Legislature(2015 - 2016)SENATE FINANCE 532
03/23/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB64 | |
| SB15 | |
| SB30 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 30 | TELECONFERENCED | |
| + | SB 64 | TELECONFERENCED | |
| + | SB 15 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 23, 2015
9:04 a.m.
9:04:28 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:04 a.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Laura Pierre, Staff, Senator Anna MacKinnon; Elizabeth
Nudelman, Director, School Finances and Facilities,
Department of Education and Early Development; Senator John
Coghill; German Baquero, Staff, Senator Coghill; Marty
Hester, Deputy Director, Division of Insurance, Department
of Commerce, Community and Economic Development; Erin
Shine, Staff, Senator Anna MacKinnon.
PRESENT VIA TELECONFERENCE
David Nees, Self, Anchorage; Linda Hulbert, Self,
Fairbanks; Matthew Blattmachr, Vice-President, Alaska Trust
Company, Anchorage; Douglas Blattmachr, President and CEO,
Alaska Trust Company, Arizona.
SUMMARY
SB 15 LIFE INSURANCE POLICY PREMIUM TAX
SB 15 was HEARD and HELD in committee for further
consideration.
SB 30 MARIJUANA REG;CONT. SUBST;CRIMES;DEFENSES
CS SB 30 (FIN) was REPORTED out of committee with
a "do pass" recommendation and with two new zero
fiscal notes from the Department of
Administration; one new zero fiscal note from the
Department of Corrections; one new zero fiscal
note from the Department of Law; one new zero
fiscal note from the Department of Public Safety;
one new zero fiscal note from the Alaska
Judiciary System; and one new fiscal impact note
from the Department of Commerce, Community and
Economic Development.
SB 64 SCHOOL BOND DEBT REIMBURSEMENT
SB 64 was REPORTED out of committee with a "do
pass" recommendation and with one new
indeterminate fiscal note from the Department of
Education and Early Development.
SENATE BILL NO. 64
"An Act relating to school bond debt reimbursement;
and providing for an effective date."
9:05:30 AM
LAURA PIERRE, STAFF, SENATOR ANNA MACKINNON, explained SB
64. She said that SB 64 would sunset the school bond debt
reimbursement program for five years, and would reduce the
rates. Currently, the reimbursement rates were 70 percent
for a standard construction or new build on a school; and
60 percent on non-standard expansion and construction.
Ms. Pierre discussed the Sectional Analysis (copy on file):
Section 1: Amends AS 14.11.014, adds new subsection
(d) Sunsets the bond debt reimbursement provisions for
school construction and major maintenance for five
years, January 1, 2015 - July 1, 2020.
Section 2: Amends AS 14.11.100(a) Page 6, line 21
restricts reimbursement of bonds authorized after
January 1, 2015. Page 7, lines 1 - 11, deletes
language relating to bonds authorized after May 1,
2015.
Section 3: Amends AS 14.11.100(a) Page 12, line 17 -
Page 13, line 2 inserts language relating to bonds
authorized on or after July 1, 2020. (18) For projects
approved under AS 14.11.100 (h), (i), and (j)(2) - (5)
the reimbursement would be 50 percent.
(19) For projects approved under AS 14.11.100
(h), (i), and (j)(2), (3), and
(5) the reimbursement would be 40 percent.
Section 4: Amends AS 14.11.100, adds a new section (s)
Restricts the Commissioner from approving an
application for bond debt reimbursement between
January 1, 2015 - July 1, 2020
Section 5: Amends AS 14.11.102, adds new section
(c)Restricts the Commissioner from approving an
application for bond debt reimbursement between
January 1, 2015 - July 1, 2020
Section 6: Repeals sections 1, 4, and 5 of this act on
July 1, 2020
Section 7: Retroactivity clause
Sections 1, 2, 4, and 5 of this act are
retroactive to January 1, 2015
Section 8: Section 3 of this act takes effect July 1,
2020
Section 9: Sections 1, 2, 4, 5, and 7 of this act take
effect immediately
9:08:49 AM
Senator Olson remarked that the bill was a positive move
toward addressing the shortfall in revenue. He wondered how
the bill affected the construction of the Kivalina School
as related to the Kasayulie Case. Ms. Pierre replied that
the only school with projects on a potential ballot was the
Anchorage School District, and their election would be
April 7, 2015. The Anchorage School District would not
receive reimbursement for the bonds, if the bill were
signed and passed into law prior to the election. She did
not know how the other school districts' bond packages were
structured.
Senator Olson wondered if the bill affected the Kivalina
School construction. Ms. Pierre replied that the
legislation did not affect the Kivalina School
construction.
Senator Bishop wondered if there would be any new budget
requests for new projects.
