      
                                                                                                                                
Mr. Duffy answered in the negative.                                                                                             
                                                                                                                                
10:02:05 AM                                                                                                                   
                                                                                                                                
Senator Stevens asked for an  explanation of pay by specific                                                                    
duty; specific duty as compare to rank and grade.                                                                               
                                                                                                                                
Mr.  Duffy  used  the  example  of  an  active  duty  member                                                                    
performing administrative duties in  the morning and manning                                                                    
a traffic  control point  in the evening.  He said  that the                                                                    
variety of duties  that could be performed form  day to day,                                                                    
even hour to hour, had its own  pay scale.  He said that the                                                                    
equation would  include the time,  multiplied by  the amount                                                                    
of pay for  that specific job on that specific  day. The new                                                                    
method  would  pay a  daily  rate,  by  rank, and  based  on                                                                    
current pay scales.                                                                                                             
                                                                                                                                
Senator  Stevens   though  that   the  old   system  sounded                                                                    
difficult.                                                                                                                      
                                                                                                                                
10:03:45 AM                                                                                                                   
                                                                                                                                
BOB DOEHL,  DEPUTY COMMISSIONER, DEPARTMENT OF  MILITARY AND                                                                    
VETERANS  AFFAIRS, JBER  (via teleconference),  testified in                                                                    
support of  the bill.  He offered  several examples  of ways                                                                    
that  the bill  would  benefit the  department and  military                                                                    
personnel.                                                                                                                      
                                                                                                                                
Senator Olson asked what the bill would do for recruitment.                                                                     
                                                                                                                                
Mr.   Doehl   believed   that  the   bill   would   increase                                                                    
recruitment.                                                                                                                    
                                                                                                                                
10:05:44 AM                                                                                                                   
                                                                                                                                
COL.  JOHN  JAMES,  DEPARTMENT   OF  MILITARY  AND  VETERANS                                                                    
AFFAIRS, JBER (via teleconference),  testified in support of                                                                    
the bill. He believed that  the proposal would provide equal                                                                    
pay for equal services.                                                                                                         
                                                                                                                                
10:06:57 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
                                                                                                                                
Vice-Chair  Bishop discussed  FN  2 from  the Department  of                                                                    
Military  and  Veterans  Affairs.   The  fiscal  impact  was                                                                    
indeterminate. He read from the analysis:                                                                                       
                                                                                                                                
     The  fiscal  impact  of   this  legislation  cannot  be                                                                    
     accurately  determined   at  this  time.   The  nature,                                                                    
     severity,  and  duration  of any  state  disaster  will                                                                    
     determine the  number of members called  to active duty                                                                    
     and  the  extent  of their  service.  Due  to  multiple                                                                    
     unknown factors,  such as  when disasters  will happen,                                                                    
     the  number  of  militia  members  called  into  active                                                                    
     status, their ranks, and  other factors, the Department                                                                    
     is unable  to calculate the estimated  fiscal impact to                                                                    
     the  state  and   therefore  submits  an  indeterminate                                                                    
     fiscal note.                                                                                                               
                                                                                                                                
     While  the Department  cannot predict  future calls  to                                                                    
     active duty,  it can  look back  to recent  examples to                                                                    
     provide   real-life  perspectives   on  the   potential                                                                    
     financial impact of HB 150 on future events.                                                                               
                                                                                                                                
Co-Chair  MacKinnon  asked for  a  cost  example that  could                                                                    
provide further detail.                                                                                                         
                                                                                                                                
Representative Tuck  referenced the  Sockeye Fire as  a look                                                                    
back that  would be studied to  find ways to save  the state                                                                    
money.                                                                                                                          
                                                                                                                                
10:09:00 AM                                                                                                                   
                                                                                                                                
Senator von  Imhof looked at  the Sockeye Fire  example, and                                                                    
considered the  administrative hours  used to  calculate the                                                                    
payroll at the  time. She wondered about how  the new system                                                                    
would compare.                                                                                                                  
                                                                                                                                
Co-Chair  MacKinnon  thought  knowing  administrative  costs                                                                    
would  be helpful.  She  wanted to  know  state and  federal                                                                    
dollar breakdown of pay.                                                                                                        
                                                                                                                                
Vice-Chair Bishop summarized that  the bill was supported by                                                                    
common sense.  He thought Mr.  Duffy had explained  it well.                                                                    
He thought the bill would create greater efficiency.                                                                            
                                                                                                                                
Senator   Stevens  assumed   that  National   Guard  members                                                                    
deployed to the Middle East were paid on a federal scale.                                                                       
                                                                                                                                
Representative Tuck answered in the affirmative.                                                                                
                                                                                                                                
Senator  Stevens thought  that the  change in  pay could  be                                                                    
confusing to troops.                                                                                                            
                                                                                                                                
Representative Tuck stated that  the bill would simplify the                                                                    
matter.                                                                                                                         
                                                                                                                                
10:12:26 AM                                                                                                                   
                                                                                                                                
Representative  Tuck  thanked  the committee  and  expressed                                                                    
that the  bill was a way  to make things easier  for members                                                                    
of the  National Guard. He  agreed to provide  the committee                                                                    
with a further example of how  the bill would save the state                                                                    
money.                                                                                                                          
                                                                                                                                
HB  150  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair MacKinnon discussed housekeeping.                                                                                      
                                                                                                                                
