Legislature(1993 - 1994)
03/25/1994 09:00 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 25, 1994
9:00 a.m.
TAPES
SFC-94, #51, Side 1 (000-end)
SFC-94, #51, Side 2 (end-400)
(Commonwealth North presentation began on tape #53)
SFC-94, #53, Side 1 (000-end)
SFC-94, #53, Side 2 (end-300)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 9:00 a.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators Sharp,
Kelly, and Kerttula were present. Senators Rieger and Jacko
did not attend.
ALSO ATTENDING: Senator Randy Phillips; Russell Heath,
Executive Director, Alaska Environmental Lobby; Chip Thoma,
private citizen; Virginia Stonkus, fiscal analyst, and Mike
Greany, Director, Legislative Finance Division; aides to
committee members, representative of the press, and other
members of the legislature.
Commonwealth North Board of Directors attending included:
Lee Gorsuch, President; Pat Pourchot, Executive Director;
Skip Bilhartz, Vice President (ARCO); Bill McHugh (Yukon
Pacific); Mark Langland, Treasurer (Northrim Bank); and
Richard Barnes (Enstar).
TELECONFERENCE: Tom Lakosh, John Bernitz, Wayne Coleman,
Ivan Widom, Dan Strickland, Gordon Scott, Kelly Weaverling,
Kristen Johnson, Stan Stephens, Walt Parker, Patty Saunders,
Kevin Harun, Michael Coumbe, from Anchorage; Randy McGovern,
Hillary Schaefer, from Fairbanks; Mary Forbes, Mike
Sirofchuck, from Kodiak; Chris Garcia, Kenai/Soldotna; and
Jim Studley, from Haines.
SUMMARY INFORMATION
Commonwealth North Presentation
Co-chair Pearce announced that a fiscal gap
presentation would be made by Commonwealth
North. She introduced Lee Gorsuch,
President; Pat Pourchot, Executive Director;
Skip Bilhartz, Vice President (ARCO); Bill
McHugh (Yukon Pacific); Mark Langland,
Treasurer (Northrim Bank); and Richard Barnes
(Enstar), to the committee. Commonwealth
North outlined its recommendations and urged
the legislature to take action regarding a
five-year fiscal plan for the state of Alaska
(see Attachment A, copy on file in the
committee minute book).
CSSB 215(RES): An Act relating to oil and hazardous
substances; redesignating the oil and
hazardous substance release response fund and
its uses; repealing the authority in law by
which marine highway vessels may be designed
and constructed to aid in oil and hazardous
substance spill cleanup in state marine water
using money in the oil and hazardous
substance release response fund and the
authority of the Department of Environmental
Conservation to levy and collect fees for
review of certain submissions related to oil;
altering requirements applicable to liens for
recovery of state expenditures related to oil
or hazardous substances; terminating the
nickel-per-barrel oil conservation surcharge;
levying and collecting two new oil
surcharges; and providing for the suspension
and reimposition of one of the new
surcharges; and providing for an effective
date.
Teleconference testimony was heard as listed
above opposing SB 215. Russell Heath,
Executive Director, Alaska Environmental
Lobby, and Chip Thoma, private citizen,
testified in opposition to the bill. SB 215
was HELD in committee.
CS FOR SENATE BILL NO. 215(RES):
An Act relating to oil and hazardous substances;
redesignating the oil and hazardous substance release
response fund and its uses; repealing the authority in
law by which marine highway vessels may be designed and
constructed to aid in oil and hazardous substance spill
cleanup in state marine water using money in the oil
and hazardous substance release response fund and the
authority of the Department of Environmental
Conservation to levy and collect fees for review of
certain submissions related to oil; altering
requirements applicable to liens for recovery of state
expenditures related to oil or hazardous substances;
terminating the nickel-per-barrel oil conservation
surcharge; levying and collecting two new oil
surcharges; and providing for the suspension and
reimposition of one of the new surcharges; and
providing for an effective date.
