Legislature(2013 - 2014)
04/19/2014 04:03 PM Senate FIN
| Audio | Topic |
|---|---|
| Start | |
| HB278 | |
| HB306 | |
| HB140 | |
| HB287 | |
| HJR10 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
April 19, 2014
4:03 p.m.
4:03:03 PM
CALL TO ORDER
Co-Chair Meyer called the Senate Finance Committee meeting
to order at 4:03 p.m.
MEMBERS PRESENT
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Edra Morledge, Staff, Senator Kevin Meyer; Robert Whicker,
Director, Consortium for Digital Learning, Association of
Alaska School Boards; Michael Hanley, Commissioner,
Department of Education and Early Development; Kelly
Cunningham, Fiscal Analyst, Legislative Finance Division;
David Teal, Director, Legislative Finance Division;
Representative Steve Thompson; Brodie Anderson, Staff
Representative Steve Thompson; Patricia Hull, Member,
Alaska Film Group, Juneau; Joe Mathis, Vice President,
External Affairs, Nana Development Corporation; Joe Balash,
Commissioner, Department of Natural Resources; Doug
Chapados, President and Chief Executive Officer, Petro Star
Inc., Juneau; Matt Gill, Senior Manager, External Affairs,
Tesoro, Juneau; Rebecca Rooney, Staff, Representative Peggy
Wilson; Tom Brice, Alaska Laborers Union, Juneau.
PRESENT VIA TELECONFERENCE
Stacey Boles, Program Director, Alaska New Media,
Anchorage; Audra Henderson, Self, University of Alaska
Anchorage, Anchorage; Lawrence David Foldes, Member, Awards
Executive Committee, Academy Motion Picture Arts & Sciences
in Los Angeles, Anchorage; Deborah Schildt, Self,
Anchorage; Bob Crocket, General Manager, Piksik LLC,
Anchorage; Natalia Lamont, Self, Anchorage; Ron Holmsteron,
Sag-Aftra, Anchorage; Sarah Saarloos, Self, Girdwood; Kent
Scheler, Mountain Safety Logistics, Anchorage; Cedar
Cussins, Gecko Services LLC, Anchorage; Richard Geiger,
Self, Anchorage; Tess Weaver, Self, Anchorage; Kathy
Robinson, Wheel Good Food, Anchorage; Lauren Trawyer, Self,
Anchorage; DK Johnston, Tri Seven Pictures, Anchorage; Beth
Skabar, Self, Anchorage.
SUMMARY
HJR 10 CONST. AM: TRANSPORTATION FUND
HJR 10 was HEARD and HELD in committee for
further consideration.
CSHB 140(FIN) am
REGULATIONS: NOTICE, REVIEW, COMMENT
SCSCSHB 140(JUD) was REPORTED out of committee
with "individual recommendations" and with a
previously published fiscal impact note: FN4
(DNR), a new fiscal impact note from the Senate
Finance Committee for the Department of
Environmental Conservation, a new zero fiscal
note from the Senate Finance Committee for the
Office of the Governor, a new fiscal impact note
from the Senate Finance Committee for the
Department of Commerce, Community and Economic
Development.
CSHB 278(FIN) am
EDUCATION
SCSCSHB 278(FIN) was REPORTED out of committee
with a "do pass" recommendation and with a new
fiscal impact note from the Department of
Education and Early Development, a new fiscal
impact note from the Department of Education and
Early Development, a new zero fiscal note from
Department of Education and Early Development, a
new fiscal impact note from the Senate Finance
Committee for the Legislature, a new fiscal
impact note from the University of Alaska, a new
indeterminate fiscal note the Department of
Revenue, a new fiscal impact note from the Senate
Finance Committee for the Department of Labor and
Workforce Development, a new fiscal impact note
from the Department of Education and Early
Development, a new fiscal impact note from the
Department of Education and Early Development, a
new zero fiscal note from the Department of
Education and Early Development, and a new zero
fiscal note from the Department of Education and
Early Development.
CSHB 287(RLS) am
OIL ROYALTIES; TAX CREDIT
CSHB 287(RLS) am was HEARD and HELD in committee
for further consideration.
CSHB 306(FIN)
EVAL. INDIRECT EXPENDITURES; TAX CREDITS
CSHB 306(FIN) was HEARD and HELD in committee for
further consideration.
HB 384 am
ALASKA MINIMUM WAGE
HB 384 am was SCHEDULED but not HEARD.
CS FOR HOUSE BILL NO. 278(FIN) am
"An Act increasing the base student allocation used in
the formula for state funding of public education;
relating to the exemption from jury service for
certain teachers; relating to the powers of the
Department of Education and Early Development;
relating to high school course credit earned through
assessment; relating to school performance reports;
relating to assessments; establishing a public school
and school district grading system; relating to
charter schools and student transportation; relating
to residential school applications; relating to tenure
of public school teachers; relating to unemployment
contributions for the Alaska technical and vocational
education program; relating to earning high school
credit for completion of vocational education courses
offered by institutions receiving technical and
vocational education program funding; relating to
schools operated by a federal agency; relating to a
grant for school districts; relating to education tax
credits; establishing an optional municipal tax
exemption for privately owned real property rented or
leased for use as a charter school; requiring the
Department of Administration to provide a proposal for
a salary and benefits schedule for school districts;
making conforming amendments; and providing for an
effective date."