CS FOR HOUSE BILL NO. 233(FIN) am                                                                                             
                                                                                                                                
     "An  Act  relating  to   the  insurance  tax  education                                                                    
     credit,  the income  tax education  credit, the  oil or                                                                    
     gas  producer   education  credit,  the   property  tax                                                                    
     education   credit,  the   mining  business   education                                                                    
     credit,  the fisheries  business education  credit, and                                                                    
     the  fisheries resource  landing tax  education credit;                                                                    
     providing  for  an  effective  date  by  repealing  the                                                                    
     effective dates of  secs. 3, 5, 7, 10, 14,  16, 18, 21,                                                                    
     23, 25,  28, 30, 32,  35, 37, 39,  42, 44, 46,  49, 51,                                                                    
     53, and  55, ch. 92,  SLA 2010,  sec. 14, ch.  7, FSSLA                                                                    
     2011, secs.  15, 17, 19,  21, 23,  and 25, ch.  74, SLA                                                                    
     2012, sec. 49, ch. 14, SLA  2014, secs. 37, 40, 43, and                                                                    
     46, ch. 15, SLA 2014, and  secs. 26 and 31, ch. 61, SLA                                                                    
     2014; providing  for an effective date  by amending the                                                                    
     effective  date of  secs. 1,  2,  and 21,  ch. 61,  SLA                                                                    
     2014; and providing for an effective date."                                                                                
                                                                                                                                
10:13:46 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon read the title of the bill.                                                                                  
                                                                                                                                
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute for  CSHB 233(), Work Draft  30-LS0152\N (Nauman,                                                                    
4/23/18).                                                                                                                       
                                                                                                                                
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
                                                                                                                                
Ms. Lucky  discussed the  CS. She  noted that  the committee                                                                    
had heard a  similar bill in concept, but  not content, with                                                                    
SB 16. She stated she  would present the differences between                                                                    
the bill as it came to  the Senate Finance Committee and the                                                                    
new version  currently before the committee.  She referenced                                                                    
the explanation of changes (copy on file):                                                                                      
     Deletes Legislative Findings and Intent.                                                                                   
                                                                                                                                
     Sets  the   amount  of  the   credit  at  50%   of  all                                                                    
     contributions.  Currently, a  tiered system  provides a                                                                    
     credit of  100% of  contributions between  $100,000 and                                                                    
     $300,000, and 50% of contributions  that do not fall in                                                                    
     that range. See sections: 2, 5, 8, 11, 14, 17, and 21.                                                                     
                                                                                                                                
     Reduces  the  total  amount  of  credits  that  can  be                                                                    
     claimed in  any tax  year to  $1,000,000    current law                                                                    
     allows $5,000,000. Sections:  3, 6, 9, 12,  15, 18, and                                                                    
     22.                                                                                                                        
                                                                                                                                
10:17:23 AM                                                                                                                   
                                                                                                                                
Ms. Lucky continued to address the Explanation of changes:                                                                      
                                                                                                                                
     Adds  section  24 at  the  request  of the  Revisor  of                                                                    
     Statutes  to reconcile  the effects  of the  passage of                                                                    
     both House  Bill 233  and House  Bill 97,  which passed                                                                    
     the House on 4/9/2018 and the Senate on                                                                                    
     4/20/2018.                                                                                                                 
                                                                                                                                
     Adds  conforming  amendments   to  the  effective  date                                                                    
     sections to accommodate these changes.                                                                                     
                                                                                                                                
Ms. Lucky  noted that the  effective date of the  changes to                                                                    
the program was  not changed. The date was  January 1, 2019,                                                                    
to correspond with the beginning of the new tax year.                                                                           
                                                                                                                                
Senator  Stevens  understood  that   the  program  had  been                                                                    
successful in opening opportunities  for Alaska students. He                                                                    
expressed concern  that businesses  might not  contribute as                                                                    
much in the future as they have in the past.                                                                                    
                                                                                                                                
Co-Chair  MacKinnon  stated   that  currently  business  was                                                                    
paying either  corporate, income, or fisheries  taxes, which                                                                    
maintained  a   constant  tax  base  unless   services  were                                                                    
hindered. She  said that whether  the businesses  donated or                                                                    
not, the  reduction in  the availability  of the  tax credit                                                                    
would provide  savings to  the state,  like an  indirect tax                                                                    
expense.  She said  that  the money  would  remain with  the                                                                    
state  in  the  form  of  money  that  the  corporations  or                                                                    
businesses were already paying in taxes.                                                                                        
                                                                                                                                
10:19:54 AM                                                                                                                   
                                                                                                                                
KEN ALPER,  DIRECTOR, TAX  DIVISION, DEPARTMENT  OF REVENUE,                                                                    
addressed  Senator Stevens  question. He  asserted that  the                                                                    
department  could not  conjecture  on  how company  behavior                                                                    
would change. The analysis had  been done based on the known                                                                    
set of  donations over the  last three years  and projecting                                                                    
forward the same or a similar  amount.  He thought that much                                                                    
good will was attached to the donations.                                                                                        
                                                                                                                                
Senator Stevens  summarized that it the  future was unknown.                                                                    
He assumed that there would  be fewer donations, which would                                                                    
result in fewer opportunities for students.                                                                                     
                                                                                                                                
Mr.  Alper stated  that there  were many  different eligible                                                                    
recipients  for  the  potential   donations.  He  said  that                                                                    
educators  looked   to  the  donations  to   back  fill  the                                                                    
reductions  of state  funding that  they had  experienced in                                                                    
recent years.                                                                                                                   
                                                                                                                                
10:22:00 AM                                                                                                                   
                                                                                                                                
Senator   Micciche  commented   that  there   were  only   2                                                                    
substantive  changes in  the bill.  He thought  that the  50                                                                    
percent reduction  between $100  thousand and  $300 thousand                                                                    
could  alter  business's  donation behavior.  The  reduction                                                                    
from  $5 million  to $1  million of  the annual  total would                                                                    
have  neutered the  legislative appropriation  authority and                                                                    
would  have increased  state operating  costs. He  expressed                                                                    
support for the bill.                                                                                                           
                                                                                                                                
