Legislature(2015 - 2016)SENATE FINANCE 532
04/17/2016 08:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB130 | |
| HB143 | |
| HB268 | |
| HB290 | |
| HB314 | |
| HB259 | |
| HB289 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 130 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 143 | TELECONFERENCED | |
| += | HB 268 | TELECONFERENCED | |
| += | HB 290 | TELECONFERENCED | |
| += | HB 314 | TELECONFERENCED | |
| += | HB 259 | TELECONFERENCED | |
| += | HB 289 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 17, 2016
8:05 a.m.
8:05:37 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 8:05 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
Janak Mayer, Chairman and Chief Technologist, enalytica;
Representative Cathy Munoz, Sponsor; Gene Therriault,
Deputy Director, Statewide Energy Policy Development,
Alaska Energy Authority, Department of Commerce, Community
and Economic Development; Laura Stidolph, Staff,
Representative Kurt Olson; Erin Shine, Staff, Senator Anna
MacKinnon; Representative Shelley Hughes, Sponsor; Mark
Luiken, Commissioner, Department of Transportation and
Public Facilities; Representative Gabrielle LeDoux,
Sponsor.
SUMMARY
SB 130 TAX;CREDITS;INTEREST;REFUNDS;O & G
SB 130 was HEARD and HELD in committee for
further consideration.
HB 143 AIDEA BONDS: SWEETHEART CREEK HYDRO PROJ.
CSHB 143(FIN) was REPORTED out of committee with
a "do pass" recommendation and with one
previously published zero fiscal note: FN1 (CED).
HB 259 RELOCATION ASSISTANCE FOR FED. PROJ/PROG
HB 259 was REPORTED out of committee with a "do
pass" recommendation and with one previously
published zero fiscal note: FN 1(DOT).
HB 268 AIDEA:DIVIDEND TO STATE;INCOME;VALUATION
HB 268 was REPORTED out of committee with "no
recommendation" and with one previously published
indeterminate fiscal note: FN 1 (CED).
HB 289 BOARD OF BARBERS AND HAIRDRESSERS
SCS HB 289(FIN) was REPORTED out of committee
with "no recommendation" and with one fiscal
impact note by the Senate Finance Committee for
the Department of Commerce, Community and
Economic Development.
HB 290 EXTENDING THE REAL ESTATE COMMISSION
HB 290 was REPORTED out of committee with "no
recommendation" and with one previously published
fiscal impact note: FN 2(CED).
HB 314 AK REG ECON ASSIST. PROGRAM; EXTEND
SCS HB 314(FIN) was REPORTED out of committee
with "no recommendation" and with one previously
published fiscal impact note: FN 1(CED).
Co-Chair MacKinnon thanked Senate Finance Committee staff.
SENATE BILL NO. 130
"An Act relating to confidential information status
and public record status of information in the
possession of the Department of Revenue; relating to
interest applicable to delinquent tax; relating to
disclosure of oil and gas production tax credit
information; relating to refunds for the gas storage
facility tax credit, the liquefied natural gas storage
facility tax credit, and the qualified in-state oil
refinery infrastructure expenditures tax credit;
relating to the minimum tax for certain oil and gas
production; relating to the minimum tax calculation
for monthly installment payments of estimated tax;
relating to interest on monthly installment payments
of estimated tax; relating to limitations for the
application of tax credits; relating to oil and gas
production tax credits for certain losses and
expenditures; relating to limitations for
nontransferable oil and gas production tax credits
based on oil production and the alternative tax credit
for oil and gas exploration; relating to purchase of
tax credit certificates from the oil and gas tax
credit fund; relating to a minimum for gross value at
the point of production; relating to lease
expenditures and tax credits for municipal entities;
adding a definition for "qualified capital
expenditure"; adding a definition for "outstanding
liability to the state"; repealing oil and gas
exploration incentive credits; repealing the
limitation on the application of credits against tax
liability for lease expenditures incurred before
January 1, 2011; repealing provisions related to the
monthly installment payments for estimated tax for oil
and gas produced before January 1, 2014; repealing the
oil and gas production tax credit for qualified
capital expenditures and certain well expenditures;
repealing the calculation for certain lease
expenditures applicable before January 1, 2011; making
conforming amendments; and providing for an effective
date."
8:08:05 AM
JANAK MAYER, CHAIRMAN AND CHIEF TECHNOLOGIST, ENALYTICA,
reminded the committee that he had finished the previous
day with an overview of the North Slope. He would continue
with the presentation "CS SB 130: KEY ISSUES and
ASSESSMENT," (copy on file). He informed that he would
review slides pertaining to the changes proposed for the
North Slope and Cook Inlet in SB 130.
Mr. Mayer commenced his presentation with slide 18, "NOL-
HARDENING SHIFTS REVENUE, TAXES LOSSES":
Effective tax rate under ACES could fall to zero
because capital credits were applied after gross floor
SB21 applied a hard gross floor under $/bbl credits -
meaning skyrocketing net tax rate at low prices
Concern to protect state at low prices always valid,
but must balance risk and reward at low and high end
Preventing NOL credit from 'piercing' floor moves
state revenue from future to present; total is the
same
Mr. Mayer thought that the concept of possible hardening of
the gross floor to be one of the more contentious topics in
SB 130. He mentioned that at low oil prices the gross floor
bent up the effective tax rate very steeply under SB 21
[oil and gas production tax legislation passed in 2013],
while taking over 100 percent of the available profit. He
referred to the graph on the lower left of the slide,
entitled "Effective Production Tax Rate," which showed that
in the previous tax regime, the effective tax rate went
down to zero in the $50 per barrel oil price range. He
pointed out that it was not possible to show effective tax
rates if the price of oil was lower than $46 per barrel.
Mr. Mayer continued discussing slide 18. He explained that
when discussing the question of the hardening of the floor,
there was no profit to consider. He recalled stating the
previous day that SB 21 completely hardened the floor for
legacy production, for all purposes but one credit that
that went below and was the Net Operating Loss (NOL). He
explicated that by definition a producer only earned a NOL
when there was no profit to be made, and expenses exceeded
revenues. A NOL credit was the portion of expenses that
could not be taken against a production tax, and was in
fact a loss. To ponder NOLs, it was necessary to examine
other means than effective tax rates, which by definition
were undefined under that scenario.
Mr. Mayer highlighted the chart "Production Tax $/Taxable
BBL" on the right hand side of slide 18, which examined
absolute monetary terms of production tax per taxable
barrel. He noted that the red line demonstrated scenarios
under SB 21/CSSB 130; versus the green line, which
demonstrated what would happen under CSHB 247(FIN). He
observed that the two lines coincided for most of the
chart, excepting the period between the oil price of $45
per barrel through $46 per barrel and below. The difference
in the lines was indicative of the hardening of the floor
proposed in CSHB 247(FIN).
