Legislature(2005 - 2006)SENATE FINANCE 532
04/04/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB93 | |
| SB155 | |
| SB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 141 | TELECONFERENCED | |
| += | SB 93 | TELECONFERENCED | |
| *+ | SB 155 | TELECONFERENCED | |
| + | SB 112 | TELECONFERENCED | |
| + | TELECONFERENCED |
MINUTES
SENATE FINANCE COMMITTEE
April 4, 2005
9:10 a.m.
CALL TO ORDER
Co-Chair Green convened the meeting at approximately 9:10:16 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Bert Stedman
Senator Lyman Hoffman
Senator Donny Olson
Senator Fred Dyson
Also Attending: SENATOR BEN STEVENS; SENATOR TOM WAGONGER;
REPRESENTATIVE ERIC CROFT; REPRESENTATIVE MIKE HAWKER; FRANK HOMAN,
Commercial Fisheries Entry Commission; JERRY MCCUNE, United
Fishermen of Alaska; CHUCK HARLAMERT, Juneau Section Chief, Tax
Division, Department of Revenue; LAUREN WICKERSHAM, Staff to
Senator Bunde; KATHY WASSERMAN, Alaska Municipal League;
Attending via Teleconference: From Mat-Su: KIM FLOYD, Public
Information Specialist, Mat-Su School District; KRIS MOORE, Wasilla
resident; From an offnet location: LESTER LUNCEFORD, resident of
Whittier;
SUMMARY INFORMATION
SB 93-FISHING PERMIT AND VESSEL LICENSE FEES
The Committee heard from the sponsor, the Commercial Fisheries
Entry Commission and an industry organization. A committee
substitute was adopted and the bill was reported from Committee.
SB 155-APPROP: SCHOOLS/UNIV/VIROLOGY LAB/MUSEUM
The Committee heard from the sponsor and members of the public. The
bill was held in Committee.
SB 112-TAX ON REAA RESIDENTS
The Committee heard from the sponsor, the Department of Revenue,
the Alaska Municipal League and members of the public. A committee
substitute was adopted and the bill was held in Committee.
SENATE BILL NO. 93
"An Act relating to commercial fishing permit and vessel
license fees; and providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Green noted a proposed committee substitute was
distributed.
Co-Chair Wilken moved for adoption of CS SB 93, 24-LS0504\F, as a
working document.
Co-Chair Green objected for an explanation.
SENATOR BEN STEVENS, sponsor of the bill, outlined two changes
proposed in the committee substitute: the first would impose a cap
on the amount of the permit fee and the second change would provide
for a 20 percent license fee increase to vessel class. The original
language of this legislation contains no limitation and a fee
structure that imposes a proportionately higher fee for smaller
vessels.
9:12:41 AM
Senator B. Stevens referenced a table titled, "DRAFT, CFEC Vessel
Fees, Current and Proposed" [copy on file] which contains the
following data.
Vessel Length: 0-25'
Number: 3,484
Current Fee: $20
Current Revenue: $69,680
Proposed 20% Fee: $24
Proposed 20% Revenue: $83,616
Vessel Length: 25-50'
Number: 5,600
Current Fee: $50
Current Revenue: $280,000
Proposed 20% Fee: $60
Proposed 20% Revenue: $336,000
Vessel Length: 50-75'
Number: 764
Current Fee: $76,400
Proposed 20% Fee: $120
Proposed 20% Revenue: $91,680
Vessel Length: 75-150'
Number: 447
Current Fee: $250
Current Revenue: $111,750
Proposed 20% Fee: $300
Proposed 20% Revenue: $134,100
Vessel Length: 150-250'
Number: 92
Current Fee: $500
Current Revenue: $46,000
Proposed 20% Fee: $600
Proposed 20% Revenue: $55,200
Vessel Length: 250'
Number: 26
Current Fee: $750
Current Revenue: $19,500
Proposed 20% Fee: $900
Proposed 20% Revenue: $23,400
Total
Number of Vessels: 10,413
Current Revenue: $603,330
Proposed 20% Revenue: $723,996
Note: A 20% across the board vessel fee increase would
generate $120,666 in fees over the current vessel fees. In
comparison the vessel fee proposal currently in SB 93
generates approximately $291,000. The current fiscal note for
SB 93 would be reduced by $170,334 under this proposal.