Senator von  Imhof wanted to  understand the flow  of funds.                                                                    
She understood  that under  the bill if  a business  wrote a                                                                    
check for  $200 thousand  to the  University of  Alaska, the                                                                    
money would be split between the state and the University.                                                                      
                                                                                                                                
Mr. Alper  explained that  a company  would make  a donation                                                                    
and  then sometime  in the  next year  would file  their tax                                                                    
return. The  tax return  would include  a line  for eligible                                                                    
donations  for   the  education  tax  credit   and  the  tax                                                                    
reduction would  be based on  the statutory  percentage. The                                                                    
first  $100   thousand  in  donation,  under   current  law,                                                                    
received a 50  percent credit, the next  $200 thousand would                                                                    
reach the  100 percent credit. He  said that the way  the CS                                                                    
was written the tax reduction would be smaller.                                                                                 
                                                                                                                                
Senator  von Imhof  asked  whether there  was  a 35  percent                                                                    
taxable rate of on the  extra $50,000, or would the business                                                                    
pay $50,000 less in state taxes.                                                                                                
10:25:55 AM                                                                                                                   
                                                                                                                                
Mr. Alper stated that it  would be a straight reduction from                                                                    
the tax liability, not the  taxable income. He said that the                                                                    
credit could  not be  received for  multiple taxes  but that                                                                    
companies  that, for  example,  a mining  company that  also                                                                    
pain corporate  income tax could  zero out one tax  and then                                                                    
use the rest of the benefit to offset the other tax.                                                                            
                                                                                                                                
Co-Chair MacKinnon  asked whether it  was fair to  say that,                                                                    
currently,  private  sector  donations above  $100,000  were                                                                    
deployed wherever the business chose.                                                                                           
                                                                                                                                
Mr. Alper answered in the  affirmative. He assessed that the                                                                    
state had  essentially outsourced  to companies  the ability                                                                    
to set state education priorities.                                                                                              
                                                                                                                                
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
OBJECTION, it was so ordered. SCS CSHB 233() was ADOPTED.                                                                       
                                                                                                                                
Co-Chair  MacKinnon  informed  that  she had  met  with  the                                                                    
sponsor and a compromise had been made.                                                                                         
                                                                                                                                
10:28:02 AM                                                                                                                   
                                                                                                                                
Representative Chris  Tuck, Sponsor, discussed the  bill. He                                                                    
read from the Sponsor Statement:                                                                                                
                                                                                                                                
     House  Bill 233  will extend  the education  tax credit                                                                    
     program from December  31, 2018 to January  1, 2025 and                                                                    
     ensure  that the  credits that  exist in  statute today                                                                    
     will  continue to  support our  education programs  and                                                                    
     institutions.                                                                                                              
                                                                                                                                
     Education tax  credits encourage private  businesses to                                                                    
     make    charitable    contributions   to    educational                                                                    
     institutions   and   programs   in   Alaska.   Eligible                                                                    
     recipients  include:  non-profit,  public,  or  private                                                                    
     accredited Alaska two-year  or four-year colleges; non-                                                                    
     profit  elementary  or  secondary  schools  and  school                                                                    
     districts;  state  operated  vocational  education  and                                                                    
     training   schools;   non-profit  regional   vocational                                                                    
     training   centers;  apprenticeship   programs;  Alaska                                                                    
     Native cultural  programs; the Alaska  Higher Education                                                                    
     Investment   Fund;   and   postsecondary   institutions                                                                    
     providing dual-credit courses.                                                                                             
                                                                                                                                
     The  credits  are non-transferable  and  non-refundable                                                                    
     and can be used  against the following taxes: corporate                                                                    
     income tax;  fisheries business  tax/fisheries resource                                                                    
     landing  tax;  insurance  premium  tax/title  insurance                                                                    
     premium   tax;  mining   license  tax;   oil  and   gas                                                                    
     production tax; and the oil and gas property tax.                                                                          
                                                                                                                                
     Currently, the  credit provision allows for  50% of the                                                                    
     annual contributions  up to $100,000, 100%  of the next                                                                    
     $200,000,  and  50%   of  annual  contributions  beyond                                                                    
     $300,000.  The total  credit per  taxpayer, across  all                                                                    
     tax types, may not exceed $5 million.                                                                                      
                                                                                                                                
     Historically, well  over two dozen companies  have used                                                                    
     this  benefit.  The  contributions  are  good  for  the                                                                    
     companies  and  good  for the  recipient  institutions.                                                                    
     House  Bill  233  will  continue  to  ensure  that  our                                                                    
    education institutions and programs are supported.                                                                          
                                                                                                                                
Senator  Stevens  asked  the   sponsor  to  reflect  on  the                                                                    
reduction  in  contributions  and  whether  there  would  be                                                                    
impact on assistance to students.                                                                                               
                                                                                                                                
Representative Tuck responded  that he was not  sure how the                                                                    
bill  would  affect  contribution  behavior.  He  hoped  the                                                                    
connect  local  business   with  education  institutions  to                                                                    
partner better  and help  educational institutions  to teach                                                                    
towards the  jobs that were  necessary for the needs  of the                                                                    
state.                                                                                                                          
                                                                                                                                
10:30:52 AM                                                                                                                   
                                                                                                                                
Senator  von Imhof  noted that  the state  had utilized  tax                                                                    
credits in various ways. She  asked whether other states had                                                                    
used education tax  credits in creative ways  to help offset                                                                    
corporate taxes owed to their particular state.                                                                                 
                                                                                                                                