8:12:40 AM
Mr. Mayer continued to discuss slide 18, pointing out that
the green line of the right-hand graph had a steep decline
to about $80 per barrel, at which there was a sharp
inflection point. He noted that the same point was mirrored
on the first chart, and reflected when the gross tax kicked
in. The point signified the beginning of the area where as
oil prices fell, revenues to the state fell more slowly and
tax rates increased sharply. The scenario remained
consistent until the $46 per barrel level, at which point
NOLs kicked in. He furthered that under CSHB 247, there was
a secondary floor that kicked in and was reflected in a
visible difference in the two lines. He thought it was
important to understand that additional revenue achieved
under the scenario was not actually new revenue, but rather
revenue brought from the future to the present.
Mr. Mayer thought an important concept was the unique
hybrid of a net tax and a gross tax. If there was a pure
gross tax, costs would not be considered or deducted in any
form against any tax. He thought that there was
fundamentally a net tax system, and the core premise was
deduction of costs against tax. When there were additional
costs that could not be deducted (because a company was
making a loss), the company was entitled at some point to
deduct the costs. He discussed the question of whether the
additional deduction would happen in the current year,
whether it would take the company below the 4 percent
floor, or whether the company would simply have to pay the
4 percent floor regardless of the loss and carry the
additional costs into the future. By carrying the costs
(NOL credit) into the future, at some point the costs would
be deducted and would have a corresponding impact on state
revenues. He stated that the impact on state revenues would
either be in the future in a more profitable time, or in
the present time. He summarized that the scenario was a
question of the timing of cash flows, not the absolute
amount.
8:16:02 AM
Vice-Chair Micciche thought it was interesting that slide
18 did not contain the phrase "loss carry forward" as it
was a key issue on the slide. He wondered why it was not
highlighted.
Mr. Mayer replied that enalytica had tried to highlight the
final sentence on the slide, which stated that piercing the
floor "moves state revenue from future to present." He
noted that the credit itself could be referred to either as
a NOL or a loss carry-forward credit. He thought perhaps in
the context of the slide, thinking of it as a loss carry-
forward credit highlighted the topic better.
Mr. Mayer continued to discuss slide 18, and emphasized
that the system was already highly regressive, and any
company that was cash flow negative was struggling to re-
invest. He thought the proposed tax regime would make it
harder for such companies, while helping to bridge some of
the state's short-term financial problems. The state would
make it more difficult for companies by taking additional
cash when they were cash-flow negative, and displacing it
by having them pay less tax in the future. He thought it
was important for the public to understand that one of the
impacts of bringing revenue from the future to the present
was that if left an additional trail of NOL credits into
the future, which may be difficult to explain when oil
prices rose and the obligation had to be met. Such an
obligation, made when times were bad, would reduce possible
future revenues.
Vice-Chair Micciche pointed out that all of what Mr. Mayer
stated was true if there was not a sunset to a loss carry-
forward.
Mr. Mayer concurred.
8:19:02 AM
Mr. Mayer discussed slide 19, "NS Changes: New Field
Example":
How do changes impact new field development?
Sample NS investment: Cumulative CAPEX and DRILLEX of
$1.3 bn; average annual OPEX of about $15/bbl
Peak production of 20 mb/d; 30 wells (production and
injection) drilled over 8 years
Ongoing DRILLEX in early years means bulk of tax
liability occurs only after several years of
production
Mr. Mayer explained that he had modelled the life cycle of
a typical new development on the North Slope. He continued
that the modelling started with a well-type curve that
considered well productivity, well costs, a drilling
schedule, facilities costs, and building the project up. He
directed attention to the graph on the left hand side of
slide 19, "Cashflow and Components: $70/BBL," which showed
cash flows from the hypothetical project.
Mr. Mayer discussed the "government take" category in red
on the graph, which was shown as negative in the early
years and positive in the later years. He mentioned the
topic of the reimbursable net operating loss (NOL) credit,
and explained that the government take category showed the
impact of the credit in the early years of the project. The
developer (without an existing liability) would be paying
cash through the credit system up front for some share of
the development costs; and as time went by, the negative
portion represented the share of the cash coming to the
state through the fiscal system. He reminded the committee
that the graph was representative of the point of view of
the company.
He referred to questions in a previous meeting about
thinking of the credits as a snapshot in time, and pointed
out that in doing so, one was unable to see the subsequent
account of all the revenues that would follow.
Mr. Mayer continued to discuss the chart on slide 19, and
thought it was interesting to observe an ongoing schedule
of drilling wells to maintain plateau-level production. He
pointed out that for most companies, there would not be
substantial production tax liability under any profit-based
production tax under the time period. The core of
production tax received by the state (illustrated by the
red bars as they became substantially greater) was really
received later. One of the big impacts of both versions of
the bill would be reducing the gross value reduction (GVR)
to a window of 5 years. He pointed out that 5-year window
coincided with the time where there was very little tax
being paid. The idea of the GVR was to reduce the effective
tax rate; unfortunately by limiting it to 5 years, the
effective tax rate was reduced precisely in a period where
there was very little tax being paid in the first place.
8:24:19 AM
Mr. Mayer addressed slide 20, "5-year GVR limit has major
impact on project value":
5-year GVR limit has major impact on project value
Project is marginal at $60/bbl; elimination of GVR can
wipe out all value at that price
Because most tax liability occurs after end of major
spending, short GVR limit provides little benefit
5-year GVR limit destroys over 60% of project value at
$60/bbl, relative to status quo
Impact of 10 year limit much lower; 15 year limit
preserves almost all of status quo value
Mr. Mayer clarified that the slide looked at comparison
with the status quo to various possible time limits on the
GVR. He recalled conversations that happened when SB 21 was
debated, regarding whether the GVR should be an ongoing
benefit without a time limit, or the opposite. Stakeholders
at the time had considered a higher benefit that was
shorter in time; versus an ongoing benefit, which was the
choice that was ultimately made. He thought the decision
was made largely to discourage changes in the way companies
invested and developed a field, such as trying to put a
project in a more compressed time frame to maximize the
benefit. He thought there was concern about capping the
benefit. He opined that if the value was capped, a time
longer than 5 years was necessary to capture any of the
value offered.
Mr. Mayer continued discussing the graph on slide 20, which
showed how much of the total value of the project was
effectively destroyed by introducing some time limit on the
GVR. He noted that the differently colored lines showed
different price levels, and compared the net present value
of a project under the status quo versus a 5-year limit. By
imposing the 5-year GVR limit, he observed that just over
60 percent of the total value of the project was taken away
from the investor. By imposing a 10-year limit, it only
removed closer to 20 percent. By imposing a 15-year limit,
very little of the value was taken away, and most of the
value could be taken by the investor during the time
period. He detailed that the impact was particularly high
at the $60 per barrel price level, since at that level the
project was marginal. He concluded that at the $60 per
barrel price, the value the project had for the investor
was due to the GVR, and without it there would be no value.