4:04:00 PM
Vice-Chair Fairclough MOVED to ADOPT the proposed committee
substitute for HB 278, Work Draft 28-GH2716\V (Mischel,
4/19/14). There being NO OBJECTION, it was so ordered.
Vice-Chair Fairclough wondered if the committee should take
a brief AT EASE to distribute the CS. Co-Chair Meyer
replied that there were very few changes in the CS.
EDRA MORLEDGE, STAFF, SENATOR KEVIN MEYER, related that
there were 5 changes in the CS. She looked at Section 7,
which involved the procurement for the Personalized
Learning Opportunity Grants. The inserted language ensured
that school districts would use competitive procedures,
including seeking bulk purchase discounts for equipment,
support, and training. The section also clarified that the
procurement process would provide vendors with reasonable
and equitable opportunities to participate in the program.
The section required the Association of Alaska School
Boards to evaluate the effectiveness of a sub grant under
the program. The section also required an independent third
party evaluation of the effectiveness of the entire grant
program, and to provide a report to the legislature.
Co-Chair Meyer noted that there was discussion the previous
day regarding the various types of electronic devices
available, and the intent of the change to allow for equal
opportunities for every company.
Vice-Chair Fairclough hoped that the Association of Alaska
School Boards would testify before the committee, in order
to ensure understanding of the new language and the
legislature's intent. Co-Chair Meyer replied that they
would testify following the presentation of the bill
changes.
Ms. Morledge looked at Section 20, which related to the
bond debt reimbursement program through Department of
Education and Early Development (DEED). The previous bill
version's effective date was July 1, 2014, but there was
some concern that it did not include the municipalities
with fall elections. The effective date was changed to
January 1, 2015. She explained that Section 24 outlined a
change to the required local contribution of a city and
borough to the school district, changing the mil tax levy
from 2.65 to 2.80 mil rate.
Co-Chair Meyer recalled that the local contribution was
changed two years prior. The mil rate was changed from 2.9
to 2.65, which took the education funding from the
municipalities to the state. He stated that the change
shifted the mil rate back to the municipality, so they
could greater contribute to education.
4:09:16 PM
Ms. Morledge explained that the two teacher tenure
provisions were removed from the bill.
Co-Chair Meyer surmised that the tenure status had returned
to its original term of three years. Ms. Morledge responded
in the affirmative.
Ms. Morledge stated that the last page of the bill had a
change, which required the Department of Administration
(DOA) to present a proposal for a statewide salaries and
benefits schedule for school districts. The current version
removed DOA from that obligation, and moved it into the
LB&A committee to present a study on the salaries and
benefits schedules statewide.
Vice-Chair Fairclough asked if there was an analysis on how
the mil rate affected the local communities. Co-Chair Meyer
replied in the affirmative, and wondered if there was a
specific community that should be addressed.
Vice-Chair Fairclough queried the mil rate for the Aleutian
Borough. Co-Chair Meyer replied that the Aleutian East
Borough would be required to contribute $34,831.
Vice-Chair Fairclough wondered if the $34,831 was in
addition to the current contribution. Co-Chair Meyer
replied in the affirmative.
Vice-Chair Fairclough explained that there was a mil rate
cap that was instituted a few years prior. She surmised
that the bill's intent was to encourage communities to
participate above the mil rate cap. Co-Chair Meyer replied
that the state took $9.2 million by moving the mil rate to
2.65. The legislation would change the mil rate to 2.8, so
Anchorage would contribute an additional $5.5 million to
education.
Vice-Chair Fairclough asked if Anchorage could use its $7
million to help the school district. She did not believe
that the action could occur retroactively, so she wondered
if there could be an effective date. Co-Chair Meyer replied
that the communities would be equally affected.
Vice-Chair Fairclough requested that the document be posted
in the backup documents attached to the bill. Ms. Morledge
agreed to provide that information.
Vice-Chair Fairclough asked that Mr. Whicker address the
procurement issues of the bill.
4:14:11 PM
AT EASE
4:18:00 PM
RECONVENED
Vice-Chair Fairclough remarked that the Association of
Alaska School Boards (AASB) managed the One-on-one
Education Learning opportunity. There was a concern
regarding the type of technology that each school district
would utilize, and the state management of technology. She
wanted the lowest possible unit cost price to school
districts to allow them to utilize their preferred
platform.
ROBERT WHICKER, DIRECTOR, CONSORTIUM FOR DIGITAL LEARNING,
ASSOCIATION OF ALASKA SCHOOL BOARDS, JUNEAU, announced that
AASB would be soliciting vendors to seek the one-to-one
solution set, and work with school districts on that
platform.