Source: CFEC 3/23/2005
9:13:42 AM
Senator B. Stevens next referenced a chart titled, "State of
Alaska, Commercial Fisheries Entry Commission, Comparison of Permit
Renewal Fees for 2005 Licensing Year Under Current Fee Schedule and
Under CFEC's Proposed Methodology for Implementing SB 93, Permit
Counts and Estimated Revenue by Base Fee with $3000 Cap, March 23,
2005, Draft" [copy on file.] This demonstrates the impact to
individual permit holders of the proposed fee increases with no
change to the current formula for deriving those fees. He detailed
the calculation of how the fees would be assessed under the
provisions of the committee substitute. The majority of the large
vessels impacted are the offshore deep sea fishing fleet.
FRANK HOMAN, Commercial Fisheries Entry Commission, testified the
increased fees would be assessed at four tenths of one percent of
the permit value.
9:17:14 AM
Co-Chair Green understood that the intent is to expand the existing
fee structure.
Senator B. Stevens affirmed the fee amounts have been limited,
although the original language of this bill would eliminate this
maximum cap. The proposed committee substitute instead increases
the cap. The cap is justified because the fisheries at the higher
end are multi-million dollar industries and fluctuate according to
worldwide factors.
9:18:16 AM
Senator Hoffman noted fees have not exceeded $300 in the past and
asked the number of residents and nonresidents who would be subject
to the higher amounts.
Senator B. Stevens indicated he could calculate this and provide
information at a later date.
Senator Hoffman surmised the majority of the new revenue generated
by this legislation would be derived from fees collected from
nonresidents.
Mr. Homan had not differentiated the residency source of the
increased revenues. The value of a permit is not correlated to the
residency of the permit holder, with the exception of a nonresident
differential assessed to each nonresident-owned vessel.
9:19:42 AM
Co-Chair Green asked the position of user groups on this
legislation.
Senator B. Stevens replied that the fee limit was reintroduced to
be less onerous on smaller vessel owners. The limit would also
assure those larger vessel owners participating in the offshore
fleet that the fees would not increase as the fishery values
increased. The majority of the fishing industry does not oppose
this legislation. He noted a letter of support from the United
Fishermen of Alaska organization dated March 7, 2005 [copy on
file.]
9:21:17 AM
Co-Chair Green requested an explanation of how the money is
expended and the function of the Commission.
9:21:33 AM
Senator B. Stevens deferred to Mr. Homan.
9:21:38 AM
Mr. Homan replied that authorization to spend money collected from
the fees is legislative. The Commercial Fisheries Entry Commission
is a receipt-supported entity without general fund support. In many
years and as recently as 1998, the Commission had a surplus of $2
million that was transferred to the State general fund. A practice
was started in the year 2000 to appropriate a portion of the
surplus to the Division of Commercial Fisheries for industry
related programs.
9:23:21 AM
Senator Stedman clarified that only the permit renewal fee would be
changed under the provisions of the committee substitute. Be
Senator B. Stevens stated the fee increase is unchanged from the
original version of the bill with the exception that a $3,000
maximum fee would be established; the original language did not
include a cap.
9:24:20 AM
Senator B. Stevens noted a companion bill was introduced in the
House of Representatives.
JERRY MCCUNE, United Fishermen of Alaska, testified in support of
the committee substitute. Members had complained about the higher
end fees proposed in the original version of the bill. He indicated
that the organization had received a letter from the commissioner
of the Department of Fish and Game, assuring that these concerns
would be considered. The organization was satisfied that the
regulation and public hearing process would be adequate to address
the matter.
9:25:51 AM
Co-Chair Green noted letters from other industry organizations were
received as well.
9:26:04 AM
Co-Chair Green removed her objection to the adoption of the
committee substitute and the committee substitute, Version "F" was
ADOPTED.
Co-Chair Wilken offered a motion to report CS SB 93, 24-LS0504\F
from Committee with individual recommendations and new fiscal note.
There was no objection and CS SB 93 (FIN) MOVED from Committee with
a zero fiscal note dated 4/1/05 from the Department of Fish and
Game.