He continued that with a zero limit it would effectively
take away the GVR altogether, thereby 100 percent of the
value was taken away from the project.
Senator Bishop looked at the manner in which Mr. Mayer had
laid out the examination of the GVR limit. He pondered the
5-year GVR limit, as well as the difficult environment for
production of oil and gas, and wondered about incentive for
drilling in the state.
Mr. Mayer thought it was important to consider that
investments were undertaken while presuming that the GVR
was not bound by time limits. He continued that companies
that had made big expensive decisions were faced with
considering diminishment of their investment in an already
low-priced environment for its project. He discussed oil
prices, and the effect of a 5-year GVR limit phenomenon on
project decisions.
8:28:43 AM
Senator Dunleavy asked what other sovereign nations were
doing in the same price environment. He wondered if other
nations were changing relationships with oil companies and
investments.
Mr. Mayer stated that choices varied around the world; and
there were places that were actively and aggressively
trying to cut taxes to maintain the oil industry, while
there were other places that did not have the same luxury
and fiscal strain necessitated toughened terms. He used the
example of the United Kingdom (U.K.), which had a
hydrocarbon basin in the North Sea that came online in the
same era as the North Slope. He noted that in 2011 the
government (under former Prime Minister John Cameron) had
substantially raised taxes to try and solve budget
problems, and a result was seeing was the industry
increasingly on the brink of the economic limit of
production. As a result, in the previous two years the U.K.
had very dramatically cut away a huge portion of the oil
and gas taxation system to keep the fields going as long as
possible.
Mr. Mayer used a counter example of Russia, which had a
highly regressive gross taxation system that placed a
substantial burden on companies. Russia was highly
resource-dependent and had put off scheduled cuts to the
taxes. He furthered that Russia was in the process of
contemplating raising taxes on industry, despite it being
widely understood that such a measure was for short-term
survival and was destructive in the long-term. He
referenced an article in The New York Times that described
the scenario as "the oil industry equivalent of eating the
seed corn." He thought it was widely understood that in
doing so, Russia was taking away the cash that would
otherwise be needed to reinvest to keep the fields running.
8:31:25 AM
Co-Chair Kelly asked about Mr. Mayer's reference to
possible decommission of the fields in the U.K. Mr. Mayer
restated that it was possible to have a negative investment
boom when there was activity to shut-in and decommission
producing fields.
Vice-Chair Micciche thought one of the difficult things
about a complicated net tax system was how many levers were
involved. He understood what Mr. Mayer was trying to convey
on slide 20, but remarked that the price of oil did not
remain static. He asked about a realistic way to assume
pricing environments over a 15-year time span when one was
evaluating a change to the GVR.
Mr. Mayer stated that enalytica had tried to show graphs
representing the price of oil in a range from $60 per
barrel to $120 per barrel, and had not gone below $60 per
barrel since the example project was already marginal at
$60 per barrel. He explained that there were losses and
negative present value to consider when looking at the
project below $60 per barrel, and the math stopped being
particularly intuitive. He concluded that he was trying to
show that while the portion of value taken away by putting
in a GVR limit was greatest at low oil prices, it was
possible to try and maintain much of the value between the
10 and 15 year limits and vastly preferable to a shorter
duration.
8:33:55 AM
Mr. Mayer discussed slide 21, "prevent GVR raising NOL
above 35% of actual loss":
Prevent GVR raising NOL above 35% of actual loss
The purpose of the Gross Value Reduction (GVR) is to
lower the effective tax rate on new production
One surprising and counter-intuitive effect is to
raise the effective rate of the NOL credit
Issue after production from new development starts,
but ongoing drilling costs mean NOL eligible
Exacerbated at low prices, but impact <$10mm yr for
20mb/d new development
Mr. Mayer referred to the question of the GVR raising a NOL
above 35 percent of an actual loss. He explained that the
slide would show why the effect happened and why it was
important to address. He directed attention to a list of
calculations on the lower left of the slide, which
illustrated using the effects of the GVR in SB 21 versus
the effect of CSSB 130. He restated that the GVR was really
a sort of fiction to imagine there was less revenue from a
project than there actually was, in aid of lowering the
effective tax rate on new production, and focusing on the
revenue side of the equation.
8:35:12 AM
Mr. Mayer highlighted the figures on the left hand side of
the slide, and discussed the effect of SB 21 with GVR
versus CS SB 130. He noted that if the GVR had not been
factored in (at $40 bbl in the example) there would be a
loss of $6 per barrel. With the GVR factored in, one could
see loss of $12 per barrel. He qualified that it was not an
actual loss, but an artifact of the way the tax system
worked. He elaborated that the way statute was written, the
NOL credit was assessed based on the production tax value
per barrel. He continued that particularly in the low-price
oil environment, there were many occasions on which a
company could get much more than a 35 percent NOL credit in
proportion to its actual loss.
Mr. Mayer directed attention to the graph on slide 21,
which illustrated the after-tax cash flow of new
development at oil priced $40 per barrel; and took into
account NOLs with the GVR or without GVR. He indicated that
there was a big effect in the period time after production
had started, while there was still ongoing drilling. It
could be observed on the graph that between years 8 and 10,
the there was a value of a NOL credit being given despite
the fact that the company was only very slightly cash flow
positive. He thought at the time of SB 21 everyone had
agreed that the state wanted a tax system that uniformly
gave 35 percent government support for spending across
almost all circumstances; however because of the way the
statute operated, it turned out to be much more than 35
percent support for spending in particular. He thought both
committee substitutes tried to address the matter by not
factoring in the impact of the GVR when NOLs were
calculated, because it was understood that it was something
artificial to reduce the tax rate and should not be used to
inflate the NOL credit.
8:38:32 AM
Mr. Mayer discussed slide 22, "Floor hardening Makes Tax
System more regressive":
Floor hardening Makes Tax System more regressive
State of Alaska making negative production tax in
today's prices; but overall gov't take is still high
Impact of floor hardening is to shift up government
take in lower oil prices
In times of high investment / low prices (as in 2016),
effective government take exceeds 100%
Mr. Mayer thought there were important considerations when
looking at the question of further floor hardening on a new
field. For new GVR-eligible production, it was not just the
NOL credit that could reduce the tax burden below the gross
minimum. He pointed out that the gross minimum did not
apply to new production because the $5 per barrel credit
and the small producer credit (along with other things)
could take the project below the floor. He noted that the
two charts on slide 22 showed some of the impact of the
changes. He noted that previous versions of the same charts
had shown a relatively uniform level of 60 percent to 65
percent government take on new production, while the
current charts showed closer to a 70 percent government
take, which was reflective of the impact of cutting off the
GVR at 5 years.
