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