9:27:02 AM
SENATE BILL NO. 155
"An Act making appropriations from the earnings reserve
account for construction of an integrated science complex at
the University of Alaska in Anchorage, for replacement of the
virology laboratory in Fairbanks, for expansion of the
Anchorage Museum of History and Art, for the major maintenance
grant fund, and for other capital projects related to
education; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
SENATOR BEN STEVENS, sponsor of the bill, testified this bill
specifically funds construction $142 million to address the entire
list of statewide deferred maintenance projects compiled by the
Department of Education and Early Development. Secondly, this
legislation appropriates money for new construction of elementary
schools statewide. These projects were selected based on location
in school districts that have experienced population growth as well
as student population growth. Consideration was also given to
projects located in areas in which rapid growth is anticipated as a
result of construction of a natural gas pipeline and exploration
and development of the Arctic National Wildlife Refuge.
Senator B. Stevens continued that this legislation would also
provide funding for University of Alaska projects and appropriates
$5 for the Anchorage Museum of History and Art.
Senator B. Stevens informed that the funding for these
appropriations is entirely from the earnings reserve account of the
Alaska Permanent Fund.
Senator B. Stevens referenced charts provided showing population
growth in areas of the state, including the Matanuska Susitna
valleys [copies on file.]
9:30:40 AM
Co-Chair Green clarified this legislation would fund every project
included on the Department of Education and Early Development
deferred maintenance list.
Senator B. Stevens affirmed all 78 projects are included.
Co-Chair Green asked if funding for all deferred maintenance
projects has ever been provided in one appropriation.
Senator B. Stevens was unaware of a previous instance.
Co-Chair Green noted Senator Hoffman affirmed this has never
occurred.
9:31:26 AM
Senator Stedman asked the length of time to "build up" another
deferred maintenance project list. He asked if consideration has
been given to a scheduled maintenance plan to eliminate future
deferred maintenance needs. This would avoid another onerous list
with schools in disrepair.
9:32:26 AM
Senator B. Stevens deferred to the Department of Education and
Early Development.
9:32:39 AM
Senator B. Stevens noted that each year a certain portion of the
maintenance list is funded. School districts identify deferred
maintenance projects and apply to the Department for consideration
and priority ranking. He did not know how rapidly the project list
would be regenerated.
9:33:11 AM
Co-Chair Wilken recalled in 1997 or 1998 the legislature adopted a
provision requiring school districts to develop a preventative
maintenance plan in order for deferred maintenance projects to
qualify for State funding.
9:34:51 AM
Co-Chair Green asked if the State has the ability to determine
whether appropriated funding has been expended for the specified
project.
9:35:04 AM
Co-Chair Wilken understood the Department has this oversight, but
was unsure of the details.
9:35:14 AM
Co-Chair Green expressed interest in including such a provision in
this legislation for monitoring projects. Some school officials are
express interest in securing State funding for projects but have no
interest in reporting back to the Department.
9:36:03 AM
Senator Hoffman applauded Senator B. Stevens for presenting this
bill. This proposal would save the State "several millions of
dollars" in the future. Maintaining and improving facilities would
extend their live expectancy.
9:36:51 AM
Senator Stedman spoke to his past experience with maintenance
issues. Due to budget constrains, the Sitka School District did not
maintain its facilities. As a result the Borough assembly removed
that function from the Board's authority.
9:38:04 AM
Co-Chair Green noted that several local governments have "cross
purposes" with different entities in charge of facility
maintenance.
9:38:22 AM
Co-Chair Wilken agreed. He told of his participation in a deferred
maintenance task force in which he traveled to different schools
and made a comparison of the condition of different schools some
within the same district. The issue is not a matter of money, but
rather of attitude.
9:39:34 AM
Senator Bunde commented to the mentality that residents are less
inclined to maintain a facility they did not contribute to
financially. He indicated the next bill on the Committee's agenda
could assist in overcoming this.
Senator Bunde clarified the intent is to utilize earnings from the
Alaska Permanent Fund for this appropriation.
9:41:17 AM
Senator B. Stevens listed the three justifications for his efforts
on this bill. The proposed projects are nonrecurring expenditures
and would not require ongoing funding from this source. It could be
argued that deferred maintenance is an ongoing service; however,
this legislation does not stipulate continued appropriations.