Mr. Mayer continued discussing the charts on slide 22, and
relayed that in the case of a 5-year GVR limit, new
production in many circumstances would actually have a
higher level of government take than legacy production. He
furthered that in such a scenario, most of the benefit of
the GVR was taken away. He qualified that the production
only had a $5 per barrel credit, and not the sliding up to
$8 per barrel credit that applied to legacy production. He
emphasized that at whatever the level of government take,
the system was designed to treat something that was fairly
flat and neutral over a wide range of prices. At the lowest
price levels, it could be observed that government take
started climbing rapidly, because of the regressive effect
of the royalty.
Mr. Mayer cdrew attention to the dashed black line on the
chart on the left side, "Level & Composition of Government
Take: CSSB130 GVR," which represented the government take,
and was the sum of all of the bars. He highlighted the
green bars at the lowest prices, at which point production
tax was effectively a negative component of the system. He
explained that production tax was negative at the lowest
prices because the value of the credits the project
received was greater than the value that the state would
subsequently recoup through the production tax system
during the life of the project. He pointed out that in the
$60 per barrel to $70 per barrel range and upwards, the
value of the production tax the state received later in the
production cycle would be greater than the initial
investment in credits; but would be less in the lower cost
environments. He summarized that the negative green bars
were pulling the black line (representing government take)
down so that it was lower than the stacked total of
positive bars. He summarized that the regressive effect of
the royalty at the lowest oil prices was so great that even
though there was a net contribution to the producer through
the production tax system, the royalty was still taking so
much of the value it would be considered a highly
regressive system.
Mr. Mayer continued to address slide 22, and discussed the
effect of floor hardening. He compared the chart on the
left with the chart on the right hand side of the slide,
noting the points at which the regressive part of the
curves kicked in. The curve on the chart on the right,
"Level & Composition of Government Take: CSHB247 GVR,"
started to get regressive below $60 per barrel, as opposed
to below $40 per barrel or $50 per barrel on the graph on
the left side.
8:43:24 AM
Mr. Mayer highlighted slide 23, "Refund limits boost
Capital needs and Lower IRR":
Refund limits boost Capital needs and Lower IRR
Refundable credit limit would increase capital needs
by up to 50% (from $350mm to $400-$550mm)
Application to projects currently under development
could have major adverse impacts
Near-Kuparak-sized new development could easily incur
>$2bn in NOL credits in development years
If per-company limit on refundability is the solution,
what is the right level? $100mm? $85mm?
Mr. Mayer specified that the slide considered at impacts of
putting limits on refundability of the NOL credit. He
relayed that one of the key impacts of up-front
reimbursement of NOL tax credits was that it enabled
projects to be undertaken by companies with substantially
less capital than might otherwise be required. The chart of
the left looked at cumulative cash flow of the example
project, and showed a descending line with a trough
(showing negative cumulative cash flow), representing the
amount of capital needed to build the project. Although the
hypothetical project assumed $1.3 billion of capital
investment, the whole amount was not needed to build a
project. After enough wells were drilled, there would be
enough production and revenue that the project would be
self-sustaining.
Mr. Mayer continued to discuss the graphs on slide 23,
which examined the impact of if NOL credit was not
refundable, and was only taken from future production tax
liability. Additionally, the slide examined the impact of a
limit on how much could be refunded and what it signified
for the amount of capital a company required. He mused that
if there were to be no refundability of the credit, a
project that previously took $300 million in capital to
execute would then take more than $500 of capital to
execute, which would represent a 50 percent increase. He
emphasized that the graphs were representative of things
actually underway on the North Slope, and pondered what
such a direction would communicate to companies that had
already moved forward on projects. He added that another
impact of not having up-front refunded credit was
substantially reducing the internal rates of return that
applied to any given price. He thought it represented a
shift in the amount of capital needed for companies for
start a project during a time the economics looked
substantially less attractive than previously. He thought
it was demonstrated why the refund limits would have a
major impact on existing investments, particularly were it
applied any time in the near future.
8:46:46 AM
Mr. Mayer thought putting a cap on the refundability (but
short of ending it) would have a similar impact, but to a
lesser degree. He directed attention to the charts on slide
23, where the larger dashed line showed the impact of a $25
million cap on NOL credits. He qualified that the $25
million cap was imposed imagining that the example project
being considered was the only a project a company had, and
could take the full value of the $25 million credit on the
project. He stated that there were several companies on the
North Slope with more than one project involved, and that a
company may have other assets in which they were still
investing money and from which they were taking the $25
million NOL credit. The extent to which a limited cap had
an impact varied company by company based on what its
capital program looked like and whether it was already
taking a NOL credit elsewhere. He pointed out that the CS
for HB 247(FIN) had proposed a $100 million cap, and most
recent analyses looking at amounts of companies capital
projects recently claimed indicated that it could be
managed under a $100 million cap. He noted that the Senate
Resources Committee had proposed an $85 million cap. He
thought could think of at least one company that would be
impacted by an $85 cap and would have to think carefully
about the implications and about how to afford its capital
program going forward.
8:48:32 AM
Mr. Mayer thought an important consideration was to limit
was liability to the state from future major developments.
He discussed the impact that credits could have if a major
Kuparak-sized new development were to occur, which could
incur upwards of $2 billion in total credits that the state
would be liable for under the current system. He pondered
that such a development could equate to $7 million or $8
million per year for a couple of years during pre-
production development. He pointed out that during a
constrained price environment, it was a deeply concerning
prospect for the state. He wondered about the right level
at which to try and constrain future outliers while having
as little possible disruption of work that was currently in
place on the North Slope.
Vice-Chair Micciche thought that in any tax system, there
were those that could "play" the system. He thought the
state had a system in which a company could play a field of
marginal value because of the healthy credits that were
available. He asked if Mr. Mayer could discuss the effects
of putting a limit on units.
Mr. Mayer thought that if it were possible to do so, there
were many reasons to support the idea of a limit on units.
He thought the level of analysis was directed at exposure
to a project rather than exposure to a company. He
mentioned "ring fencing," which was to distinguish between
units or projects, while each asset had its own separate
tax return and its own separate accounting of costs. He
thought that the major limiting factor was that at the
moment, the state had a Slope-wide system where company by
company reported its costs to be audited, but costs were
not distinguished by asset.
8:51:17 AM
Vice-Chair Micciche mentioned the Armstrong project, and
thought that although it was exciting, the cost to the
state would be substantial. He wondered what the value of
the project might look like in the long term. He questioned
if there was any way to define future projects, and have a
cap per unit, as opposed to existing projects that might
deliver more value to the state. He emphasized that while
the legislature wanted to understand the effects on
companies, it had to manage the effects on the state.