Co-chair Pearce announced that SB 215 was before the
committee and invited the Kenai/Soldotna location to begin
the teleconference portion of the meeting.
CHRIS GARCIA testified via teleconference form
Kenai/Soldotna opposing SB 215. He felt this legislation
was allowing the oil companies a tax break. He also
objected that an administrative order was needed for
responses smaller than 100,000 barrels. He had questions
about the use of the contingency and abatement account for
capital projects. Co-chair Pearce said that capital
projects would be limited to catastrophic release of oil and
hazardous substances.
MARY FORBES testified via teleconference from Kodiak in
opposition to SB 215. She felt that industry claims, and
the attitude that the 470 Fund had been misspent, motivated
this legislation. She cited a recent audit regarding the
470 Fund that said DEC had been handling the funds
responsibly. She was willing to pay more at the pump to
insure proper protection from oil spills.
MIKE SIROFCHUCK testified via teleconference from Kodiak in
opposition to SB 215. He pleaded with the committee not to
pass the bill. He felt the response fund had been spent
properly and was barely adequate to deal with the situations
in the state. He lived in Kodiak during the oil spill and
witnessed the catastrophic effects that continued to this
day. He felt SB 215 would weaken efforts to prevent further
oil spills and inhibit the state's ability to respond to
them. He echoed Ms. Forbes' comments regarding the audit
and the responsible use of the 470 Fund. He encouraged
DEC's budget be increased so it could better handle oil
spills and other situations. He stated oil companies did
not need a tax break but he would also be willing to pay a
little more at the pump to protect the environment, and the
mental, financial and economic stability of the community
and state. He again urged the committee to hold SB 215 in
committee.
WAYNE COLEMAN, member of the executive committee of the
Prince William Sound Regional Citizens Advisory Council,
testified, via teleconference from Anchorage, in opposition
to SB 215. He had submitted written testimony on March 9,
1994, but he reiterated that RCAC was concerned with the
effective and efficient manner the Fund was accessed in the
event of a spill, and adequate funding for spill prevention
and preparedness programs. He said the "I" work draft of
the bill contained numerous problems and inconsistencies.
He went on at length to detail those concerns.
IVAN WIDOM, testified via teleconference from Anchorage,
that he was attending a conference regarding the prevention,
response and oversight, five years after the Valdez oil
spill. There were about 75-100 people talking about issues
around the spill and one of the most important was issues
around complacency. He could not understand how SB 215
could pass and give oil companies a tax break.
DAN STRICKLAND, fisherman and journalist, testified via
teleconference from Anchorage, that his family had suffered
first hand from the devastation of the oil spill, the
effects of a poorly prepared spill response, and a
unresponsive and dominant oil industry. He said progress
had been made in the last five years but SB 215 was an
example of backsliding. He urged the committee to defeat SB
215.
GORDON SCOTT, fisherman in Prince William Sound and member
of the Regional Advisory Council Committee on Oil Spill
Prevention and Response, testified via teleconference from
Anchorage. He said that the legislators needed to remind
themselves that they represent Alaskan people and resources.
The profit motive drove the oil industry to cut their costs
where they could and cutting prevention and oversight
programs and funds for response to actual spills was an
example of dropping resource protection for the benefit of
their shareholders, very few of which were Alaskans. He
urged the committee to vote against SB 215.
KELLY WEAVERLING, who during the oil spill organized and
operated the wildlife rescue fleet, testified via
teleconference from Anchorage. He said it was the largest
wildlife rescue attempt ever mounted. He saw first hand the
effects of poor response and preparedness. He had been
elected the mayor of Cordova but was speaking now as a
private citizen. He described a pattern that he recognized.
During the Reagan administration, a promise of double hulls,
and adequate holding facilities at marine terminals in the
event of poor weather preventing ships from entering or
leaving Port Valdez was made. Several administrations
later, the PWS oil spill occurred and several ships had to
pass through the oil spill since holding facilities were not
available. This should have been a wake up call for the
U.S. but it seemed that the snooze alarm had been pushed.