Vice-Chair Fairclough looked at page 7, item C, and
announced that, if passed, the law would read:
"Before making a sub grant to a school district, the
Association of Alaska School Boards shall use a
competitive process to solicit prices from vendors,
including, where possible, seeking bulk purchase
discounts for the technology, equipment, support, and
training to be purchased with the funds from the grant
program."
MICHAEL HANLEY, COMMISSIONER, DEPARTMENT OF EDUCATION AND
EARLY DEVELOPMENT, felt that Ms. Morledge accurately
addressed the bill changes. He remarked that the changes
were small, but significant, and would continue to have a
positive impact on education.
Co-Chair Meyer remarked that the funding of the legislation
had also changed from the original version. He stated that
the fiscal notes would be discussed, and hoped that the
conversation would bring clarity to the bill's funding.
There had been some discussion about the funding for the
upcoming three years. The $25 million a year funding
equated to a $100 base student allocation (BSA). He
stressed that the funding was outside of the current
funding formula. He remarked that there were some other
additions to the funding: broadband, standardized testing,
middle school pilot program for Alaska Native Science and
Engineering Program (ANSEP), the charter school startup,
and the correspondence schools. He reiterated that the
analysis of additional funding depending on the financial
manipulation. He felt that there were substantial changes
and additions to the education funding.
4:25:32 PM
KELLY CUNNINGHAM, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION, wondered if there would be a page by page
discussion of the fiscal note packet. Co-Chair Meyer
replied in the affirmative.
Co-Chair Meyer asked if there would be one fiscal note
substitution. Ms. Cunningham replied in the affirmative.
Ms. Cunningham announced that the fiscal note from the
Department of Labor and Workforce Development (DLWD), and
was an agency wide allocated appropriation. The fiscal note
was only for TVEP, and was applied to eight entities.
Senator Dunleavy inquired the number of the fiscal note.
Ms. Cunningham responded that the fiscal notes had not been
numbered.
Co-Chair Meyer announced that the fiscal note was labeled,
"Department of Labor and Workforce Development."
Ms. Cunningham restated that the fiscal note was agency
wide and allocated, and related to eight entities.
Ms. Cunningham related that the next fiscal note was for
DOA. She stated that the funding was originally intended
for a study that the new CS directed LB&A as the overseer.
The note should now be disregarded.
Senator Hoffman wondered if the funding would be applied to
LB&A. Co-Chair Meyer responded that LB&A already had the
funding to conduct the study.
Vice-Chair Fairclough announced that LB&A would attempt to
use its existing funds to conduct the study.
Ms. Cunningham stated that there was a fiscal note from the
Tax Division of the Department of Revenue (DOR), and was a
zero fiscal note.
Ms. Cunningham explained the fiscal note for the DEED
Boarding Home Grants for $2.249 million. It increased the
stipend ratio to the boarding schools. There was a partial
increase the year prior, and the funding provided a slight
increase to the grant.
Ms. Cunningham announced that the fiscal note for K-12
Support Foundation was zero, because the actual dollars
were reflected in the public education fund note.
Ms. Cunningham explained that the fiscal note for the
Alaska Library and Museums was $7.3 million for internet
support. She believed the funding would provide for a
district at which one or more schools qualify for a
discounted rate for internet services would be eligible to
receive an amount to bring their download speed up to ten
megabits per second.
Vice-Chair Fairclough asked if the fiscal note related to
the "e rate", and whether it including matching money. Ms.
Cunningham replied that the fiscal note was associated with
Senator Olson's broadband legislation. The e-rate was
mentioned, but she could not speak further on that topic.
4:30:08 PM
Senator Olson understood that the fiscal note related
directly to matching e-rate funds. He stated that it also
included the federal portion that would apply directly to
the school districts.
Vice-Chair Fairclough did not see information regarding
matching money in the backup for the note.
Senator Olson observed that one of the reasons that it was
not in the note was because the money went directly to the
school district, but was delivered at a four-to-one ratio.
Ms. Cunningham spoke to a zero fiscal note for debt service
and school debt reimbursement. She stated that there was
some reduced cost, so that was the reason for the zero
note. The replacement note was for the DEED Student and
School Achievement. The note added $3 million for
personalized learning grants.
Co-Chair Meyer wondered if the revised fiscal note also
included a three-year pilot program for STEM. Ms.
Cunningham replied in the affirmative.
Senator Dunleavy asked if the $750,000 in Innovative Grants
was contained in the revised fiscal note. Ms. Cunningham
replied in the affirmative.
Senator Dunleavy announced that the funding was included in
the DEED submitted budget. Ms. Cunningham responded that
the funding would not be accepted at the Conference
Committee.
Co-Chair Kelly announced that the adjustment would be
addressed at the Conference Committee.
Ms. Cunningham
Vice-Chair Fairclough wondered if the fiscal note for
$1.794 million should be disregarded, and be replaced with
$7.550 million should replace that note. Ms. Cunningham
replied in the affirmative, and explained that the backup
for the new fiscal note would be revised to reflect the
changes.