Mr. Mayer thought the advantage of a project like the
Armstrong project could be immense, but could put a lot of
cash flow strain on the state in the short term. He did not
have a good answer in terms of a good way to focus on the
unit rather than the company, but agreed to come back with
more information at a later time.
Senator Hoffman did not know if the state wanted to limit
the amount to specific units, but thought perhaps limiting
the number of projects a company could have would diminish
the state's liability. At the present time, a company could
have an unlimited number of projects.
Senator Dunleavy asked if Mr. Mayer would discuss a
schedule of investments. He discussed falling oil prices,
and wondered if the state should be looking at a continual
investment concept, so that production was continually
going towards maintaining the pipeline.
Mr. Mayer agreed with Senator Dunleavy that incremental
constant reinvestment was the only way to stem decline. He
observed an impressive amount of investment in the recent
years, even considering the ongoing downturn in oil prices.
He acknowledged the current strain of bearing the cost of
credits in a low price environment, and thought the long
term issue was that it could not possibly be maintained
with oil prices at such a low.
8:55:30 AM
Senator Dunleavy asked if Mr. Mayer would discuss
investment mentality, and how tax policy might come to bear
in middle and long term potential investments.
Mr. Mayer emphasized that there was no single attribute of
a fiscal system more important than stability, and Alaska
had changed its fiscal system many times over the previous
decade. He thought there were certain things, such as the
GVR and if it inflated the NOL credits, which were
important to look at as oversights of the SB 21 process. He
thought many other things (such as floor hardening or other
measures) required trading any short term gain for longer
term issues that were created in how investors perceived
stability of the state's fiscal regime. He asserted that no
one wanted to invest in a regime that changed the
fundamentals of its fiscal system every couple of years.
Senator Dunleavy asked Mr. Mayer if from his perspective,
Alaska was a place that changed its tax systems more often
than others.
Mr. Mayer was not aware of many jurisdictions that changed
their fiscal regime as often as Alaska debated and changed
its regime.
Co-Chair Kelly asked if there was anything in the bill that
Mr. Mayer could predict that would increase production.
Mr. Mayer answered in the negative, and thought that
whichever version of the bill was passed, it did not change
the fact that there was major credit outlay in the Cook
Inlet. He thought that efforts to try and limit the credit
outlay, and to some extent put a floor under the revenues,
were driven by the short term financial needs of the state
as opposed to the long term investment climate.
Co-Chair Kelly used an analogy to ask Mr. Mayer if SB 130
would increase or decrease production.
Mr. Mayer was not sure that the analogy was the best way in
which to think about the important question of the future
of production.
Co-Chair Kelly thought that it was obvious that hardening
the floor and other measures would decrease investment and
decrease production.
8:59:12 AM
Co-Chair MacKinnon mentioned that the state had a long-term
relationship with oil and gas explorers, producers,
transporters, and other businesses around the state. She
thought it was possible for the state to examine itself
like a business, and consider how to move forward in the
current fiscal climate. She referred to the assertion by
the governor that the state could no longer function in the
same capacity, and had less ability to invest. She
commented that similarly to the state, the oil industry was
also reducing its workforce and laying down rigs. She
referred to proposals for new revenue and shared taxation,
to help compensate for the current credit system; but
thought the problem was projecting into the future and
considering the deficit.
Co-Chair MacKinnon continued discussing the state's fiscal
situation and new revenue proposals. She used the example
of taxes on alcohol, tobacco, gambling, mining, and
fishing; all of which could not supplant the dollars that
the state was expending under the tax credit situation. She
did not want to change the oil tax regime, but emphasized
that the state did not have the resources in the long term
to pay for its expenses. She wondered how to create balance
with industry in the state.
Co-Chair MacKinnon continued to use the analogy of the
state as a business, and drew a parallel between the
state's finances and those of companies in the state. She
asked the committee to use time to have a roundtable
discussion on the topic of what the state should consider
(as a sovereign) to retool what it had to invest. She
emphasized that the state wanted to invest and be a good
business partner. She rejected the idea that the
legislature was trying to alter oil tax policy, but rather
trying to balance the existing system and act as a board of
directors of a good business.
9:05:43 AM
Vice-Chair Micciche thought there was a difference in the
way the state had been politically fickle on tax policy;
yet thought that even though it had settled on a system, it
should still periodically evaluate and adjust blatant and
significant flaws in the policy. He thought the state was
engaged in a healthy evaluation. He stated that he could
give a healthy debate on the value of SB 21, but noted it
had unintended consequences that could be addressed. He
expressed that he was a supporter of the oil industry, but
thought it was important to evaluate adjustments and find a
balance.
Co-Chair MacKinnon commented that she wanted industry to
know that the state was responding as a business would
respond; and trying to protect its shareholders, and not at
the expense of one industry.
Senator Bishop discussed competition on a global commodity
price comparison, and thought Alaska was starting with a
disadvantage. He concurred with comments of the previous
speaker. He discussed the six times in eleven years that
the tax structure had been changed. He emphasized the
importance of modelling the structure with stakeholders
from government and industry present to arrive at a
tentative agreement to be considered by the legislature. He
referenced resource development in Aberdeen, Scotland;
which had experienced a boom and bust cycle. He brought up
an area of North Dakota that was facing a decline.
9:09:49 AM
Senator Dunleavy thought production on the North Slope was
an anomaly due to the Cold War and dependence on oil in the
Middle East. He referred the North Sea. He referred to new
technology, and less expensive places in which to invest.
He thought that individual legislators and the
administration were not on the same page. He thought the
administration was focused on natural gas. He thought there
were groups that had saturated the public with the idea
that no further cuts could be made, and the idea that it
was necessary to draw from savings. He referred to Alaska's
Clear and Equitable Share (ACES), and thought it was an
opportunistic attempt to reap benefits from high oil
prices.
Senator Dunleavy continued, and pondered that no one had
anticipated that the price of oil would drop so
precipitously. He thought that there were people in Alaska
that believed it was not possible to reduce government
further, and the bill being considered was an example of
trying to glean money where available. He thought it was
time to decide realistically what the actions of the
legislature would do to the state's future relationships
and investments in oil; as well as what the actions would
do to the permanent fund. He thought that many of the
issues were linked and difficult to separate. He thought
the state had done a tremendous amount of budget reducing
over the previous two years. He pointed out that the
permanent fund was not 100 percent invested within Alaska.
He pondered that the Alaska Permanent Fund Corporation
would most likely not invest in the state. He mentioned
that the robust native corporations had much of their
investments outside of the state. He thought that the
recent policy changes had made the state an unattractive
investment.