ELIZABETH NUDELMAN, DIRECTOR, SCHOOL FINANCES AND
FACILITIES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT,
explained that the timeline eligibility throughout the
legislation was voter authorization. Some of the voter-
authorized bonds were not yet applied to the department,
and some had not yet sold all of the bonds. The legislation
stated that the commissioner may not approve and
application for indebtedness authorized by the qualified
voters of the municipality.
DAVID NEES, SELF, ANCHORAGE (via teleconference), testified
in support of the legislation.
Co-Chair MacKinnon CLOSED public testimony.
9:16:58 AM
AT EASE
9:18:36 AM
RECONVENED
9:18:48 AM
Co-Chair MacKinnon discussed the retroactive effective
date. She remarked that there was some concerns about the
legality of the retroactive date of January 1, 2015, and
how it affected language consistent with statute.
Ms. Pierre explained that she had some discussion regarding
the retroactive effective date. The legislative legal
department suggested and effective date of May 1, 2015,
which reflected current state statute. The statute stated
that districts could issue bond debt from October 2006
through May 1, 2015. She announced that legislative legal
did not express concern regarding the retroactive date, so
long as the legislation were signed and passed by the
Anchorage election on April 7, 2015.
Senator Olson asked if the administration was in favor of
the legislation. Ms. Pierre responded that there was a
scheduled meeting with the governor to discuss the bill.
Co-Chair MacKinnon announced that local communities
currently had the ability to indebt the state to an amount
that the community determines, rather than what the state
determines.
Senator Dunleavy felt that SB 64 was responsible
legislation. He believed that the legislature often invited
lawsuits, but he felt the fear of litigation should not be
a driving force behind supporting a bill.
9:23:30 AM
AT EASE
9:23:59 AM
RECONVENED
9:24:06 AM
Senator Olson agreed with the focus of the legislation. He
remarked that school construction was important, but also
very expensive. He felt that the legislation was prudent.
Senator Dunleavy stressed that there was no guarantee that
the state would provide funding, because it was always
subject to appropriation. Co-Chair MacKinnon agreed with
that assertion.
Vice-Chair Micciche stated that the fiscal note related to
debt service.
9:25:51 AM
AT EASE
9:26:52 AM
RECONVENED
Vice-Chair Micciche expected the bill to have zero fiscal
impact on the state.
Vice-Chair Micciche MOVED to REPORT SB 64 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
SB 64 was REPORTED out of committee with a "do pass"
recommendation and with one new indeterminate fiscal note
from the Department of Education and Early Development.
9:28:03 AM
AT EASE
9:33:09 AM
RECONVENED
SENATE BILL NO. 15
"An Act relating to the tax on policy year premiums
for life insurance policies; relating to single and
group life insurance policies; and relating to other
types of insurance policies that insure the life of
one or more individuals."
9:33:09 AM
SENATOR JOHN COGHILL, SPONSOR, explained that the
legislation would install eight-tenths of a percent instead
of one-tenth of one percent on policies that exceeded
$100,000. He stated that the issue was broad to his
attention as he was dealing with some trust legislation for
estate planning. He remarked that the bill came by way of
request, dealing with some of the people that were involved
in state planning.
GERMAN BAQUERO, STAFF, SENATOR COGHILL, remarked that the
legislation would only affects the tax collected on life
insurance policies that exceed $100,000 by changing the tax
from one-tenth of a percent to 0.08 percent. The
legislation also added an applicability that would affect
all future life insurance policies from December 31, 2015.
He shared that there was a zero fiscal note that was from
the Division of Insurance. He read from the second page of
the fiscal note:
The reduction in tax is expected to have a negligible
fiscal impact on the Division, as the amount of
premium that is subject to this tax is very small. The
potential increase as a result of additional premium
sales is expected to negate any reduction in revenues,
if not increase the tax revenues beyond what they
previously.
9:38:16 AM
Senator Coghill Alaska had been a main player in the trust
investment strategy in the U.S. He remarked that other
states had followed Alaska's strategy in trust investments.
He felt that legislation would attract further investment
by reducing the tax rate.
Senator Olson wondered how the change affected the policy
purchaser or the policy pay out recipient. Senator Coghill
stated that legislation would have very little effect on
the purchaser or recipient.
Senator Olson surmised that the purchaser would not see an
increase in the cost of the premium. He further wondered if
there were consumer groups that would be affected by the
change. Senator Coghill responded that the estate planning
industry felt the legislation was a benefit to
beneficiaries by the lower tax rate.
Co-Chair MacKinnon looked at the South Dakota rates. She
wondered how Alaska compared to all states. She remarked
that the rate was reduced at the request of the insurance
companies. Therefore the insurance companies benefitted
from the change. She felt that Alaska could obtain addition
policies that had been lost over some of the years. She
wondered if Alaska wanted to be number one in the insurance
industry. Senator Coghill deferred to Mr. Baquero.