Single hulled vessels still traversed PWS and only half of
the holding facilities needed were available. This pattern
repeated itself with such legislation as SB 215. He asked
the committee to vaporize this bad bill.
KRISTEN JOHNSON, member of RCAC for Prince William Sound,
testified via teleconference from Anchorage, in opposition
to SB 215. She felt that the legislation did not listen to
the people of Alaska, especially the ones that had suffered
from the spill. She did not want the 470 Fund weakened in
any way. She felt the coordination and preparedness in case
of another disaster needed strong support. She strongly
opposed the passage of SB 215.
STAN STEPHENS, testified via teleconference from Anchorage,
in opposition to SB 215. He felt the legislature was being
complacent and ignored its citizens. He strongly opposed SB
215.
WALT PARKER, chairman of the Hazardous Spill Technology
Review Council, testified via teleconference from Anchorage
in opposition to SB 215. He said there was a lot of
expectation that steps would be taken towards prevention and
response. He felt SB 215 would take the impetus out of that
effort.
RANDY MCGOVERN, private citizen and former member of the
Hazardous Substance Spill Technology Review Council,
testified via teleconference from Fairbanks. He opposed SB
215. He also cited the audit regarding the funds spent
since 1986. He felt 2.8 cents per barrel would not effect
the oil companies. Cutting this revenue into the fund made
no sense to him at all. He urged the legislature to not
pass SB 215.
HILLARY SCHAEFER testified, via teleconference from
Fairbanks, in opposition to SB 215. She listed her reasons
and reiterated that the fund was needed for adequate
response.
PATTY SAUNDERS, private citizen, fisherman, and attorney,
testified via teleconference from Anchorage in opposition to
SB 215. She said that there was still evidence and effects
of the PWS oil spill. People's lives had been changed
forever. She said lessons had been learned and it had made
people more cautious and aware. Benefits from the oil
companies needed to be balanced with awareness of potential
problems. She also cited the audit that supported the
rightful management of the 470 Fund. She did not feel that
DEC's budget should be cut. She asked the legislature, as a
whole, to look at the big picture and not cut the 470 Fund.
MICHAEL COUMBE, native of Alaska, testified via
teleconference from Anchorage in opposition to SB 215. He
said Alaska was our home and we needed to take care of it.
He likened the oil companies to tenants and the citizens of
Alaska as the landlord. He said that the landlord needed to
stand firm when the tenants made a mess and did not clean it
up. He said if there was any question of where the money
was going, maybe it was time to raise the rent.
KEVIN HARUN, director of the Alaska (word inaudible on the
tape) Environment, testified via teleconference from
Anchorage, in opposition to SB 215. He said that 2.5 cents
per barrel was not enough especially in light of the budget
crisis that the state was facing. He understood that the
industry was in search of tax relief but he told the
legislature it was their job to ensure those taxes were not
lowered. He did not approve of DM&VA being funded from the
prevention pot for disaster relief. He urged the
legislature to support public interest.
JOHN BERNITZ, public citizen, testified via teleconference
from Anchorage, in opposition to SB 215. He did not
understand in an environment of budget shortfalls why the
legislature was attempting to pass this legislation.
JIM STUDLEY, public citizen with many hats, testified via
teleconference from Haines, in opposition to SB 215. He
said funding was needed at the local level. If funds were
limited, the local communities would not be able to carry
out their preparedness programs.
RUSSELL HEATH, Executive Director, Alaska Environmental
Lobby, a coalition of 20 Alaskan environmental groups,
testified in person in Juneau in opposition to SB 215. He
said the battle over the 470 Fund had been long and in the
last year many people had voiced their concern that Alaska
have a strong spill prevention response capability. No one
had testified that it need not protect itself from oil and
hazardous substance spills. He asked why SB 215 was before
the legislature. Individuals testifying in support of SB
215 had said three things - the fund was broke, funds had
been mismanaged or spent inappropriately, or the formula for
determining the surcharge cap was broken or unfair. Over
the course of debate, he felt none of those facts had been
substantiated. The facts were that the fund was not broke,
the audit report documented the funds had not been
mismanaged, and slowly the cap would be reached but it
seemed a very equitable calculation.