9:13:28 AM
Co-Chair Kelly referred to points he disagreed with,
including that the assertion that the state had responded
to the fiscal situation. He asserted out that industry had
laid of thousands of people, while the state had laid off
only up to 50. He disagreed with Vice-Chair Micciche and
thought that changing the state's tax regime 6 times in 11
years was fickle. He emphasized that nothing being
considered in the bill would increase production. He
recounted working with the previous administration with the
goal of increasing oil production to up to $1.1 million
barrels of oil. He thought the state had missed a huge
opportunity when the price of oil had been up to $140 per
barrel and the state was operating under ACES. He
acknowledged that it had earned the state money at the
serious cost of loss of investment. He was not supportive
of ACES.
Co-Chair Kelly discussed the benefits of oil company
investment, including jobs. He continued to say that the
only jobs that the legislature had been trying to protect
were state jobs. He discussed the taxing environment and
thought there were unpredictable effects. He thought that
it was intuitive that nothing the committee was doing would
increase production. He thought issues in the Cook Inlet
were different, but considered that happenings on the North
Slope should not be under discussion. He did not think the
legislature should be considering altering SB 21.
9:18:02 AM
Senator Hoffman thought that all committee members were
concerned about the state's fiscal situation, and wanted to
do what was right for the state. He spoke to the state's
dependency on the oil industry. He mentioned the number of
changes that had happened in recent years, and thought it
reflected on the politics of the legislature and the
governor. He reminded the committee that the legislature
was there to take care of the people's business. He thought
committee members looked across party lines. He thought
there was promise in the state, more so than most people
could realize at the current time. He felt that the state
needed to tighten its belt more. He thought the permanent
fund dividend (PFD) was crucial to Alaskans, and thought
Alaskan's were looking at the issue more so than any
others. He considered that extreme care should be taken in
any course of action concerning the PFD. He emphasized that
the state should be thankful for the gifts the state had
provided.
Senator Olson expressed optimism for the state, and
attributed it to having young children. He looked forward
to the future, and spoke about being a child in the state.
9:21:30 AM
Co-Chair MacKinnon asked Mr. Mayer to provide guidance in
the context of the state being a business and a partner
with components in different professions and industries.
She asked Mr. Mayer to provide the committee with written
comments on how the state could be a good partner, and move
forward in a balanced way. She asked him to address
historical tension between a sovereign and taxation,
understanding the inability of the state to continue
forward under the current structure. She referred to the
AKLNG project, in which the state was proposing being an
equity owner.
Mr. Mayer stated that clearly the overwhelming problem was
(in the low priced oil environment) the balance between
revenues the state received from its overall petroleum
fiscal system and the amount it was spending on credits. He
stated that the Cook Inlet and the North Slope were very
different, in terms of the amount of revenue versus the
amount of credits going out; and the balance was more off
when looking at Cook Inlet versus the North Slope. He
thought it was important to consider the purpose of the
credits and how they functioned. In Cook Inlet, the credits
were concerned with spending money to incentivize favorable
behaviors; while on the North Slope, the credits were about
timing of cash. He explicated that when considering the
refund of NOL credit and floor hardening, the point was the
time at which costs were recognized.
Mr. Mayer commented that it was clear that what was
happening in Cook Inlet was unsustainable. He stated that
many companies were committed to serious capital programs
for the current year, and he thought it was very important
to ensure that the companies could continue the capital
programs in the current year. He thought there was a strong
argument to say that companies could be pushed into
bankruptcy by the state trying to take away support. From
the following year onwards, he thought there was
possibility to take away a lot of the support and not to
have to do so in an excessively gradual way.
Mr. Mayer thought there were harder more intractable
problems on the North Slope, because they were concerned
with timing of cash flows. He referred to slide 23 and
pondered if the state should try and limit the
refundability of the credits. Limiting the refundability of
the credits was a method of constraining the cash flow
problem, but had major impacts on who could operate in the
basin. He remarked on the state's policy of the previous
years of using a system to try and encourage small, less
well capitalized companies to try and diversify and operate
in the basin, and thought it had been successful thus far.
He thought that changing the policy would have a major
impact on the amount of capital required to do such
projects, and therefore the sorts of companies who could do
them. Major shifts in the policy could mitigate the state's
cash crunch, but would have a major impact on whether some
currently operating companies could continue. He thought
the great risk for the state was in trying to manage the
cash timing crunch versus having major detrimental effects
in the long run.
9:26:10 AM
Mr. Mayer suggested that an important framing question for
a state with major financial assets was how to leverage the
assets to decrease volatility, and provide stability during
a cash crunch. He considered how much the state would make
difficult decisions in the present, that had potential
major impacts for the future; and conversely to what degree
the state would try and minimize long-term consequences,
understanding that it made short-term finances more
difficult.
SB 130 was HEARD and HELD in committee for further
consideration.
9:27:01 AM
AT EASE
9:53:20 AM
RECONVENED
CS FOR HOUSE BILL NO. 143(FIN)
"An Act authorizing the Alaska Industrial Development
and Export Authority to issue bonds to finance the
infrastructure and construction costs of the
Sweetheart Lake hydroelectric project."
9:53:30 AM
REPRESENTATIVE CATHY MUNOZ, SPONSOR, discussed HB 143,
which would allow Alaska Industrial Development and Export
Authority (AIDEA) go through a due-diligence process with
Juneau Hydropower, Inc. for consideration of conduit bond
financing for a 19.8 megawatt project located 43 miles
south of Juneau. The project would increase hydro-electric
capacity in the Juneau area by approximately 20 percent.
Representative Munoz addressed a question from the bill's
most recent hearing, as to whether the conduit bond
financing would affect the $400 million rolling 12-month
limit for AIDEA bonding capacity. She clarified that the
purely conduit financing would not affect the limit, and
AIDEA would be acting as an agent in the project.
Co-Chair Kelly requested a brief summary of conduit
financing.
Representative Munoz explained that conduit financing was
outside financing that was not an instrument of the State
of Alaska. She used the example of a bond possibility in
energy bonding, for which the Juneau project could compete.
Co-Chair Kelly asked for the anticipated total for the
conduit financing.
Representative Munoz stated that the conduit financing
would be up to $120 million.
Senator Dunleavy asked if, as sponsor, Representative Munoz
would ponder adding any amendments or additional projects
to the bill.
Representative Munoz expressed a desire to know more about
hypothetical projects that could be added to the bill, and
stated that if the projects were important to a community
she was open to the idea.
Medicaid discussed FN 1 (CED), which was a zero fiscal note
with no capital and no added personnel.
Vice-Chair Micciche MOVED to report CSHB 143(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note.
CSHB 143(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one previously published zero
fiscal note: FN1 (CED).