Ms. Cunningham spoke to another fiscal note for the
University of Alaska (UA), which included technical funding
for the TVEP program.
Senator Bishop commented that the increase was a decrement
of $204,000 to UA, so it was less than what would appear
under the percentage decrement.
Vice-Chair Fairclough wondered if the funding related to
the penny increase. Senator Bishop replied that it was 0.16
of 1 percent increase.
Vice-Chair Fairclough asked if the funding was new money
for UA, and if it was an addition of the expanded programs.
Ms. Cunningham deferred to Mr. Teal.
4:37:48 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, stated
that the change was negative, but there was an increase in
total TVEP funding. He explained that UA had 50 percent of
the funding, but 5 percent of the funding for UAS was
removed, so UA received 45 percent of a larger portion, but
was ultimately less money.
Ms. Cunningham explained that the public education fiscal
note correlated with the K-12 foundation program. It
included the correspondence multiplier change from 0.8 to
0.9, and amends the charter school funding by providing
higher funding starting at the 75 ADM.
Mr. Teal pointed out that there was still a missing fiscal
note from DEED.
Senator Dunleavy wondered if the change in the mil rate
guaranteed that the schools within the municipality would
receive that funding. Mr. Teal replied that the change did
not guarantee funding for the municipality.
Senator Dunleavy queried the impact of the change in the
mil rate. Mr. Teal responded that communities had to
contribute another $132 million to school districts.
Senator Dunleavy wondered if "communities" referred to
recognized municipalities. Mr. Teal responded in the
affirmative
Vice-Chair Fairclough stated that there was an additional
fiscal note from LB&A Committee for FY 15 only for $650,000
to implement a school district cost factor study; a school
size factor study; and a study of the salaries and benefits
that were paid through the State of Alaska.
Senator Dunleavy asked what the total package would be for
each year of the proposed legislation. Ms. Cunningham
replied that there was $22.695 million in FY 15.
Senator Dunleavy asked that she be more specific by
announcing specific dollars.
4:42:33 PM
AT EASE
4:45:48 PM
RECONVENED
4:45:53 PM
Ms. Cunningham stated that part 1 of the total package cost
was $100 million in FY 15, and the fiscal notes were an
additional $23 million, with a $12 million savings from the
change in the mil rate. The total extra cost in FY 15 was
approximately $11 million in addition to the $100 million.
Senator Dunleavy surmised that the total cost for FY 15 was
$111 million. Ms. Cunningham agreed. She furthered that the
cost would continue into FY 16 and FY 17, except for the
$650,000 the LB&A studies.
Co-Chair Meyer thought that the figure was pretty close to
his own estimate. He felt that it was almost a $500 BSA. He
stated that a large portion of the funding was for
broadband.
Senator Dunleavy announced that it $111 million per year
for the following three years and $2 billion was
appropriated for the Public Employees' Retirement System
(PERS). He felt that the proposed legislation would stop
the argument that the state was not funding public
education.
Co-Chair Meyer wondered if the legislation funding was in
addition to the overall spending for $1.2 billion to $1.3
billion. Mr. Teal replied in the affirmative
Co-Chair Meyer asked if it was $1.2 billion or $1.3
billion. Mr. Teal replied that it was almost $1.3 billion.
Vice-Chair Fairclough noted that there were a lot of public
interest based on an expectation of an increase to the BSA.
She commented that she was willing to participate with the
organizations for three years to solve the schools issues
in urban and rural Alaska.
4:51:32 PM
Co-Chair Kelly MOVED to REPORT SCSCSHB 278(FIN) as amended
out of committee with individual recommendations and the
accompanying and forthcoming fiscal notes. There being NO
OBJECTION, it was so ordered.
SCSCSHB 278(FIN) was REPORTED out of committee with a "do
pass" recommendation and with a new fiscal impact note from
the Department of Education and Early Development, a new
fiscal impact note from the Department of Education and
Early Development, a new zero fiscal note from Department
of Education and Early Development, a new fiscal impact
note from the Senate Finance Committee for the Legislature,
a new fiscal impact note from the University of Alaska, a
new indeterminate fiscal note the Department of Revenue, a
new fiscal impact note from the Senate Finance Committee
for the Department of Labor and Workforce Development, a
new fiscal impact note from the Department of Education and
Early Development, a new fiscal impact note from the
Department of Education and Early Development, a new zero
fiscal note from the Department of Education and Early
Development, and a new zero fiscal note from the Department
of Education and Early Development.