Representative  Tuck  had  not   compared  Alaska  to  other                                                                    
states.  He had  investigated  how to  make  the tax  credit                                                                    
system better in  Alaska. He made note of  the many statutes                                                                    
referenced in  the bill title.  He thought that it  would be                                                                    
cleanest  to begin  by extending  the tax  credits and  then                                                                    
working on ways to improve the system.                                                                                          
                                                                                                                                
10:32:32 AM                                                                                                                   
                                                                                                                                
Ms. Kloster spoke to the Sectional Analysis for the bill                                                                        
(copy on file):                                                                                                                 
                                                                                                                                
     Section 1   Amends  the Insurance tax (AS 21.96.070(a))                                                                    
     education credit to add an Alaska two-year or four-                                                                        
     year college  accredited by  a national  association to                                                                    
     be eligible  for the education  tax credit  program. It                                                                    
     also   removed   an   annual   intercollegiate   sports                                                                    
     tournament  from being  eligible for  an education  tax                                                                    
     credit.                                                                                                                    
                                                                                                                                
     Section 2    Amends the Insurance  tax, AS 21.96.070(b)                                                                    
     to  remove  the  100   percent  contribution  from  the                                                                    
     $100,000-$300,000,  therefore,  all contributions  will                                                                    
     be a 50 percent credit.                                                                                                    
                                                                                                                                
     Section 3    Amends  the insurance tax  AS 21.96.070(d)                                                                    
     to decrease the cap for  the total amount of the credit                                                                    
     to be not more than $1,000,000.                                                                                            
                                                                                                                                
     Section   4   -  Amends   the   Net   Income  tax   (AS                                                                    
     43.20.014(a)) education  credit to  add an  Alaska two-                                                                    
     year  or four-year  college  accredited  by a  national                                                                    
     association  to  be  eligible  for  the  education  tax                                                                    
     credit program.                                                                                                            
                                                                                                                                
     Section 5   Amends 43.20.014(b)  the net income tax, to                                                                    
     remove the 100 percent  contribution from the $100,000-                                                                    
     $300,000,  therefore, all  contributions will  be a  50                                                                    
     percent credit.                                                                                                            
                                                                                                                                
     Section 6   Amends 43.20.014(d)  the net income tax, to                                                                    
     decrease the cap for the  total amount of the credit to                                                                    
     be not more than $1,000,000.                                                                                               
                                                                                                                                
     Section  7  -  Amends  the  oil  or  gas  producer  (AS                                                                    
     43.55.019(a)) education  credit to  add an  Alaska two-                                                                    
     year  or four-year  college  accredited  by a  national                                                                    
     association  to  be  eligible  for  the  education  tax                                                                    
     credit   program.    It   also   removed    an   annual                                                                    
     intercollegiate sports  tournament from  being eligible                                                                    
     for an education tax credit.                                                                                               
                                                                                                                                
     Section 8    Amends  the oil and  gas producer  tax, AS                                                                    
     43.55.019(b),  to remove  the 100  percent contribution                                                                    
     from    the     $100,000-$300,000,    therefore,    all                                                                    
     contributions will be a 50 percent credit.                                                                                 
     Section 9  - Amends  the oil and  gas producer  tax, AS                                                                    
     43.55.019(d), to decrease the  cap for the total amount                                                                    
     of the credit to be not more than $1,000,000.                                                                              
                                                                                                                                
     Section  10  - Amends  oil  and  gas property  tax  (AS                                                                    
     43.56.018(a)) education  credit to  add an  Alaska two-                                                                    
     year  or four-year  college  accredited  by a  national                                                                    
     association  to  be  eligible  for  the  education  tax                                                                    
     credit   program.    It   also   removed    an   annual                                                                    
     intercollegiate sports  tournament from  being eligible                                                                    
     for an education tax credit.                                                                                               
                                                                                                                                
     Section   11      Amends   the   mining  business   (AS                                                                    
     43.65.018(b))  to remove  the 100  percent contribution                                                                    
     from    the     $100,000-$300,000,    therefore,    all                                                                    
     contributions will be a 50 percent credit.                                                                                 
                                                                                                                                
     Section   12  -   Amends   the   mining  business   (AS                                                                    
     43.65.018(d)) to decrease the  cap for the total amount                                                                    
     of the credit to be not more than $1,000,000.                                                                              
                                                                                                                                
     Section 13  - Amends mining business  (AS 43.65.018(a))                                                                    
     education credit to add an Alaska two-year or four-                                                                        
     year college  accredited by  a national  association to                                                                    
     be eligible for the education tax credit program.                                                                          
                                                                                                                                
     Section 14  - Amends mining business  (AS 43.65.018(b))                                                                    
     to  remove  the  100   percent  contribution  from  the                                                                    
     $100,000-$300,000,  therefore,  all contributions  will                                                                    
     be a 50 percent credit.                                                                                                    
                                                                                                                                
     Section 15  - Amends mining business  (AS 43.65.018(d))                                                                    
     to decrease the cap for  the total amount of the credit                                                                    
     to be not more than $1,000,000.                                                                                            
                                                                                                                                
     Section 16 - Amends  AS 43.75.018(a) fisheries business                                                                    
     education credit to add an Alaska two-year or four-                                                                        
     year college  accredited by  a national  association to                                                                    
     be eligible for the education tax credit program.                                                                          
                                                                                                                                
     Section 17 - Amends  AS 43.75.018(b) fisheries business                                                                    
     tax  to remove  the 100  percent contribution  from the                                                                    
     $100,000-$300,000,  therefore,  all contributions  will                                                                    
     be a 50 percent credit.                                                                                                    
                                                                                                                                