9:57:04 AM
AT EASE
10:00:21 AM
RECONVENED
HOUSE BILL NO. 268
"An Act relating to the dividends from the Alaska
Industrial Development and Export Authority; relating
to the meaning of 'mark-to-market fair value,' 'net
income,' 'project or development,' and 'unrestricted
net income' for purposes of the Alaska Industrial
Development and Export Authority; and providing for an
effective date."
10:00:25 AM
Co-Chair MacKinnon noted that the public hearing for SB 268
had been opened and closed on April 12, 2016.
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, discussed the
intent of the bill. He specified that the legislation
proposed to fix two issues with computation of the AIDEA
dividend. He explained that the dividend was paid out of
AIDEA's net earnings on a yearly basis, and there were two
issues which were starting to create unpredictability to
the process. He specified that federal rules required that
AIDEA make adjustments in order to get its financial
audited statement. He furthered that a number of the
adjustments needed were for non-cash adjustments, and the
adjustments impacted net income before the calculation for
the dividend took place. He specified that one of the two
problems was mark to market adjustments. He illustrated an
example that if one had an investment portfolio in stocks
and bonds, at the end of the fiscal year the market might
be up. AIDEA was required to take a snapshot of the current
value, and unrealized gains were booked (as if they were
sold) and created an inflated income on which dividends
were based. He noted that the market could also be down,
which would create an artificially reduced net income. The
bill would back out the non-cash adjustments in order to
calculate the dividend with true net income.
Mr. Therriault discussed a second issue pertaining to
calculation of the AIDEA dividend. He recounted that
several years previously, the authority was instructed that
when it received money from an outside source (such as
federal funds or a direct capital appropriation to support
a project), the funds were reflected as income. The
practice had artificially inflated AIDEA's income, and the
legislature had allowed for the outside funding to be
disregarded for the purposes of calculating the dividend.
The legislature had not anticipated that at times, funds
from outside sources were spent to investigate but not go
forward with a project, and the value of expenditures (such
as an environmental impact study) would have to be written
off the books. The periodic adjustments of such
expenditures would artificially suppress the income in a
particular year. He qualified that the expense write-offs
happened very infrequently, and the AIDEA accounting staff
had requested a remedy for the problem so that true net
income would be considered when dividends were calculated.
Co-Chair MacKinnon directed attention to the fiscal note,
FN 1(CED), and noted that the fiscal note was
indeterminate.
Co-Chair Kelly MOVED to report HB 268 out of Committee with
individual recommendations and the accompanying fiscal
note.
HB 268 was REPORTED out of committee with "no
recommendation" and with one previously published
indeterminate fiscal note: FN 1 (CED).
10:05:40 AM
AT EASE
10:07:45 AM
RECONVENED
HOUSE BILL NO. 290
"An Act extending the termination date of the Real
Estate Commission; and providing for an effective
date."
10:07:48 AM
Co-Chair MacKinnon recalled that there had been a public
hearing on HB 290 on April 16, 2016.
LAURA STIDOLPH, STAFF, REPRESENTATIVE KURT OLSON, stated
that HB 290 would extend the Alaska Real Estate Commission
until June, 2018. She furthered that the bill provided for
a shortened extension of the commission, as it was unable
to obtain a master errors and omissions policy, which
Representative Olson felt was crucial to the commission.
Co-Chair MacKinnon discussed FN 2 (OMB component 2360) for
the Department of Commerce, Community and Economic
Development (DCCED); noting that FY 17 through FY 19
reflected an expense of $8,700. There were no capital
appropriation requests, no supplemental, and no regulation
change.
Senator Dunleavy asked what would happen if the bill was
not passed.
Ms. Stidolph explained that if the bill was not passed, the
commission would go in to wind-down mode over the following
year, and the licensing and other jobs of the board would
fall to the responsibility of DCCED.
Co-Chair MacKinnon restated that the responsibilities of
the board would not go away, and would fall to individuals
who may or may not have the same level of expertise as
those on the board.
Ms. Stidolph concurred.
Senator Olson asked about the difference between the
commission and an oversight board.
Ms. Stidolph believed the function of the commission was
the same as a board, which included setting regulation and
licensing.
Co-Chair Kelly MOVED to report HB 290 out of Committee with
individual recommendations and the accompanying fiscal
note.
HB 290 was REPORTED out of committee with "no
recommendation" and with one previously published fiscal
impact note: FN 2(CED).
10:11:40 AM
AT EASE
10:13:44 AM
RECONVENED
HOUSE BILL NO. 314
"An Act relating to the Alaska regional economic
assistance program; extending the termination date of
the Alaska regional economic assistance program; and
providing for an effective date."
10:13:44 AM
Co-Chair MacKinnon noted that the public hearing for HB 314
was closed on April 13, 2016.
Vice-Chair Micciche MOVED to ADOPT proposed committee
substitute for HB 314(FIN), Work Draft 29-LS1381\G (Shutts,
4/16/16).
Co-Chair MacKinnon OBJECTED for discussion.
ERIN SHINE, STAFF, SENATOR ANNA MACKINNON, pointed out that
the only change between the previous version "I" and the
committee substitute (CS) was on page 4, line 10. The CS
had a sunset date of 2021, where the previous version had
removed the sunset date altogether.
Co-Chair MacKinnon explained that the change had been at
her request. She mentioned an audit of the Alaska Regional
Economic Assistance (ARDOR) program that she had found
troubling, and noted that the sponsor had worked diligently
with the program to ensure it was operating well. She
wanted to include an element oversight before removing the
sunset date.
Co-Chair MacKinnon REMOVED her OBJECTION. There being NO
OBJECTION, it was so ordered.
10:15:56 AM
REPRESENTATIVE SHELLEY HUGHES, SPONSOR, stated that her
original bill had contained a five-year sunset that had
been removed during the committee process.
Representative Hughes gave a high-level overview of the
bill. She articulated that due state fiscal constraints, it
was no longer possible to provide the same level of funding
to ARDOR. She noted that there were 10 ARDORs (regional
development programs) who had each received approximately
$70,000 per year. She noted that 89 percent of ARDOR
funding the previous year had not come from state funds.
She stated that the bill would provide a designation and
would ensure that the ARDORs could continue their important
work at no cost to the state. She specified that the ARDORs
would continue to do some basic reporting, which would
provide the state with statistics and increase
understanding of economic development in the state. She
mentioned a project in Bethel that was building trusses for
cold climate housing, a manufacturing focus in Southwest
Alaska, and increased focus on start-ups.
10:18:16 AM
AT EASE
10:19:33 AM
RECONVENED
Vice-Chair Micciche discussed FN 1 (CED), from DCCED (OMB
component 2743). He stated that it was essentially a zero
fiscal note, but for the governor's request of $774,000.
Co-Chair MacKinnon understood that even though the numbers
were listed as the governor's request, the House and Senate
had both zeroed out the appropriation.