4:51:55 PM
AT EASE
5:19:41 PM
RECONVNED
Co-Chair Meyer handed the gavel over to Vice-Chair
Fairclough
CS FOR HOUSE BILL NO. 306(FIN)
"An Act relating to the review and administration of
tax credit programs; requiring the Department of
Revenue to report indirect expenditures; relating to
the duties of state agencies; requiring the
legislative finance division to analyze certain
indirect expenditures; relating to lapse dates for
appropriations for capital projects; repealing the
insurance tax education credit, the income tax
education credit, the veteran employment tax credit,
the oil or gas producer education credit, the property
tax education credit, the mining business education
credit, the fisheries business education credit, the
fisheries business tax credit for scholarship
contributions, the fisheries business salmon product
development tax credit, the fisheries business salmon
utilization tax credit, the fisheries business landing
tax credit for scholarship contributions, the
fisheries resource landing tax credit for the
fisheries resource harvested under the community
development quota, the fisheries resource landing tax
education credit, and the film production tax credit;
and providing for an effective date."
5:20:06 PM
REPRESENTATIVE STEVE THOMPSON, presented HB 306:
HB 306 is sound fiscal policy. HB 306 provides the
legislature with an effective tool to identify and
capture potential lost revenue. A Legislative Research
report shows that over the past five years, the State
has forgone almost half a billion dollars through
identified indirect spending across all departments,
inclusive of $20 million in Department of Revenue tax
credits not related to oil and gas.
HB 306 will provide a mechanism to help the
legislature identify its spending by providing
information on indirect expenditures, and capital
grants to projects by bringing them back before the
legislature for fiscal review.
HB 306 lapses grants to capital projects that have not
begun substantial, ongoing work within five years of
the effective date of the appropriation or allocation.
Thereby, each capital project without action within a
five-year period will lapse, if its ongoing existence
is not justified for re-appropriation.
Secondly, HB 306 requires that before the start of the
first regular session of each new Legislature, the
Dept. of Revenue provide to the chairs of the Finance
Committees, and the Legislative Finance Division, a
report on indirect expenditures. An "indirect
expenditure" is defined in HB 306 as a credit,
exemption, deduction, deferral, discount, exclusion,
or other differential allowance designed to encourage
an activity to benefit the public by forgoing revenue
to the state, an example being the credits used
against corporate taxes.
Then, the Legislative Finance Division will take
Department of Revenue's report and analyze the
indirect expenditures for each department, as
scheduled in the bill, with subsequent reviews every
six years. The Legislative Finance will then issue a
report to the legislature providing an estimate of
forgone revenue due to the indirect expenditure, an
estimate of monetary benefits, whether the legislative
intent of the statute is being met, and a
recommendation as to continuance of the indirect
expenditure, its economic effect, and an explanation
of the methodology used in preparing the report.
Lastly, the bill sunsets specific Department of
Revenue Tax Credits, not related to gas or oil by the
end of the Second Regular Session of the Twenty-Ninth
Legislature. Bringing these credits back before future
Legislatures for a review will continue to guarantee
the effectiveness of the State's indirect spending.
5:27:07 PM
Vice-Chair Fairclough wondered if the legislation repealed
the film tax credit. She surmised that the legislation
generally examines all tax credits. Representative Thompson
replied that the legislation gave the film tax credit a
sunset date for the end of 2016, at which time the
legislature would review the tax credit. He explained that
the film tax credit was developed with $300 million, and
there were already commitments for over $100 million of
that fund. He stated that the fund would need to
recapitalize at the end of 2015.
Vice-Chair Fairclough wondered if there was any additional
information.
BRODIE ANDERSON, STAFF REPRESENTATIVE STEVE THOMPSON,
stated that Representative Thompson covered the major
components of the legislation.
5:28:58 PM
PATRICIA HULL, MEMBER, ALASKA FILM GROUP, JUNEAU, spoke
against HB 306. She related that film tax credit had built
the industry in Alaska. She thought that eliminating the
film production tax credit would kill the industry in
Alaska.
Vice-Chair Fairclough noted that there was still confusion
and requested an explanation of the inclusion of the film
tax credit in the legislation. Mr. Anderson replied that
legal aspect of the legislation dealt with a sunset and
repeal the same way and that it was the legislature. He
stated that the intent was to review the credits.
5:35:07 PM
STACEY BOLES, PROGRAM DIRECTOR, ALASKA NEW MEDIA, ANCHORAGE
(via teleconference), testified against HB 306. She
remarked that the film tax credits provided an increase to
Alaska's economy.
5:38:13 PM
AUDRA HENDERSON, SELF, UNIVERSITY OF ALASKA ANCHORAGE,
ANCHORAGE (via teleconference), spoke against HB 306. She
explained that she had a career in film in television,
which started at the David Letterman Show. She hoped to
continue her career in the state. She felt that the film
tax credits encouraged and strengthened Alaska's economy,
and it needed more time to fully develop.
5:39:50 PM
LAWRENCE DAVID FOLDES, MEMBER, AWARDS EXECUTIVE COMMITTEE,
ACADEMY MOTION PICTURE ARTS & SCIENCES IN LOS ANGELES,
ANCHORAGE (via teleconference), testified against HB 306.
He related that financing for the film industry was
difficult, especially in Alaska. He remarked that the film
tax credits helped to encourage the development of film and
television in Alaska. He stressed that it was a new
program, and needed much more time to be developed and
become fully integrated and utilized.