Mr. Baquero explained that the intent of the legislation
was to remain competitive with the other states.
9:43:11 AM
Co-Chair MacKinnon did not know if the lower taxes would be
good for the state. She remarked that the policies were
slightly reduced, but noted that the only people that
advocated for the legislation were the insurance companies.
Mr. Baquero replied there was no opposition for the
legislation. There was only support from the insurance
industry.
Co-Chair MacKinnon noted that South Dakota taxed on
annuities, but Alaska did not. She looked at insurance
policies under $100,000, Alaska was taxing at two-tenths of
a percent higher than South Dakota. She wondered why there
was not a reduction on the under $100,000. Mr. Baquero
replied that reducing the tax for under $100,000 was also a
policy issue.
Senator Coghill furthered that the issue was mostly related
to estate planning in the trust industry.
9:46:38 AM
LINDA HULBERT, SELF, FAIRBANKS (via teleconference),
testified in support of the legislation. She felt that the
insurance industry in Alaska should be competitive.
MATTHEW BLATTMACHR, VICE-PRESIDENT, ALASKA TRUST COMPANY,
ANCHORAGE (via teleconference), testified in support of the
legislation. He remarked that the insurance companies may
benefit from increased business, but the legislation also
benefitted the consumer. He stated that the legislation was
proposed to change the structure of the larger policies.
Senator Olson wondered how to reduce the "frenzy" between
Alaska and South Dakota. Mr. Blattmachr replied that it was
a valid concern, which is why the state was only matching
the rate in South Dakota. He furthered that it was possible
that South Dakota may lower their tax structure, but shared
that it was highly unlikely because their tax structure had
been established for a number of years.
Vice-Chair Micciche wondered if the bill required an annual
review. Mr. Blattmachr responded that he did not know if
there would be an annual review. He stated that the issue
was monitored by the industry.
9:54:30 AM
Vice-Chair Micciche wondered if there were people that
would switch their date of service, because of tax policy.
Mr. Blattmachr replied in the affirmative. He stated that
trust accounts were created to purchase life insurance
policies.
DOUGLAS BLATTMACHR, PRESIDENT AND CEO, ALASKA TRUST
COMPANY, ARIZONA (via teleconference), spoke in support of
the legislation.
Co-Chair MacKinnon CLOSED public testimony.
MARTY HESTER, DEPUTY DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
stated that he was available for questions.
Co-Chair MacKinnon wondered why Alaska wanted to be number
one on a taxation issue. Mr. Hester responded that it was a
policy decision. He explained that he was available to
speak to the differences in premiums from the previous
years versus the small amounts.
Co-Chair MacKinnon asked if he had the current spreadsheet.
Mr. Hester replied that he had the updated spreadsheet.
9:58:13 AM
AT EASE
9:59:12 AM
RECONVENED
9:59:18 AM
Co-Chair MacKinnon looked at a spreadsheet titled, "Life
Insurance Companies Licensed in the State of Alaska" (copy
on file). She queried the difference in the premiums. Mr.
Hester replied that he had done calculations on 2013 and
2011, because they were the smallest and largest years. He
explained that in 2011, if the premium tax was reduced to a
0.08 percent, the difference to the state collection would
have been $88,656. In 2013, the state would have collected
a difference of $15,961. The amount of the collected taxes
would vary depending on the premium amount. He explained
that the increase in 2011 was due to a policy that was
written in excess of $300 million.
Co-Chair MacKinnon wondered if he said $3 million or $300
million. Mr. Hester replied that it was $300 million.
Senator Dunleavy wondered if the bill would translate into
state investment in which companies would hire more people.
Mr. Hester responded that he did not know the business
plans of the companies.
Senator Dunleavy stressed that he would like to know if the
companies would pursue instate hire. Ms. Hulbert replied
that the Alaska Trust Act passed in 1967 required that one
must have a major asset in Alaska in order to set up a
trust. The Alaska Trust, and the premium tax bills had
added financial capacity to Alaskan banks, as well as
attracted many individuals to invest in the state.
Co-Chair MacKinnon wondered if the Alaska Trust Company
located in Alaska. Mr. Blattmachr replied that the
corporate headquarters were located in Alaska.
Co-Chair MacKinnon remarked that there was a letter which
stated that 362 life insurers were licensed to do business
and none were domiciled in the state. She asked for more
information. Mr. Hester replied that a domesticated insurer
was an insurance company that was based in Alaska. He
stated that Alaska had seven domesticated insurers, and the
majority were property and casualty insurers. He stated
that the life insurers were domesticated in other states
and were admitted to write in any state they decide to
conduct business.
10:05:49 AM
Senator Olson felt suspicion when the corporations
attempted to speak in favor of consumers. He wondered if
there was an effect on the consumers. Mr. Hester responded
that the premium must reflect the risk if the premium was
less, and the premium taxes were built into the price of
the premium. He stressed that each risk must be determined
on its own merit.