Senator Olson asked what the governor's request was
intended for.
Co-Chair MacKinnon stated that the governor's request was
to help support the program, and had been denied by the
legislature.
Representative Hughes understood that the column "Included
in Governor's FY2017 Request" was there for informational
purposes. She qualified that the department had worked with
the sponsor and agreed to zero it out.
Vice-Chair Micciche MOVED to report SCS HB 314(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note.
SCS HB 314(FIN) was REPORTED out of committee with "no
recommendation" and with one previously published fiscal
impact note: FN 1(CED).
10:21:31 AM
AT EASE
10:26:20 AM
RECONVENED
HOUSE BILL NO. 259
"An Act relating to relocation assistance for
federally assisted projects and programs; and
providing for an effective date."
10:26:20 AM
Co-Chair MacKinnon noted that there was a public hearing on
HB 259 on April 16, 2016.
MARK LUIKEN, COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND
PUBLIC FACILITIES, explained that the bill proposed to
bring the Department of Transportation and Public
Facilities (DOT) relocation policy and payments in line
with a change in federal law. The bill would allow DOT to
increase the payments to people who would need to be
relocated as a result of property being acquired through a
DOT transportation project.
Senator Olson asked if there was any opposition to the
legislation.
Commissioner Luiken answered in the negative.
Vice-Chair Micciche discussed FN 1 (DOT), (OMB component
2357), and stated that it was a zero fiscal note with no
capital and no added personnel. He relayed there was a
brief note on the back of the fiscal note that indicated
there was no impact on the operating budget, and the
increased relocation costs would be absorbed within
existing capital program funding.
Vice-Chair Micciche MOVED to report HB 259 out of Committee
with individual recommendations and the accompanying fiscal
note.
HB 259 was REPORTED out of committee with a "do pass"
recommendation and with one previously published zero
fiscal note: FN 1(DOT).
10:29:01 AM
AT EASE
10:30:48 AM
RECONVENED
HOUSE BILL NO. 289
"An Act relating to the membership of the Board of
Barbers and Hairdressers."
10:30:50 AM
Co-Chair MacKinnon detailed that there had been a public
hearing for HB 289 on April 12, 2016.
Vice-Chair Micciche MOVED to ADOPT proposed committee
substitute for HB 289 (FIN), Work Draft 29-LS1367\E (Bruce,
4/16/16).
Co-Chair MacKinnon OJBECTED for discussion.
ERIN SHINE, STAFF, SENATOR ANNA MACKINNON; reviewed the
sectional analysis to explain changes to the bill reflected
in the committee substitute (CS) (copy on file):
Section One
Amends AS 08.13.010 by changing the membership of the
Board of Barbers and Hairdressers from six members to
seven members. One barber seat is replaced with an at-
large licensed member. One licensed nail technician or
manicurist is added to the board.
Section Two
Amends AS 08.72.050 by adding the power for the board
to adopt regulations allowing the prescription and
pharmaceutical agents for the treatment of eye
disease, it will describe the scope of practice for a
licensee to perform ophthalmic surgery and noninvasive
procedures.
Section Three
Amends AS 08.72.181 (d) by requiring specified hours
and period of continuing education requirements for
the renewal of an optometrist's license but retains
delegation of those requirements to the board in
regulation.
Section Four
Repeals and reenacts AS 08.72.272(a) to provide that
pharmaceutical agents, including controlled
substances, may be used by a licensed optometrist if
consistent with standards adopted by the board and any
limitations on practice under section six of the bill.
Section Five
Amends AS 08.72.272 and adds new subsections
prohibiting an optometrist to make injections into the
ocular globe of the eye and limits the prescribing of
a controlled substance in a quantity exceeding a 7-day
supply and requires a referral to a physician or
ophthalmologist if a longer prescription is needed.
Section Six
AS 08.72 is amended and a new section, AS 08.72.278
Limitation on Practice, is added. Provides that a
licensee may perform only services within the
licensee's education, training and experience as
provided by board regulation.
Section Seven
08.72.300(3) revises the definition of optometry.
Section Eight
Provides uncodified transition language for the Board
of Barbers and Hairdressers to implement the changes
in AS 08.13.010 as board members rotate off the board.
Co-Chair MacKinnon commented that it was an awkward time of
year in the legislature, when bills became attached to
other bills; which she observed was happening with HB 289.
REPRESENTATIVE GABRIELLE LEDOUX, SPONSOR, thought that the
addition would probably kill the bill.
Co-Chair MacKinnon wanted to ensure that Representative
Ledoux's objection to the additions to the bill went on the
record.
Co-Chair MacKinnon REMOVED her OBJECTION. There being NO
OBJECTION, it was so ordered.
Vice-Chair Micciche discussed the new zero fiscal note from
DCCED (OMB component 2380). He noted that it was a zero
fiscal note from FY 17 through FY 22, with no capital and
no added personnel. He stated that the fiscal note would be
forthcoming.
10:35:46 AM
AT EASE
10:36:00 AM
RECONVENED
Co-Chair MacKinnon discussed entering another bill into a
bill with a title that would accept the entry under a
single subject rule, and noted that SB 55 had been
incorporated into HB 289. She informed that the committee
had moved SB 55 out of committee the previous day, and
asked Vice-Chair Micciche to discuss the accompanying
fiscal note.
Vice-Chair Micciche discussed the fiscal note from DCCED
for SB 55 (OMB component 2360), and assumed the fiscal note
would add $2,500 to the fiscal note for HB 289. The funds
would be for FY 17 for services to cover legal costs for
amend regulations, printing, and postage. There was no
additional cost from FY 17 through FY 22.
Vice-Chair Micciche MOVED to report SCS HB 289(FIN) out of
Committee with individual recommendations and the
forthcoming fiscal note.
SCS HB 289(FIN) was REPORTED out of committee with "no
recommendation" and with one fiscal impact note by the
Senate Finance Committee for the Department of Commerce,
Community and Economic Development.
10:38:04 AM
AT EASE
10:41:32 AM
RECONVENED
Co-Chair MacKinnon remarked that she would call the
committee into recess and expressed appreciation for the
committee members.
10:42:42 AM
RECESSED
9:08:30 PM
RECONVENED
ADJOURNMENT
9:08:57 PM
The meeting was adjourned at 9:08 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 314 SCSHB 314(FIN) ver G.pdf |
SFIN 4/17/2016 8:00:00 AM |
HB 314 |
| HB 289 S CS HB 289(FIN) ver E.pdf |
SFIN 4/17/2016 8:00:00 AM |
HB 289 |
| HB 289 S CS HB 289 (FIN) Sectional Analysis.docx |
SFIN 4/17/2016 8:00:00 AM |
HB 289 |