End SFC-94 #51, Side 2
Begin SFC-94 #51, Side 2
Mr. Heath asked if most of the charges leveled against the
fund were unfounded, what did SB 215 fix. He said that the
bill fixed the calculation of the surcharge cap which was
unfair to the public. It did not address any issues
recommended by the audit to improve management of the fund
nor did it strengthen the spill prevention programs. He was
disappointed that none of the programs had been assessed.
He said that the Alaska Environmental Lobby had strong
concerns regarding SB 215 and Wayne Coleman had spoke to
those same concerns. He did not wish to reiterate them but
he would like to state a few general principles. First,
prevention was key. Once the oil was on the water, all was
lost. Industry and the state must be vigilant in looking
for and finding ways to prevent oil spills. Prevention was
also the most cost effective policy. Secondly, adequately
trained personnel was very important. Thirdly, the Fund was
established in 1986 to deal with problems involving
petroleum and other hazardous substances including sites
contaminated by hazardous materials. It was essential that
non-petroleum hazards be addressed. Four, provision must be
made for the future. Funding for the prevention and
response programs must be available as long as Alaska was at
risk. The Alaska Environmental Lobby did not believe that
SB 215 provided for any of these four general principles,
and therefore opposed the bill.
CHIP THOMA, public citizen, testified in opposition to SB
215. He turned the committee's attention to a CS that was
being drafted in House Resources, HB 238. That version
incorporated the recommendations of the legislature budget
audit on the 470 Fund. It made accounting clearer and
placed the valid criticism on DM&VA and not on DEC. He felt
the criticism of the Fund was false. He termed SB 215
diversionary and vengeance legislation by the oil industry,
especially Exxon and British Petroleum. He felt the message
of this bill was that oil companies carried a lot of weight
in the legislature. He said the oil companies would take
from Alaska between $3 and $6 billion. While we sat around
arguing about nickels and pennies, the big bucks were going
into net profits for the oil companies.
TOM LAKOSH testified via teleconference from Anchorage in
opposition to SB 215. He felt holding that money in reserve
would stifle the efforts to see that proper response
equipment was purchased in advance and would limit the
state's ability to protect Prince William Sound as well as
other areas which were threatened such as Cook Inlet. He
said he had sent committee members faxes relating to several
recent tanker collisions in the Middle East. He said the
threat of a burning spill was one that was inadequately
prepared for in the industry. If SB 215 passed,
preparedness for that sort of emergency would be blocked.
He strongly opposed passing SB 215.
Co-chair Pearce closed the teleconference portion of the
meeting. She said that SB 215 would be HELD in committee.
Recess 10:15am
Reconvene 10:25am
Begin SFC-94 #53, Side 1
COMMONWEALTH NORTH - BUDGET RECOMMENDATIONS FOR ALASKA
Co-chair Pearce announced that a fiscal gap presentation
would be made by Commonwealth North which included a handout
(see Attachment A, copy on file in the committee minute
book). She introduced Lee Gorsuch, President; Pat Pourchot,
Executive Director; Skip Bilhartz, Vide President (ARCO);
Bill McHugh (Yukon Pacific); Mark Langland, Treasurer
(Northrim Bank); and Richard Barnes (Enstar), to the
committee.
LEE GORSUCH said that Commonwealth North was a non-profit
organization dedicated to the understanding of public
policies that effected the long term interest of the state
of Alaska. This organization invited distinguished speakers
from around the world and the country to share insights and
issues that might effect Alaska. It also engaged
independent studies of issues that directly effected Alaska.
One of those issues was the state's long term financial
future. Commonwealth North was concerned about the absence
of a long term strategy to finance the state's welfare
through the 90s and into the next century. He said
Commonwealth North followed the Governor's economic summit
with a budget conference of their own. A series of
recommendations came out of that meeting. The
recommendations were similar when compared to those that
came out of the Governor's economic summit, and Commonsense
of Alaska. All agreed that it was more than time for Alaska
to employ all the fiscal tools available to implement a long
term financial plan beginning with immediate action. He
said a budget committee was formed and some recommendations
were suggested for adoption this year and over the next four
years.