Secondly, this is an investment. The Alaska Permanent Fund is
viewed as an investment fund and the earnings have never been
expended for any purposes other than investments. Past investments
have been made for a monetary return; this would be an investment
in educational facilities and would provide an intellectual return.
It is important to invest in these facilities that provide an
intellectual return. Lastly, the Alaska Constitution mandates these
funds be deposited into the State general fund unless otherwise
provided for in statute. Current statute provides that funds from
the earnings reserve account must first be utilized to inflation
proof the Fund with excess earnings available for allocation at the
discretion of the legislature. Past legislatures have chosen to
invest the funds for monetary return.
9:44:18 AM
Senator Bunde asking that this information be conveyed to the
public to promote understanding of this philosophy. He indicated he
is a cosponsor of this legislation.
Senator Bunde stated that investments, dividends, and hold harmless
provisions are appropriate uses of the earnings reserve account
funds. Constitutionally these are State funds and are no different
than oil revenues or other revenues generated by the State. He
countered the argument that proceeds from the Alaska Permanent Fund
should not be spent without a public vote by contending that all
State appropriations should therefore require such voter approval.
Every year the legislature expends excess earnings of the Fund.
9:46:17 AM
Senator Hoffman noted the sponsor statement reference to the effect
of this legislation on dividend payments, which is likely the
highest concern of citizens. The impact would be less than one
percent, or a $10 reduction to the amount of the previous year's
dividend payment.
9:47:09 AM
Senator B. Stevens stated he would provide further details on the
calculations [copy on file.]
Senator B. Stevens clarified these calculations are "forward
looking", explaining that the one-percent impact on dividends would
be an impact on the distribution of future dividends, as growth
rates would not be as high. He cited information provided by the
Division of Legislative Finance, "the impact on the future
distribution over the next 15 years is anticipated under the status
quo … would be $29,690 in distributions." If this legislation were
implemented and this "one-time draw" were made from the earnings
reserve account, the distribution is estimated to be $29,393. The
total reduction would therefore be $297 in future distributions.
Dividends would continue to increase from royalty deposits,
inflation-proofing the principal of the Fund would continue, and
with prudent management, the Fund would continue to grow. He
informed that over the 15 years an individual is educated in
kindergarten through college, that individual would receive $29,000
from the State. These are conservative estimates. The question as
to whether this is a prudent investment is justified.
9:50:19 AM
Senator Stedman wanted elaboration on the history of utilizing the
Alaska Permanent Fund for capital appropriations versus on-going
operation expenses. He pointed out the significant difference
between these expenses. He also requested clarification on the
differences of debt versus equity financing. This legislation
essentially proposes to "pay cash" for these projects, as opposed
to borrowing money to fund the projects, which is "not free".
9:51:21 AM
Senator B. Stevens replied that a capital expenditure is a one-time
expense not a baseline number for future appropriations. The
operating budget uses a management plan to create an ongoing
funding source to provide a steady stream of funds for State
services. This legislation is a one-time appropriation bill with no
expectation to continue the following year. The proposed projects
are worthy of this funding source.
9:53:22 AM
Senator B. Stevens continued that certain projects are "worthy" of
debt financing, while others should be funded with cash. None of
the proposed projects are to "cash generating" facilities. Roads
would generate commerce from freight transports and commuters
traveling to jobs. The proposed projects provide education for
students. This funding source would allow the proposed projects to
be completed earlier. An argument could be made that the funds are
currently invested to earn money and would not earn interest
through this appropriation. However, funding would be required to
pay for the projects or to pay off debt incurred to undertake the
projects. Investing equity into an "instrument" that earns money is
sensible; investing equity into a facility that does not make money
only increases the debt.
9:56:11 AM
Co-Chair Green recalled calculations done on a separate bond
proposal of $350 million paid out over 20 years estimated a debt of
$600 to $700 million over the life of the bonds. The interest owed
on bonds issued for these projects could impede the ability to
undertake new projects.
9:57:02 AM
Co-Chair Wilken appreciated Senator B. Stevens' efforts and
recognizing that the State has the capacity to pay for projects
without debt financing. Conditions may not be as favorable in the
future and efforts should be made to ensure that future generations
are not encumbered.