5:44:04 PM
DEBORAH SCHILDT, SELF, ANCHORAGE (via teleconference),
spoke against HB 306. She stated that Alaskans across the
state supported the film tax credits, and the film
industry. She stressed that the program gave Alaskans
unique career opportunities, and exposed the state to much
needed marketing.
5:47:14 PM
BOB CROCKET, GENERAL MANAGER, PIKSIK LLC, ANCHORAGE (via
teleconference), testified against HB 306. He felt that
there would be great ramifications of the film industry in
Alaska. He felt that the jobs and businesses would have a
great negative effect, and remarked that the film industry
was growing in Alaska.
5:50:16 PM
NATALIA LAMONT, SELF, ANCHORAGE (via teleconference), spoke
against HB 306. She stated that she was a part of the
Alaska New Media program, and hoped to develop a script in
order to make a successful screenplay. She felt that the
film tax credits would make it possible to develop her
screenplay.
5:52:50 PM
JOE MATHIS, VICE PRESIDENT, EXTERNAL AFFAIRS, NANA
DEVELOPMENT CORPORATION, testified against HB 306. HE
expressed concerns about the inclusion of the film tax
credit in the bill. He stated that NANA had over $40
million invested in Alaska's film industry, and hoped that
the industry would continue to flourish. He discouraged the
sunset of the film tax credit program.
5:54:28 PM
RON HOLMSTERON, SAG-AFTRA, ANCHORAGE (via teleconference),
spoke against HB 306. He worked in the film industry, and
knew many people working in the Alaska film industry. He
felt that the legislation would have a great negative
impact on his industry, his peers, and the state.
5:56:02 PM
SARAH SAARLOOS, SELF, GIRDWOOD (via teleconference),
testified against HB 306. She expressed concerns about the
inclusion of the film tax credit in the legislation. She
stated that the Alaska film industry supported her family.
She witnessed the positive impacts of the film industry
across the state.
KENT SCHELER, MOUNTAIN SAFETY LOGISTICS, ANCHORAGE (via
teleconference), testified against HB 306. He stated that
the film tax credits had encouraged the production of ski
films in Alaska. He felt that the film industry provided a
great support and infrastructure in Alaska.
6:01:12 PM
CEDAR CUSSINS, GECKO SERVICES LLC, ANCHORAGE (via
teleconference), testified against the inclusion of the
film tax credit in HB 306. She stated that her husband had
worked on the production of the movie, "Big Miracle", which
had a great positive impact on her company. She stated that
his work on the film catapulted her company into a
successful Alaskan business.
6:02:39 PM
RICHARD GEIGER, SELF, ANCHORAGE (via teleconference), spoke
against the inclusion of the film tax credit in HB 306. He
felt that sun setting the film tax credit program would
destroy Alaska's film industry.
6:04:03 PM
TESS WEAVER, SELF, ANCHORAGE (via teleconference),
testified against the inclusion of the film tax credit in
HB 306.
6:05:07 PM
KATHY ROBINSON, WHEEL GOOD FOOD, ANCHORAGE (via
teleconference), supported the removal of the film tax
credit from HB 306.
6:06:53 PM
LAUREN TRAWYER, SELF, ANCHORAGE (via teleconference),
testified in support of removing the film tax credit from
HB 306.
6:09:51 PM
DK JOHNSTON, TRI SEVEN PICTURES, ANCHORAGE (via
teleconference), requested the removal of the film tax
credit sunset form the legislation.
6:11:19 PM
BETH SKABAR, SELF, ANCHORAGE (via teleconference),
testified against the inclusion of the film tax credit in
HB 306.
Vice-Chair Fairclough CLOSED public testimony.
CSHB 306(FIN) was HEARD and HELD in committee for further
consideration.
CS FOR HOUSE BILL NO. 140(FIN) am
"An Act relating to the proposed adoption, amendment,
or repeal of a regulation; and relating to contact
with agencies about regulations."
6:13:44 PM
AT EASE
6:15:57 PM
RECONVENED
6:16:00 PM
Vice-Chair Fairclough explained the fiscal notes attached
to the legislation.
Co-Chair Meyer MOVED to REPORT SCS CSHB 140 (JUD) out of
committee with individual recommendations and the
accompanying fiscal notes.
SCSCSHB 140(JUD) was REPORTED out of committee with a "do
pass" recommendation and with a previously published fiscal
impact note: FN4 (DNR), a new fiscal impact note from the
Senate Finance Committee for the Department of
Environmental Conservation, a new zero fiscal note from the
Senate Finance Committee for the Office of the Governor, a
new fiscal impact note from the Senate Finance Committee
for the Department of Commerce, Community and Economic
Development.
6:20:13 PM
AT EASE
6:23:24 PM
RECONVENED
CS FOR HOUSE BILL NO. 287(RLS) am
"An Act relating to the determination of the royalty
received by the state on oil production refined or
processed in the state; providing tax credits for
qualified infrastructure expenditures for in-state
refineries and hydrocarbon processing facilities;
approving and ratifying the sale of royalty oil by the
State of Alaska to Tesoro Corporation and Tesoro
Refining and Marketing Company LLC; and providing for
an effective date."