Mr. Gorsuch said he would outline their general
recommendations. For this year, spending must be reduced,
revenue should be increased, and an urgent push made to
outline a plan. Under reduced spending, the operating
budget should be frozen at or below the current level, and
reduce actual nominal dollars by $60M. Also, the capital
budget should be reduced significantly below historic levels
this year, perhaps by $100-150M, and look forward to a
capital budget of $250M. Another recommendation was to cap
the Permanent Fund at the same level as was paid out last
year. The entire Alaskan public must understand that the
dividend is a source of spending. Also, under increased
revenues, it was suggested (as the Governor had) that some
increases in taxes and user fees be raised to generate $60-
90M, and look at changing the statutory priority to
inflation of the Permanent Fund first. Uniformly, it was
felt the Permanent Fund was Alaska's ace in the hole and
should be preserved. Inflation should be the first order of
business before dividends were distributed. It was also
felt that oil exploration and mineral development was
essential to the long term interest of the state. The last
immediate recommendation was to create an Alaska Finance
Commission with administrative, legislative, and public
members to produce a four-year financial plan. During the
interim, a four-year plan could be created for consideration
when the legislature reconvenes.
Mr. Gorsuch went on to recommend an Income Tax Commission
with a similar composition. Since the Department of Revenue
had not read income tax data for over ten years, it was
suggested that process should be thought through in regard
to Alaska.
In answer to Senator Kerttula, Mr. Gorsuch said Commonwealth
North had not looked at statewide sales tax or a state
income tax but it was felt the capacity to raise revenues
needed to be undertaken fairly quickly because
implementation would take at least 2 years.
Mr. Gorsuch added that Commonwealth North also recommended a
plan for consolidating and providing access to the reserves
and non-recurring future revenues. He listed some other
recommendations such as limiting the growth of formula and
entitlement programs including the dividend, phase out
unique programs not based on need, and restructure programs
for efficiencies, privatization, and opportunities for
possible local government responsibilities in service areas.
He said that if those could be held at the level of a 5
percent reduction over the next five years, a savings could
be realized of $400-500M. He asked the legislature to
consider reducing but not eliminating the Permanent Fund
dividend expenditure over time.
Mr. Gorsuch said that Commonwealth North recommended that
all cash reserves should be deposited into a consolidated
fund. He said it was very confusing and complicated to have
so many pots of money and a consolidation should be made
with attached rules for the funds. He also emphasized that
the legislature and the Permanent Fund Board pay attention
to moving more of the investments into equities. The
general sense was that inflation proofing could be embraced
in the appreciated value of the equity holdings. He
reiterated the importance of exploration and development of
mineral and oil resources. He said the recommendations were
not felt to be radical but there was a sense of urgency to
employ the fiscal tools available. He then showed an
overhead graph that illustrated revenues from the
recommendations he had outlined.
BILL MCHUGH added there was not one specific solution that
would solve the financial problems Alaska faced. A
diversity of support was recommended. In regard to the
sales tax, some studies showed that it should be reserved
for the municipalities. Senator Kerttula agreed that was
historically the case. Mr. McHugh said the lead time needed
to get some of the recommendations in place was the fact
that caused the crisis.
MARK LANGLAND said, once the plan was put together, a
tremendous amount of education must be done for the general
public so they could support legislature with such a
disciplined approach.
SKIP BILHARTZ said he would like to express his frustration
and sense of urgency regarding the issues facing Alaska
right now. A plan was needed.
RICHARD BARNES also expressed the urgency he felt with
88,000 utility customers in south central Alaska. A drop in
the economy in 1986 proved to be a real hardship for people.