Co-Chair Wilken emphasized that appropriations would be made from
the earnings reserve account after the Fund is inflation proofed
and after dividends are paid. He acknowledged that constituents are
concerned about reduced dividends, but stressed that once this is
explained to them, they understand. Many mistakenly predict their
annual dividend would be reduced significantly, at about $900;
however, the actual reduction is approximately $42. This is an
investment he could accept for "building Alaska". This requires a
change in "how we view Alaska" but Alaskans have a fund of billions
of dollars to benefit 600,000 people, which no other state or
country has. This presents a "daunting responsibility."
10:00:51 AM
Senator Bunde compared this legislation to personal finances. It is
illogical to incur maximum debt on personal credit cards if one has
sufficient funding in a bank account. He expressed concern that
Alaska could become akin to an eccentric who dies in poverty with
millions of dollars stuffed into a mattress.
10:01:58 AM
Senator Stedman referenced a table titled, "State of Alaska,
Department of Education and Early Development, Capital Improvement
Projects (FY 2006), Major Maintenance Grant Fund, Final Agency
Decision" dated March 11, 2005 [copy on file] that lists the total
cost of the projects at $187 million. He noted the sponsor
statement includes a list of "K-12 Maintenance and New
Construction" totaling over $212 million. He understood the intent
of this legislation to address every identified deferred
maintenance project and asked about the additional $25 million. He
agreed to the necessity to prioritize investment in areas of the
State with increasing student population growth and anticipated
future growth as a result of the construction of a natural gas
pipeline.
10:03:16 AM
Senator B. Stevens replied that appropriations made in Sections 1
and 2 of the legislation equal $212 million. Section 2 lists 14
specific projects. Section 3 appropriates funding to for the
construction of a virology laboratory managed by the University of
Alaska, Fairbanks. Section 4 appropriates funding to the University
of Alaska for projects at various campuses. Section 5 appropriates
funding for the Anchorage Museum of History and Art.
10:04:32 AM
Senator Stedman calculated this legislation would appropriate $141
million for deferred maintenance projects, $80 million for new
construction of schools, the University of Alaska and the museum.
Senator B. Stevens affirmed. The University of Alaska would receive
$119 million, $80 million would be appropriated for construction of
new K-12 facilities, approximately $142 would be appropriated for
deferred maintenance, and $5 million for the museum.
10:05:32 AM
Senator Stedman commented that in the past, some school
construction has been undertaken without consideration to
population changes. He agreed with the concept of directing capital
to areas with population growth and not stagnant or declining
populations. "There is only so much money to go around." The
distribution proposed in this legislation is fair and would address
areas experiencing population growth much quicker than would occur
if past practices were continued.
10:06:47 AM
Senator Olson noted the proposed projects listed in the sponsor
statement are not all maintenance and deferred maintenance items,
but also include new construction, which he considered capital
expenditures.
10:07:18 AM
Senator B. Stevens replied that the list of deferred maintenance
projects is provided separately than the proposed new projects.
Individual new construction projects are listed in Section 2 of the
bill.
10:07:48 AM
Senator Olson asked that although such withdrawals from the
earnings reserve account are legal, how assurances would be
provided that future projects would be as worthy and the draw would
not escalate in future years.
10:08:24 AM
Senator B. Stevens reiterated this legislation is a "stand alone"
capital appropriation worthy of consideration. Future legislatures
would have discretion to make future withdrawals from the account.
This is not a binding process. He intended to utilize the excess
earnings of the Fund for an investment. The "time is right" to
undertake these projects in this manner, and circumstances could be
more or less favorable in the future. These projects are necessary
and the State has the resources to fund them.
10:09:37 AM
Senator B. Stevens addressed a spreadsheet titled, "Alaska
Permanent Fund, Fund Financial History & Projections, as of January
31, 2005" [copy on file.] Each year the financial projections of
the that FY 05 would be the first year the expenditure for
inflation proofing the principal of the Fund would exceed the
dividend payout. The end of year balance is important because of
concerns that appropriation of the earnings reserve account would
affect dividend distribution. The balance of the earnings reserve
account has been "swept", or transferred to the principal of the
Fund, seven times and has never been used to pay dividends. The
appropriation of this legislation would be less than one-third of
the excess amount in the account in the worst-case scenario.
10:14:05 AM
Co-Chair Wilken directed attention to the total balance of the
Fund, which is expected to be $49 billion in FY 2015.