     Section 18 - Amends  AS 43.75.018(d) fisheries business                                                                    
     tax to  decrease the  cap for the  total amount  of the                                                                    
     credit to be not more than $1,000,000.                                                                                     
                                                                                                                                
     Section 19 - Amends  AS 43.77.045(a) fisheries resource                                                                    
     landing tax education credit to  add an Alaska two-year                                                                    
     or   four-year  college   accredited   by  a   national                                                                    
     association  to  be  eligible  for  the  education  tax                                                                    
     credit program.                                                                                                            
                                                                                                                                
     Section 20   Amends  AS 43.77.045(a), the education tax                                                                    
     credit  against  the  fisheries resource  landing  tax,                                                                    
     contains  a   cross  reference  to  AS   43.77.040.  AS                                                                    
     43.77.040  is a  different credit,  separate and  apart                                                                    
     from the education tax credits,  that provides a credit                                                                    
     for  various donations  related  to  fisheries and  the                                                                    
     seafood industry.  Under Secs. 23  and 36, Ch.  61, SLA                                                                    
     2014, AS 43.77.040 will be  released December 31, 2020.                                                                    
     Because the  repeal of AS 43.77.045.  the education tax                                                                    
     credit, has been extended from  2018 to 2025, the cross                                                                    
     reference  to  AS 43.77.040  must  be  removed from  AS                                                                    
     43.77.045 on December 31, 2020.                                                                                            
                                                                                                                                
     Section  21 -  Amends  AS  43.77.045(b), the  fisheries                                                                    
     resource  landing   tax  to  remove  the   100  percent                                                                    
     contribution  from  the  $100,000-$300,000,  therefore,                                                                    
     all contributions will be a 50 percent credit.                                                                             
                                                                                                                                
     Section  22 -  Amends  AS  43.77.045(b), the  fisheries                                                                    
     resource landing tax to decrease  the cap for the total                                                                    
     amount of the credit to be not more than $1,000,000.                                                                       
                                                                                                                                
     Section 23 - repeals the  contraction dates set at 2021                                                                    
     for  the  education  tax   credit  expansions     which                                                                    
     includes the  number of programs that  are eligible for                                                                    
     the  education  tax  credits and  the  cap  amount.  By                                                                    
     repealing  the  contractual  language,  it  leaves  the                                                                    
     program AS IT IS TODAY in place.                                                                                           
                                                                                                                                
Ms.  Kloster noted  that because  the education  tax credits                                                                    
had  expanded  over  the   years,  with  multiple  different                                                                    
iterations, there  were multiple  repeal dates.  The Section                                                                    
was meant to lineup all the repeal dates.                                                                                       
                                                                                                                                
10:37:36 AM                                                                                                                   
                                                                                                                                
Ms. Kloster continued to address the Sectional Analysis:                                                                        
     Section 24    Adds reviser's instructions  to reconcile                                                                    
     the effects of  the passage of both House  Bill 233 and                                                                    
     House Bill 97,  which passed the House  on 4/9/2018 and                                                                    
     the Senate on 4/20/2018.                                                                                                   
                                                                                                                                
     Section 25    repeals the  effective dates that  are in                                                                    
     accordance  with section  23. Per  legislative drafting                                                                    
     the repeal  of effective dates  need to be  in separate                                                                    
     section.                                                                                                                   
                                                                                                                                
     Section 26   extends the  sunset date from December 31,                                                                    
     2018 to January 1, 2025.                                                                                                   
                                                                                                                                
     Section 27    Sections 1-19, 21, and 22  take effect on                                                                    
     January   1,  2019   which  relate   to  the   national                                                                    
     accreditation,   removal   of  intercollegiate   sports                                                                    
     tournament, make  all tax credits  contribution amounts                                                                    
     at  50  percent,  and decreasing  the  total  cap  from                                                                    
     $5,000,000 to $1,000,000.                                                                                                  
                                                                                                                                
     Section 28    Relates  back to section  20 of  the bill                                                                    
     which  is removing  a cross  reference to  an unrelated                                                                    
     fisheries tax credit.                                                                                                      
                                                                                                                                
     Section 29   With the  exception of sections 27 and 28,                                                                    
     everything else in the bill  has an immediate effective                                                                    
     date.                                                                                                                      
                                                                                                                                
10:38:36 AM                                                                                                                   
                                                                                                                                
Vice-Chair Bishop discussed a new fiscal note from the                                                                          
Department of Revenue, OMB Component 2476. He read from the                                                                     
analysis:                                                                                                                       
                                                                                                                                
     Assuming  an  unchanged   donation  profile  in  future                                                                    
     years, the  reduction to the  credit rate  would reduce                                                                    
     the  total credits  claimed under  this version  of the                                                                    
     bill to  $5.42 million. Although the  fiscal note shows                                                                    
     "negative" revenue  of $5.42 million, this  is compared                                                                    
     to  the status  quo which  would  be a  full sunset  on                                                                    
     1/1/19.  Alternatively,  this  should be  viewed  as  a                                                                    
     reduction in revenue impact of  $2.15 million. In other                                                                    
     words,   this   bill   represents  $2.15   million   in                                                                    
     additional revenue versus a so-called clean extension.                                                                     
                                                                                                                                
     For FY1019, the impact will  be half this number due to                                                                    
     the change occurring in the  middle of the fiscal year.                                                                    
     Continuing this program will not add administrative                                                                        
     costs to the Department of Revenue.                                                                                        
                                                                                                                                
Co-Chair  MacKinnon pondered  why  reducing  the ability  to                                                                    
apply a tax  credit against taxes owed to the  state was not                                                                    
reflected in the fiscal note as increased revenue.                                                                              
                                                                                                                                