6:23:41 PM
Co-Chair Meyer MOVED to ADOPT the proposed committee
substitute for HB 287, Work Draft 28-GH2862\O (Nauman,
4/19/14). There being NO OBJECTION, it was so ordered.
JOE BALASH, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
explained the legislation and the changes to the bill:
New section 1 amends AS 38.05.180(cc) to include the
DNR commissioner's ability to accept payment on a
federal lease for the state's royalty share of oil
production. Current law is limited to gas production.
New section 2 adds new subsections (hh) under AS
38.05.180 to allow the DNR commissioner to enter into
an agreement with the lessee to use or accept as a
price for the royalty oil an amount not less than the
contract price between the lessee and an in-state
refiner. The price would not exceed the amount that
would otherwise be due under the lease. Before
entering into an agreement, the commissioner must make
a written finding that the agreement is in the state's
best interest; the in-state refiner meets certain
criteria; and the contract price or prospective
royalty receipts are balanced by employment
opportunities or other tangible benefits to the state.
The subsection defines how contract or purchase
parties are affiliated through influence, interest, or
action.
Subsection (ii) defines "in-state refiner", "price
established in the contract between lessee and an in-
state refiner", and "state's royalty share of oil
production".
New section 3 adds a new section AS 43.20.053, which
adds a new corporate income tax credit for a taxpayer
that owns an in-state refinery or hydrocarbon
processing facility and incurs "qualified
infrastructure expenditures". The credit may not
exceed the lesser of 40 percent of total qualifying
expenditures or $10 million per tax year and sunsets
in 5 years. The taxpayer is required to apply the
credit against any corporate income taxes owed to the
state, and any unused portion can be refunded by the
state.
New subsection (b) clarifies the credit may not be
applied to an expenditure for the installation,
modification, adjustment, or other alteration of
tangible personal property primarily used for the
manufacture or transport of liquefied natural gas,
compressed natural gas, or to convert natural gas to
liquids.
New subsection (h) defines "processed hydrocarbon
products", "qualified infrastructure expenditure",
"refined petroleum products" and "unpaid delinquent
tax".
New section 4 amends AS 43.55.028(a) to include the
qualified infrastructure expenditures as a credit that
can be paid from the oil and gas tax credit fund.
New section 5 amends AS 43.55.028(g) to allow the
Department of Revenue to adopt regulations to carry
out purposes of this section for refunds and payments
under the qualified infrastructure expenditure.
Section 6 (previously Section 1) provides legislative
approval of an amendment of a royalty oil contract
between the State of Alaska and Tesoro Corporation and
Tesoro Refining & Marketing Company LLC, attached as
Exhibit 1 to the final best interest finding and
determination executed January 9, 2014.
Section 7 provides an effective date of January 1,
2015 for Sections 1-5.
Section 8 provides an immediate effective date for
Section 6 related to the Tesoro royalty oil contract.
6:34:02 PM
DOUG CHAPADOS, PRESIDENT AND CHIEF EXECUTIVE OFFICER, PETRO
STAR INC., JUNEAU, spoke in support of HB 287. He stated
that there was a hard copy of a PowerPoint in the backup,
which provided some information on Petro Star.
Senator Olson noted that the bill was integral to the
survival of an important industry. He inquired about the
negative effects of bill not passing. Mr. Chapados replied
that the closure of the Petro Star would have ramifications
all across Alaska. Petro Star's biggest customers were the
airlines; it was also the sole supplier of military grade
jet fuel for the military bases in the state.
6:38:12 PM
AT EASE
6:38:32 PM
RECONVENED
Senator Olson asked many people and families would be
affected by closing the refinery. Mr. Chapados responded
that there was information in the backup, which outlined
the economic impacts of the refinery closure.
6:41:54 PM
MATT GILL, SENIOR MANAGER, EXTERNAL AFFAIRS, TESORO,
JUNEAU, spoke in support of HB 287. He stated that the
contract extension outlined in the legislation would
provide Tesoro with a stable supply of ANS crude oil, and
give the flexibility to accommodate seasonal fluctuations
in demand for refined products. The availability,
flexibility, and stability of the contract would have a
positive impact on Tesoro's ability to maintain ongoing
operations at its Kenai refinery.
Vice-Chair Fairclough CLOSED public testimony.
Senator Dunleavy wondered how many individual facilities
would qualify under the legislation. Commissioner Balash
responded that the qualifying facilities included the Flint
Hills facility in North Pole; the Petro Star facility in
North Pole; the Petro Star facility in Valdez; and the
Tesoro facility in Nikiski. He stated that the Petro Star
facility in North Pole was slated to close, so there would
only be three qualifying facilities once the credits become
available.
Senator Dunleavy wondered if Agrium facility was qualified.
Commissioner Balash replied in the affirmative.
Senator Dunleavy queried the total possible tax credit.