He saw the status quo of state budgets as pushing out the
inevitability of a precipitous cliff in the economy of
Alaska. The sooner the legislature could take the actions
to smooth the impact or avoid any dislocations to his
customers, the better it would be. He saw this as a crucial
action that should be started this year.
PAT POURCHOT said he would echo many of the comments made.
From a political standpoint, Commonwealth North was there to
help. One of the benefits as a citizens' group was helping
to address some recommendations that were not popular such
as an income tax or the capping of the Permanent Fund. One
of their functions was to help in that public process.
Senator Kerttula was heartened that Commonwealth North had
recommended a five-year plan. However, he worried about
statewide equity measures. He spoke to indirect subsidies
for natural gas. He said his biggest concern was higher
property taxes for providing schools, etc. that would effect
a small number of people. He did not want the legislature
to impact local governments without providing a tax base.
Mr. Gorsuch agreed there was no one solution and that was
the purpose of setting up a long term plan. One of the
other Board members offered that the longer a state income
tax was not implemented, the longer property owners would
pay higher taxes.
In comment to an earlier recommendation, Senator Kelly said
that equities were risky and he would like some guarantee
that it would not effect the Permanent Fund portfolio. Mr.
Gorsuch answered that as a long term financial plan, there
was more flexibility in equity holdings and it would protect
it from year to year fluctuations. Equities in the long
term were safe but if a certain cash flow needed to be
guaranteed, there would be some risk. Mr. Langland agreed
with that answer.
In answer to Senator Kelly, Mr. Langland thought the equity
percent in the Permanent Fund was approximately 25-30
percent. Mr. Langland said that a recommended percent had
not been discussed.
Senator Kelly said that it had been suggested that the
Permanent Fund dividend should be dissolved before an income
tax be instated. Mr. Gorsuch said that general targets had
been considered but Alaska should begin to look at either
option as part of the financial plan.
In answer to Senator Kelly, Mr. Langland thought the
Permanent Fund dividend would be around $900. Senator Kelly
said that one opinion said that the Permanent Fund should be
capped around $1000. Mr. Gorsuch said that as long as the
state was sending out checks of $1000 to each citizen, there
would be the feeling that the state was not in any great
financial trouble. He wanted the people to get the real
message about the state's financial situation. He felt the
longer the state waited to take a stand on the Permanent
Fund issues, the harder it would be to initiate change.
Senator Phillips said there was a private study of
investment policies of the Permanent Fund. He would like to
make available to the members of the Board of Commonwealth
North two pieces of pending legislation and asked one or two
of them to stop by his office. Mr. Pourchot said that he
was not aware of the pending legislation.
Senator Sharp said that raising property taxes impacted
fewer citizens but a cap on the Permanent Fund would effect
everyone. He also felt it was the most equitable way to
meet the budget. Senator Kerttula pointed out that the
Permanent Fund kept some rural areas alive especially in the
winter time when most businesses were shut down.
Co-chair Frank applauded the Board's efforts to bring these
ideas to the legislature, and asked for their plan to bring
them to the general public. Mr. Gorsuch said that it was
felt that the legislature should form a commission and call
for a state plan so it would be on the table next session.
It could be compared to the Governor's budget and public
comment could be had. That would give some official
sanction to the group rather than Commonwealth North just
proposing its ideas.
In answer to Senator Kelly, Mr. Pourchot said that
Commonwealth North was not a lobbying organization and would
not push certain legislation. However, there was pending
legislation in the House by Representative Willis that
modeled the organization's recommendations.
Again, in answer to Senator Kelly, Mr. Langland said it was
thought that the Commission would be headed by the Governor
with the Board comprised of one individual from the
legislature, and other members from the administration, and
the business community. That group would deal with
different subcommittees on a grassroots level. Mr. Gorsuch
said that the group should be limited to 7-9 people with
staff support, and then detailed some issues the commission
would address for the incorporation of a plan.
Senator Kelly suggested that Senate Finance take the
initiative in drafting legislation along those
recommendations. He said the time had come to make a plan
happen. He felt it was too late for this year but thought
it could be drafted for next session. He thought the
commission should be taken out of the political and put into
the financial arena, and no legislator should be a member.