Mr. Alper  stated that the  initial purpose of the  bill had                                                                    
been to extend a program  that had been scheduled to sunset.                                                                    
He said that  if the bill were not to  pass the $7.5 million                                                                    
in education  tax credits currently  being claimed  would be                                                                    
reflected as  additional state revenue  in future  years. He                                                                    
said  that  the  fiscal  note  showed  a  revenue  reduction                                                                    
because the comparison was between  the current bill version                                                                    
and what would happen if no legislation were to pass.                                                                           
                                                                                                                                
10:42:22 AM                                                                                                                   
                                                                                                                                
Co-Chair  MacKinnon  directed  committee  attention  to  the                                                                    
analysis  previously  related  by Vice-Chair  Bishop,  which                                                                    
outline d the  $2.15 million in additional  revenue that the                                                                    
state  would receive  based on  the  changes in  the CS  and                                                                    
allowing the extension to go forward.                                                                                           
                                                                                                                                
Mr. Alper agreed.                                                                                                               
                                                                                                                                
Co-Chair  MacKinnon asked  whether  it was  accurate to  say                                                                    
that the bill was extending  the program in its current form                                                                    
versus  reducing  the  state's  contribution  and  that  the                                                                    
difference was reflected on the fiscal note.                                                                                    
                                                                                                                                
Mr. Alper said that  roughly speaking approximately $200,000                                                                    
of the $2.15 million would  be from the very large donations                                                                    
that would be  above the $2 million cap. A  little less than                                                                    
$2  million would  be  the lower  credit  rate between  $100                                                                    
million and $300 million donation.                                                                                              
                                                                                                                                
Co-Chair  MacKinnon  understood that  if  the  bill did  not                                                                    
advance the state could save $7 million.                                                                                        
                                                                                                                                
Mr.  Alper  stated  that  if  the  program  were  to  sunset                                                                    
completely the state would save $7.5 million per year.                                                                          
                                                                                                                                
Co-Chair  MacKinnon recognized  that sunsetting  the program                                                                    
would negatively affect Alaskan  students. She said that the                                                                    
bill would represent a compromise  that the tax credit would                                                                    
be extended  at a  cost to  the state  as long  as donations                                                                    
remained the same at $5.4 million.                                                                                              
                                                                                                                                
Co-Chair   MacKinnon   discussed  the   challenging   fiscal                                                                    
situation in  the state. She  lamented the possible  loss of                                                                    
good   programs,  reduction   of   contributions,  and   the                                                                    
availability  of  the  private  sector  to  donate  to  good                                                                    
causes.                                                                                                                         
                                                                                                                                
10:46:00 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon OPENED public testimony.                                                                                     
                                                                                                                                
SUSAN  FOLEY, PRESIDENT,  UNIVERSITY  OF ALASKA  FOUNDATION,                                                                    
ANCHORAGE (via teleconference), testified  in support of the                                                                    
bill.  She explained  that the  foundation  was the  biggest                                                                    
beneficiary  of   the  donations  that  qualified   for  the                                                                    
education  tax  credit. She  stated  that  one of  the  most                                                                    
serious  threats  to  the  state   was  "brain  drain"  from                                                                    
students   leaving  the   state   to  pursue   postsecondary                                                                    
education.  She said  that  it was  impossible  to know  the                                                                    
impact of  the 50 percent credit  remaining constant, rather                                                                    
than the  increase under  the bill,  but relayed  that gifts                                                                    
from  businesses -  more than  $100,000  in any  one year  -                                                                    
amounted to an average of  44 percent of the total donations                                                                    
received by the foundation since  January 1, 2010. She added                                                                    
that for the same period,  donations in excess of $1 million                                                                    
averaged 9  percent of total  donations. She related  that a                                                                    
large portion  of those donations  went to  scholarships and                                                                    
programs  important   to  employers.   She  said   that  the                                                                    
extension  of   the  tax  credits   was  important   to  the                                                                    
foundation and the University.                                                                                                  
                                                                                                                                
10:49:34 AM                                                                                                                   
                                                                                                                                
Senator  Stevens   understood  that  44  percent   of  total                                                                    
donations to  the UA Foundation were  from businesses making                                                                    
donations in  excess of  $100,000 per  year, 9  percent were                                                                    
from donations that were over $1 million.                                                                                       
                                                                                                                                
Ms. Foley agreed.                                                                                                               
                                                                                                                                
Senator Micciche asked  about the average of  the 44 percent                                                                    
of the donations.                                                                                                               
                                                                                                                                
Ms. Foley  stated that  the time frame  was from  January 1,                                                                    
2010, to the present.                                                                                                           
Senator Micciche asked for the  average amount over $100,000                                                                    
for the 44 percent.                                                                                                             
                                                                                                                                
Co-Chair MacKinnon asked Ms. Foley to respond in writing.                                                                       
                                                                                                                                
Ms. Foley agreed to provide the information.                                                                                    
                                                                                                                                
Ms.  Foley  clarified  that  the  44  percent  was  for  all                                                                    
donations over $100,000.                                                                                                        
                                                                                                                                