Co-Chair Wilken spoke of the upcoming election year and suggested
the Committee members could campaign for reelection on a platform
that utilizing a portion of the earnings reserve account funds for
these projects would have improved the condition of the State at a
cost of $154 per person over ten years of receiving approximately
$10,000 in Permanent Fund dividends. Some would argue this amount
is too high and therefore the question is political. If voters
disapprove of the decision to appropriate these funds, they could
vote for a different candidate.
10:17:36 AM
Senator Olson asked the source of the $49 billion FY 15 projection
of the balance of the Permanent Fund.
10:18:00 AM
Co-Chair Wilken corrected the projected amount is $48 billion.
10:18:13 AM
Senator Olson expressed concern with the projection, cautioning
that the situation might not be as favorable in the future. In
constructing new facilities, maintenance and operation expenses
would increase. He cited the under funding of the State retirement
system as an example of unforeseen circumstances.
10:19:19 AM
Co-Chair Wilken agreed that the situation could decline but pointed
out that during the worst bear market since the 1930s, the balance
of the Fund declined from $26.5 billion to $23.5 billion. This loss
is inconsequential given the circumstances.
10:20:08 AM
Senator B. Stevens informed that endowments to the Permanent Fund
are dependant upon receipt of royalty payments from natural
resource development. The projected amounts of these royalties only
reflect proven oil reserves and production of those reserves.
However, efforts continue to identify and develop additional
reserves. The projected amounts do not include potential royalties
as a result of a natural gas pipeline, development of resources in
the Arctic National Wildlife Refuge (ANWR) or other sources.
Therefore, future royalty projections are significantly under
stated.
10:21:55 AM
Co-Chair Green reported a student population growth in the Mat-Su
School District of 300 since October 2004. This places pressure on
existing facilities.
KIM FLOYD of the Mat-Su School District, and a parent, testified
via teleconference from Mat-Su to thank the Committee for the
discussion, which has informed her on this matter. She would share
this information with others. She detailed the growth in student
population and need for three new elementary schools not in the
future but for today. Additional schools would be needed in future
years. She preferred utilizing funds from the earnings reserve
account, which she stated she would "never see" rather than
increased property taxes. She spoke to a positive impact created by
investing in the future. She pledged her support for this
legislation.
10:24:50 AM
KRIS MOORE, Wasilla resident, testified via teleconference from
Mat-Su glad to the growth rate in the area. She witnesses
development activities daily. While she is privileged to live in an
area with potential, some issues must be addressed to ensure
quality of life. She supported this legislation and the proposed
funding source for the listed projects. She intended to speak to
others about this bill. It offers a fiscally responsible way to
address these needs.
10:26:55 AM
Co-Chair Wilken asked if either of the previous two witnesses were
elected officials.
Ms. Moore informed she is a mother, a student at "Mat-Su" and a
member of the community.
Ms. Floyd listed her title as the Public Information Specialist for
the Mat-Su School District, although her role as mother of two
elementary-school aged students is primary.
10:27:31 AM
Co-Chair Wilken understand the needs of the Matanuska and Susitna
valleys area. He questioned the decision of the local government to
not issue bonds to fund additional school facilities and
expansions. This is an appropriate question for the elected
officials.
10:28:09 AM
Co-Chair Wilken spoke of preventative maintenance, reminding the
Committee of legislation adopted in 1998 stipulating rules by which
grants for deferred maintenance projects could be received from the
State. These rules require that a school district develop a
preventative maintenance plan acceptable to the Department of
Education and Early Development. The plan must include a
computerized maintenance management program, regular custodial
care, facilities training, energy management, and renew and
replacement schedules. Department regulations require that each
school district be visited one of every five years. All 53 school
districts have been visited at least once and the Department has
issued a report titled, "Preventative Maintenance State of the
State, Report of the ADA [Americans With Disabilities Act]
Assessments and Related Data" [copy not provided.] The preventative
maintenance plans of six districts do not meet the five criteria
necessary to receive grants. If the Department enforces these
regulations, premature deferred maintenance projects would be
minimized. Therefore, the list of proposed deferred maintenance
projects would not "grow out of control" in the future.