Senator Olson surmised that consumer groups would be in
favor of the legislation. Mr. Hester replied that he had
not heard from any consumer groups regarding the
legislation.
Vice-Chair Micciche noted that there was an estimated
$16,000 reduction in taxes. He wondered if there was an
anticipated increase to make up the difference in revenue.
Mr. Hester replied that there could one or many policies to
make up the difference in revenue.
Vice-Chair Micciche wondered if there was a national trend
for a reduction in life insurance policies. Mr. Hester
replied that he was not aware of a trend, and agreed to
provide more information.
Vice-Chair Micciche remarked that the state should
understand the policy, and there should be some resistance.
SB 15 was HEARD and HELD in committee for further
consideration.
10:10:22 AM
RECESSED
12:14:00 PM
RECONVENED
SENATE BILL NO. 30
"An Act relating to controlled substances; relating to
marijuana; relating to driving motor vehicles when
there is an open marijuana container; and providing
for an effective date."
12:14:32 PM
Vice-Chair Micciche MOVED to ADOPT the committee substitute
for SB 30, Work Draft 29-LS0231\V (Martin, 3/13/15). Co-
Chair MacKinnon OBJECTED for discussion.
ERIN SHINE, STAFF, SENATOR ANNA MACKINNON, explained the
changes in the committee substitute. She stated that the
committee substitute incorporated some of the amendments
from March 12 and March 13. She looked at page 1, line 3,
which deleted "relating to municipalities" as related to
Amendment 4. She referred to page 3, lines 13 through 29,
which incorporated Amendment 22: the promoting contraband
amendment. She explained that currently, a controlled
substance was not allowed in a prison. The change treated
marijuana like alcohol, and lowered the penalty from a
Class C felony to a Class A misdemeanor. She looked at page
5, lines 17 through 20, which incorporated Amendment 6 that
changed the aggregate to usable marijuana. She referred to
page 6, line 18, as related to Amendment 18 that was a
technical fix that included misconduct involving a
controlled substance. She looked at page 6, lines 24
through 25, which clarified that home possession levels
were not applicable for criminal possession levels. She
referred to page 7, lines 2 through 7, which removed
manufacturers, because the initiative clearly allowed for
manufacturing. She looked at page 7, line 28 through page
8, and line 1, which incorporated the usable marijuana. She
referred to page 8, lines 6, 9, 12, and 19, which
incorporated usable marijuana.
12:22:45 PM
Co-Chair Kelly remarked that the CS did not include the
amendment that was previously adopted.
Co-Chair MacKinnon surmised that the committee substitute
included all previously adopted amendments, except for one.
Ms. Shine agreed.
Co-Chair MacKinnon REMOVED her objection. There being NO
further OBJECTION, the proposed committee substitute was
adopted.
Senator Hoffman MOVED to ADOPT Amendment 1, 29-LS0231\V.2,
Martin, 3/19/15 (copy on file).
Co-Chair MacKinnon OBJECTED for discussion.
Senator Hoffman explained the amendment.
Co-Chair MacKinnon REMOVED her objection. There being NO
further OBJECTION, Amendment 1 was adopted.
12:27:23 PM
AT EASE
12:27:49 PM
RECONVENED
12:27:55 PM
Vice-Chair Micciche discussed the attached fiscal notes.
12:32:08 PM
AT EASE
12:34:42 PM
RECONVENED
12:34:49 PM
Vice-Chair Micciche remarked that the Department of Public
Safety (DPS) would identify other funding sources.
Senator Hoffman noted that the fiscal note from Department
of Commerce, Community and Economic Development (DCCED)
reflected that the governor had requested.
Co-Chair MacKinnon stated that there was a separate bill
that address regulations.
Senator Dunleavy did not support adding more funds to the
legislation, because of Alaska's current fiscal situation.
Co-Chair MacKinnon remarked that there was a similar bill
that was currently in the legislative process.
Vice-Chair Micciche MOVED to REPORT SB 30 out of committee
with individual recommendations and the accompanying fiscal
notes.
CS SB 30 (FIN) was REPORTED out of committee with a "do
pass" recommendation and with two new zero fiscal notes
from the Department of Administration; one new zero fiscal
note from the Department of Corrections; one new zero
fiscal note from the Department of Law; one new zero fiscal
note from the Department of Public Safety; one new zero
fiscal note from the Alaska Judiciary System; and one new
fiscal impact note from the Department of Commerce,
Community and Economic Development.
12:37:47 PM
AT EASE
12:38:54 PM
RECONVENED
Co-Chair MacKinnon discussed the following day's agenda.
ADJOURNMENT
12:39:34 PM
The meeting was adjourned at 12:39 p.m.