10:51:48 AM                                                                                                                   
                                                                                                                                
MIKE  SATRE,  MANAGER,  GOVERNMENT RELATIONS  AND  COMMUNITY                                                                    
AFFAIRS,  HECLA  GREENS  CREEK   MINE,  testified  that  the                                                                    
largest legislative  priority for  the mine  in 2018  was to                                                                    
advocate for a  clean extension of the tax  credit. He spoke                                                                    
to his concerns with the  current bill version. He said that                                                                    
the greatest challenge for the  mining industry in the state                                                                    
was the  recruitment and retention of  quality employees. He                                                                    
said  that   the  mine  had   utilized  the   credit  almost                                                                    
exclusively for workforce development  programs at all three                                                                    
University     of     Alaska    campuses     and     various                                                                    
vocational/technical  centers   throughout  the   state.  He                                                                    
related that  the current  format of  the tax  credit system                                                                    
allowed  the  industry  to  make  large,  programmatic  type                                                                    
donations  that  institutions  could  count  on  to  provide                                                                    
multi-year programs.  He said a  $300,000 donation  from the                                                                    
mine to the University allowed  for a budget of $100,000 for                                                                    
a  three-year program,  which  the mine  had  done for  many                                                                    
years,  contributing nearly  $1 million  to the  Pathways to                                                                    
Mining Careers program. He believed  that by taking away the                                                                    
incentive for making these  large donations, companies would                                                                    
likely  make smaller  donations or  no donation  at all.  He                                                                    
shared  that the  $100,000 donation  now  cost the  industry                                                                    
$50,000  out-of-pocket;   that  same  donation   would  cost                                                                    
$150,000  out-of-pocket under  the  bill.  He stressed  that                                                                    
that out-of-pocket  money was new  money to  the University,                                                                    
new money  to the  school system, in  addition to  the money                                                                    
that  was   redirected  from  the  General   Fund  to  local                                                                    
institutions. He  hoped that the  intent of  the legislation                                                                    
would be to incentivize partnerships  and new money into the                                                                    
University  and  school  systems.  He  reiterated  that  the                                                                    
extension of  the tax  credit was  the priority  but thought                                                                    
that the current version would result in less donations.                                                                        
                                                                                                                                
10:55:18 AM                                                                                                                   
                                                                                                                                
He  referenced  the  newspaper   in  Juneau,  in  which  was                                                                    
reported  the  cancellation  of the  automotive  program  at                                                                    
Juneau-Douglas High  School. Under  the current  tax credit,                                                                    
it was possible  for the school to solicit  a qualifying tax                                                                    
payer to make a $200,000  payment in support of the program.                                                                    
Under the CS, there would be  no incentive for the tax payer                                                                    
to donate.                                                                                                                      
                                                                                                                                
10:57:16 AM                                                                                                                   
                                                                                                                                
Co-Chair  MacKinnon  thanked  Mr. Satre  for  his  company's                                                                    
participation in the tax credit program.                                                                                        
                                                                                                                                
Vice-Chair Bishop  asked Mr. Satre  to convey  the increased                                                                    
percentage of Alaska hire since  the tax credit programs had                                                                    
been in place.                                                                                                                  
                                                                                                                                
Mr. Satre agreed to provide the information.                                                                                    
                                                                                                                                
Senator von Imhof thought Mr.  Satre had made salient points                                                                    
and  sound and  reasonable arguments.  She thought  that the                                                                    
challenge for the  committee was to keep  the credit program                                                                    
alive  but at  a higher  expense to  industry. She  believed                                                                    
that time  would tell how  the change would  impact donation                                                                    
behavior.                                                                                                                       
                                                                                                                                
10:59:15 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon  notified that  the committee  had posted                                                                    
the  CS online  and provided  a copy  to the  sponsor before                                                                    
public testimony.                                                                                                               
                                                                                                                                
11:00:08 AM                                                                                                                   
                                                                                                                                
DOUG  WALRATH,  DIRECTOR,  NORTHWEST  CAREER  AND  TECHNICAL                                                                    
CENTER, NOME  (via teleconference), spoke in  support of the                                                                    
education tax  credit program. He  said that the  center had                                                                    
been aggressive  in pursuing business partnerships  with the                                                                    
education tax credit for nearly  a decade; the education tax                                                                    
credit represented approximately 30  percent if the center's                                                                    
annual operating  budget. He said  that prior to  the credit                                                                    
the graduation  rate from the Bering  Strait School District                                                                    
was  39  percent, since  training  programs  had been  build                                                                    
using the credit donations graduation  rates had risen to 82                                                                    
percent. He  echoed the concerns  of the  previous testifier                                                                    
that  the  current  bill  version  could  negatively  affect                                                                    
donations from  industry. He thought  that it  was important                                                                    
to  acknowledge  the total  contribution  of  new money  for                                                                    
credits claimed in 2017.                                                                                                        
                                                                                                                                
11:04:44 AM                                                                                                                   
                                                                                                                                
Senator Micciche  stated that the  tax credit  program still                                                                    
had bi-partisan  support in the legislature.  He asked about                                                                    
the total  contributions to the Northwest  Alaska Career and                                                                    
Technical  Center  in 2016  of  $320,500.  He wondered  what                                                                    
percentage  of  the  donations  were  between  $100,000  and                                                                    
$300,000.                                                                                                                       
                                                                                                                                
Mr.  Walrath  considered  the technical  center's  nine-year                                                                    
history.  He said  that 27  contributions had  been received                                                                    
between FY10 and  FY18, of those contributions  only one was                                                                    
at  the  $300,000 level.  96  percent  of the  contributions                                                                    
received had been  below $300,000 level. He said  that 15 of                                                                    
the  contributions were  between  $10,000  and $100,000,  11                                                                    
contributions were between $100,000 and $300,000.                                                                               
                                                                                                                                
Vice-Chair Bishop  asked about  the graduation rates  at the                                                                    
center.                                                                                                                         
                                                                                                                                