10:30:46 AM
Co-Chair Green clarified that additional language in this bill is
not necessary to address this matter.
10:30:56 AM
Co-Chair Wilken stated that "preventative language" could be
beneficial.
10:31:11 AM
Co-Chair Green assigned Co-Chair Wilken to draft this language.
10:31:36 AM
Co-Chair Green ordered the bill HELD in Committee.
10:32:09 AM
CS FOR SENATE BILL NO. 112(CRA)
"An Act imposing a tax on residents of regional educational
attendance areas and relating to permanent fund dividend
applications; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Senator Bunde presented this bill saying it relates to discussions
on the previous bill. The Committee has heard testimony that school
districts need more money. This legislation would generate
approximately $13 million. The intent is that this money would be
used for education purposes as "new funding" rather than supplant
existing funding. Residents of cities and communities governed by
home rule contribute some money for operation of the schools in
their communities. This is an "important expression" of a
community's investment in their schools both fiscally and
psychologically. Residents who have a local investment take a
greater interest in protecting that investment. This legislation
would generate additional revenue as well as local responsibility
for schools.
10:34:47 AM
Senator Bunde relayed an incident told by a school superintendent
in the Bristol Bay region. School supplies would be received in
small communities and left unprotected from the weather without
concern by local residents. Once those residents began contributing
financially to the operation of the small schools in their
communities, the supplies were better cared for. This is not a
reflection solely on rural residents, but rather of human nature
regardless of location.
10:36:46 AM
Co-Chair Green noted a proposed committee substitute.
Senator Bunde moved for adoption of CS SB 112, 24-LS0505\L, as a
working document.
Co-Chair Green objected for an explanation.
10:38:02 AM
Senator Bunde outlined the committee substitute. Language beginning
on page 1, line 12 provides that individuals aged 21 through 65
would be liable for the tax. This mirrors the requirements of many
organized communities.
10:38:36 AM
Senator Bunde noted language beginning on page 2, line 8 lists
exemptions for those whose income is less below the poverty line,
disabled veterans, and those owning real property, but also pay
property tax in another Alaskan jurisdiction.
Senator Bunde deemed this legislation a "fairness bill" that would
"allow" contribution by those not paying taxes. Residents of
unorganized areas would pay the proposed tax. The intent is not to
"double tax" residents and therefore the exemption is given to
those who are levied a tax in an organized area.
10:40:06 AM
CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department of
Revenue, testified the Department had some technical suggestions to
make the tax "administratable".
10:40:33 AM
Co-Chair Green asked if those suggestions are included in the
committee substitute.
10:40:38 AM
Senator Bunde affirmed.
10:40:41 AM
Mr. Harlamert stated that Section 2, on page 2, line 16 relates to
paying the tax in the event an employer did not withhold the tax.
10:41:34 AM
Senator Bunde furthered that if the tax was not withheld from a
paycheck, the individual must file the tax.
10:41:58 AM
Mr. Harlamert continued that the language contained on page 2, line
22 through page 3, line 21 simplify and clarify the provisions for
withholding the tax.
10:43:01 AM
Co-Chair Green, Senator Bunde and Mr. Harlamert established that
similar technical changes are included through line 21 of page 3.
10:43:37 AM
Mr. Harlamert next addressed the refund provision on page 3, line
26. Refunds would be issued the calendar year after the tax year to
avoid redundant claims during the year. This corresponds with other
administrative procedures.
10:44:00 AM
Co-Chair Green asked if the provision relating to the Office of
Administrative Hearings was new to the committee substitute.
10:44:24 AM
Mr. Harlamert affirmed and explained this provision is intended to
avoid frivolous appeals. These appeals would be subject to
adjudication in the same manner as other State administered
programs.
10:44:56 AM
Co-Chair Green asked for an explanation of the language on page 7,
line 14.
Mr. Harlamert was unable to answer.
10:45:17 AM
Senator Bunde informed that the legislative bill drafters inserted
this language, although he was unsure the reason.
10:45:31 AM
LAUREN WICKERSHAM, Staff to Senator Bunde, elaborated that the
drafter stated this language was necessary for "upkeep". She would
obtain additional information.
10:45:57 AM
Co-Chair Wilken asked if the fiscal note amount would be adequate
to cover the provisions inserted in the committee substitute, such
as increased enforcement.