He said the former Permanent Fund task force was an example
of such a commission.
In answer to Co-chair Pearce, Mr. Gorsuch said that
Commonwealth North had not taken a position on the Roger
Cremo plan. He said it had been given serious consideration
and the presentation had been made to them. He went on to
illustrate the reservations that Commonwealth North felt
toward this plan. The main concern was how the state was to
close the gap. Also, oil and mineral exploration and
development had not been addressed in the Cremo plan. He
applauded the thought and efforts that had gone into it but
felt it did not address the fundamental issues.
End SFC-94 #53, Side 1
Begin SFC-94 #53, Side 2
Senator Kerttula mentioned a program put together by
Brooking's Institute that compartmentalized the different
issues and then came back together in a commission for
support to implement those decisions politically. He said
that it had worked well and would like to see a similar
approach for this situation. Senator Kelly said that a one
time appropriation could be made to fund this commission.
Senator Kerttula reiterated his concern that not everyone
would be involved and that a broader view was needed, not
just businessmen making assessments.
Co-chair Pearce noticed that one of Commonwealth's
recommendations was to form an Income Tax Commission. She
said she supported that. The former Attorney General
Charlie Cole had suggested that it was time to come up with
a simpler way of evaluating taxes so that this on-going
problem of settling oil taxes, etc. could be resolved. She
asked if Commonwealth North had discussed this issue.
Mr. Gorsuch said they had not discussed that issue. What
they recommended were targets of revenue, spending and
reductions of dividends, and within that, the legislature
would have to make priorities in these areas. He said the
Income Tax Commission would have to act as a separate entity
because of all the laws and applications involved.
Co-chair Pearce felt that an Evaluation Commission might be
a good idea for solving some of the state's financial
problems. Mr. Langland agreed that Charlie Cole's comments
be considered. He felt stabilization and simplification
were key factors for lenders and investors in new projects.
Co-chair Pearce felt this was an important issue to solve in
light of the large amount of money that was pending in court
decisions regarding the tax issues in the oil industry. One
unidentified Board member said the solution for that issue
had not been thought of as a separate group but was
addressed in two ways. One was in the economic development
piece as well as whatever funds would come in from that
process, where they would go and the accessibility of those
funds.
Mr. Langland said they had talked a lot about the Permanent
Fund and he did not want the committee to forget about the
revenue enhancement ideas, not necessarily though taxation
but through regulatory reform. He said the state needed to
make business more attractive to the state. As a lender, it
had gotten very difficult and risky to finance things in
Alaska. These were areas that risk could not be quantified.
Small and large businesses alike found it difficult to
address that risk.
Senator Phillips said that there might be the greatest
concept in the world but getting it implemented was a
difficult task. He went on to reiterate this. Mr. Gorsuch
said it was a fact that the Board consisted of mostly
businessmen but they were open to ideas on how they could
effect their recommendations in regard to the political
process.
Discussion was had by Co-chair Pearce and Senator Kelly
regarding a joint plan to cap the Permanent Fund and
reinstate the state income tax.
Co-chair Frank said that getting the common people to look
at these issues was the next step that the legislature
needed to address, and it was definitely a political
challenge.
Mr. Gorsuch said the political process was an issue that had
been well thought out. One of the ideas was a model based
on the base closure review used by the federal government
regarding cutting back military bases. He felt it was
difficult to get the public to support a plan that meant
less services, etc. It was clear that everyone agreed that
something must be done and as a whole, and the state must
rise above individual interests to solve its financial
problems.
Senator Kelly observed that the plan should not surface
until after the November election. He did not want it to
become part of that political process.
Senator Sharp hoped the plan would give specific direction
on how to reduce the rapid escalating items such as
education, corrections, and welfare issues.
Co-chair Pearce thanked the gentlemen for coming before the
committee.
ADJOURNMENT
The meeting was adjourned at approximately 11:40 a.m.
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