Mr. Walrath  stated that the  grad rate of the  district was                                                                    
at 32  percent in 2008, one  year before the tax  credit was                                                                    
available  at the  secondary  level. He  that  the rate  had                                                                    
grown since  the programs inception  to 89 percent  in FY17.                                                                    
He said  that the  program had  directly contributed  to the                                                                    
reduction of the dropout rate by 76 percent.                                                                                    
                                                                                                                                
11:08:22 AM                                                                                                                   
                                                                                                                                
DR.  BRAD  HARRIS,  SELF,  ANCHORAGE  (via  teleconference),                                                                    
testified shared that  he was a professor  at the University                                                                    
of Alaska.  He stated that  the program in its  current form                                                                    
was extremely effective. He encouraged  the extension of the                                                                    
program in its  current form. He disagreed  with the removal                                                                    
of  the "sweet  spot' and  the changes  in the  current bill                                                                    
version.  He believed  that the  legislation would  hurt the                                                                    
relationship between educational  institutions and industry.                                                                    
He thought that the fiscal note  that showed the cost of the                                                                    
program did  not reflect the  full benefits  associated with                                                                    
the program.  He requested the  extension of the  program in                                                                    
its current form.                                                                                                               
                                                                                                                                
11:12:40 AM                                                                                                                   
                                                                                                                                
TOMMY   SHERIDAN,   SILVER   BAY  SEAFOODS,   CORDOVA   (via                                                                    
teleconference), testified  in strong support of  HB 233. He                                                                    
shared that he had benefited  from the education tax credits                                                                    
as  a   student  in  the  University   of  Alaska  Southeast                                                                    
Fisheries  Technology   program.  He  summarized   that  the                                                                    
extension of  the program would continue  to promote private                                                                    
investment  in Alaskan  higher  education  and would  ensure                                                                    
that  the  state  could  maintain  its  world-class  fishery                                                                    
management system.                                                                                                              
                                                                                                                                
11:14:58 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
                                                                                                                                
Representative  Tuck  gave  an  example of  the  tax  credit                                                                    
program  partnering  with  industry.  He stated  he  was  an                                                                    
electrician by  trade. He  shared a  story relating  the way                                                                    
that industry supported schools, and ultimately, society.                                                                       
                                                                                                                                
CSHB  233(FIN)  am  was  HEARD and  HELD  in  committee  for                                                                    
further consideration.                                                                                                          
                                                                                                                                
Co-Chair  MacKinnon informed  the committee  that amendments                                                                    
were due April 27, 2018, at noon.                                                                                               
                                                                                                                                
Co-Chair  MacKinnon  discussed housekeeping.  She  announced                                                                    
that  the  committee  would hear  public  testimony  on  the                                                                    
capital budget. She relayed the public testimony process.                                                                       
                                                                                                                                
Co-Chair MacKinnon offered words  on the fiscal crisis faced                                                                    
by the  state and the  hard decision to  discontinue funding                                                                    
meaningful programs.  She explained  that the  committee was                                                                    
working  to reduce  the  state's fiduciary  responsibilities                                                                    
while balancing  the consequences  of those  reductions. She                                                                    
discussed the history of the  inception of the Parament Fund                                                                    
Dividend. She stressed the  difficult financial choices that                                                                    
the  committee had  been, and  would be,  forced to  make in                                                                    
order  to balance  the state  budget.  She complimented  the                                                                    
individual  talents  and  strengths  each  committee  member                                                                    
brought to the table.                                                                                                           
                                                                                                                                
ADJOURNMENT                                                                                                                   
11:24:33 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 11:24 a.m.                                                                                         
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HB 135 Sectional Analysis.pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB 135 Sponsor Statement.pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB 135 - Letters of Support.pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB 135 Summary of Changes Ver. A to Ver. D.A..pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB150 Additional Document - 2017 Military Pay Chart 3.15.18.pdf SFIN 4/26/2018 9:00:00 AM
HB 150
HB150 Additional Document-Sockeye Fire Spreadsheet from DMVA 3.15.18.pdf SFIN 4/26/2018 9:00:00 AM
HB 150
HB150 Sponsor Statement 3.15.18.pdf SFIN 4/26/2018 9:00:00 AM
HB 150
HB150 Supporting Document-Letter DMVA 3.15.18.pdf SFIN 4/26/2018 9:00:00 AM
HB 150
HB233 Letters of Support.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB233 DOR Education Tax Credit Report CY2017.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB233 Edu Tax Credit Presentation.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB233 Memo of Changes.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB233 Sponsor Statement 2.28.18.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB233 Sectional Analysis ver U.A.PDF SFIN 4/26/2018 9:00:00 AM
HB 233
HB 135 SCS FIN v. J Summary.pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB 135 SCS work draft version. J.pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB 233 SCS FIN v. N Summary.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 SCS FINwork draft version. N.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Alaska Pacific University Testimony.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Background Information - Tax Division.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 135 SCS FIN v. J Summary.pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB 150 Doehl to MacKinnon -- HB 150 -- 04-26-2018.pdf SFIN 4/26/2018 9:00:00 AM
HB 150
HB 135 Sectional Analysis v. J.pdf SFIN 4/26/2018 9:00:00 AM
HB 135
HB 233 Testimony Northrim Bank.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Testimony Alaska Native Heratige Center.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 2018 04 27 - UA Foundation HB 233 Hearing Follow-Up.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Batter.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony King.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Education Tax Credit extension Atkinson.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Cunningham.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 2018 04 28 UAF CFOS ETC Letter.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Kroska.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Seitz.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Manishin.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Nielsen.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Sutton.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Hallinan.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Hassell.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Graham.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Fish.pdf SFIN 4/26/2018 9:00:00 AM
HB 233
HB 233 Public Testimony Figus.pdf SFIN 4/26/2018 9:00:00 AM
HB 233