10:46:44 AM
Mr. Harlamert replied that the fiscal note was written to the
original version of the bill and assumes the "best case scenario"
for administrative purposes. The fiscal note also assumes the
Division would "take business decisions for third party data" and
"administer tax from our desks". The fiscal notes would change
according to the committee substitute.
10:47:46 AM
Co-Chair Wilken asked if the Department would issue a new fiscal
note for the committee substitute.
10:47:55 AM
Co-Chair Green affirmed this would occur.
10:47:58 AM
Co-Chair Wilken relayed he has heard some support of withholding a
portion of permanent fund dividend payments for those residents
living in unorganized boroughs who do not already pay taxes
supporting local schools.
10:48:25 AM
Senator Bunde affirmed this suggestion has been discussed with the
Permanent Fund Dividend Division. The Division is "hesitant" to
support this, as it would be cumbersome to administer and
expensive. In addition, garnishment for this purpose would be
prioritized with garnishment for child support payments and other
obligations. The likelihood of garnering revenue from this source
for education would be limited.
10:49:24 AM
Co-Chair Wilken reminded the Committee that organized communities
have contributed $177.9 million to schools. Senator Bunde is
attempting to "level the playing field a bit". Co-Chair Wilken
supports this legislation and is a co-sponsor.
10:50:01 AM
Senator Hoffman suggested that if this legislation is a fair
proposal it could be made universal to all areas of the state and
subsequently, organized communities could reduce property taxes for
their residents. Contrary to statements that this tax would be
fair, there are many inequities because while residents in one
school district pay the maximum allowable tax, other school
districts impose a lesser tax. The tax rate proposed in this bill
is based on the average amount paid by those who currently are
taxed. The fairest system would be a statewide tax.
10:51:16 AM
Senator Bunde explained current State statute requires that
organized communities contribute "some local support" for schools.
How that funding is generated, whether through property tax, sales
tax or other sources, is the decision of the community
representatives. The legislature sits as the assembly for
unorganized boroughs. A statewide head tax would be a progressive
income tax, which he did not support.
10:52:32 AM
LESTER LUNCEFORD, resident of Whittier, testified via
teleconference from an offnet location to applaud Senator Bunde's
courage in sponsoring this bill. Mr. Lunceford heard complaints
about the fairness or unfairness of taxation for schools and
surmised this proposal would be implement fairness.
10:53:33 AM
DAN BOCKHORST, staff, Local Boundary Commission, Division of
Community Advocacy, Department of Community and Economic
Development, testified via teleconference from an offnet location
that the Commission unanimously supports this bill.
10:54:03 AM
Co-Chair Green asked whether the Commission has provided written
documentation of that support.
10:54:09 AM
Mr. Bockhorst replied that a letter of support was written on April
1 and submitted.
10:54:22 AM
KATHY WASSERMAN, Alaska Municipal League, testified in Juneau to
the need to address and resolve this issue. However, she questioned
the use of the individual average amount paid in property taxes as
the method for establishing this tax rate. The average property tax
assessed for education purposes in organized communities is four
mils and equals approximately $426 per person. However, lower
income citizens presumably live in homes of lesser value and
subsequently pay less than those living in higher valued homes.
Additionally, property values in unorganized boroughs tend to be
significantly lower than properties located in organized boroughs.
She furthered that schools located in Rural Education Attendance
Areas (REAA) serve as a microcosm to the community. Funding these
schools would result in less money available for other community
needs.
Ms. Wasserman suggested that community members of both organized
and unorganized boroughs should meet and find a solution to this
issue. More information is needed to ensure the tax is fair.
10:57:28 AM
Senator Bunde was aware of the different costs of living in
organized and organized boroughs but pointed out the combined
income of residents of unorganized boroughs is $505.5 million. For
this reason he supported a head tax over a property tax. He
reminded that Alaska had a head tax in the past with those proceeds
going toward education expenses.
10:58:16 AM
Co-Chair Green directed that any additional questions be submitted
to Senator Bunde.
Co-Chair Green withdrew her objection to the adoption of the
committee substitute and Version "L" was ADOPTED.
Co-Chair Green ordered bill HELD in committee.
ADJOURNMENT
Co-Chair Green adjourned the meeting at 10:58 AM
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