Commissioner Balash responded that, if all four refineries
plus the Agrium facility participated, it would be 50
multiplied by 5, which would equal $250 million. He
stressed that the facility provided a positive impact to
the state treasury.
6:47:10 PM
Senator Bishop wondered if the major oil companies were
still refining product on the North Slope. Commissioner
Balash responded in the affirmative.
Senator Bishop asked if those companies were excluded from
the legislation. Commissioner Balash replied that those
companies were excluded from the legislation.
Vice-Chair Fairclough wondered if there was an analysis of
the costs that were part of the advancement of the
proposal. Commissioner Balash replied that DNR had
conducted best interest findings, and DNR had conducted a
review of specific economics of the refining done in state.
Vice-Chair Fairclough queried whether there would be a
further examination of the structural problems of the
Alaskan refineries. Commissioner Balash stated that DNR did
not intend to pursue that type of investigation. The
department was aware of the impacts to the refineries costs
He explained that the quality bank and its charges were
decided at the federal level and that the state had little
ability in that regard to influence decision making. As
commissioner, he intended to watch those companies closely
as they were given the tax credits.
6:54:36 PM
Vice-Chair Fairclough wondered why the companies would not
be investigated first, followed by offering credits.
Commissioner Balash responded that there was an urgency to
maintaining the operations of the facilities. He stressed
that the revised legislation was much less generous than
its original version.
Senator Olson asked what the state would do if the
legislation failed. Commissioner Balash replied that Petro
Star had renewed its annual contract and that the state
expected. He stated that the impacts would be fairly
widespread.
Senator Olson queried what other financial issues committee
might should consider, if the legislation failed.
Commissioner Balash expressed concerns that additional
costs fuel prices would continue to increase.
7:02:36 PM
Senator Olson wondered if the airports would still need
refineries after the ten-year period. Commissioner Balash
replied that he was concerned that the number of landings
in Ted Stevens International Airport would decrease.
Senator Bishop expressed additional concern that the
availability of asphalt would be affected.
HB 287 was HEARD and HELD in committee for further
consideration.
7:05:35 PM
AT EASE
7:06:14 PM
RECONVENED
CS FOR HOUSE JOINT RESOLUTION NO. 10(FIN)
Proposing amendments to the Constitution of the State
of Alaska creating a transportation infrastructure
fund.
7:06:56 PM
REBECCA ROONEY, STAFF, REPRESENTATIVE PEGGY WILSON,
presented HJR 10:
HJR 10 will put a constitutional amendment before
voters to amend the Alaska constitution to reinstate a
dedicated fund for transportation projects. If this
change is passed by the voters, the Alaska
Transportation Infrastructure Fund (ATIF) will
dedicate transportation user fees and taxes, (motor
fuel tax, vehicle rental tax, studded tire tax,
driver's license and identification card fees, vehicle
registration fees) to transportation projects.
The crafters of the constitution allowed for two
dedicated transportation funds at the time of
statehood, one for land transportation and one for sea
transportation. They realized that some funds would be
needed no matter the economic or political climate.
They lasted for several years until they were
eliminated. HJR 10 will reinstate a transportation
fund.
In FY14, 79 percent of our capital transportation
budget will come from the federal government. The
Federal Government passed a new, two year highway
program, MAP-21. The good news is that the overall
federal-aid funding remains consistent with SAFETEA-
LU, the previous program. However, the amount of
funding for roads not on the National Highway System
(NHS) has been cut by about 50 percent. We will see a
lot less funding for our borough and city roads.
The categories of funding have been reduced and they
are much more restrictive. Our own DC delegation have
told the legislature that Alaska needs to rely less on
the federal government and start shouldering some of
the burden of improving our transportation
infrastructure.
The roads, bridges, airports, ferries and transit
systems that make up our state's transportation system
are essential to mobility, commerce and economic
development. This system enhances economic
competitiveness, increases safety and enhances quality
of life. There is a growing imbalance between system
use and capacity as well as the need for new
infrastructure to access our valuable resources. To
insure Alaska has the infrastructure necessary to
develop our resources as well as providing a quality
of life for our citizens we must commit to funding
transportation. Having a dependable revenue stream
from year to year will allow Alaska to tackle today's
congestion and maintenance projects as well as
developing the needed access to resources and energy.
The latest version of HJR 10 updated the dates that
the revenue would be directed into the ATIF and it
also added tire taxes as another source of revenue.
7:09:58 PM
TOM BRICE, ALASKA LABORERS UNION, JUNEAU, spoke in support
of HJR 10. He understood that the fund needed some time to
increase in order to be used for actual large
transportation projects. He felt that the taxes should be
used for dedicated highway programs.
Vice-Chair Fairclough CLOSED public testimony.
Vice-Chair Fairclough noted that there were a number of
letters in support of the bill.
HJR 10 was HEARD and HELD in committee for further
consideration.
HB 384 am was SCHEDULED but not HEARD.
7:12:29 PM
RECESSED until 1 P.M. on 4/20/14.
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