Legislature(2017 - 2018)SENATE FINANCE 532
04/07/2017 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB6 | |
| HB16 | |
| SB45 | |
| SB78 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 45 | TELECONFERENCED | |
| + | SB 78 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 6 | TELECONFERENCED | |
| += | HB 16 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
April 7, 2017
9:06 a.m.
9:06:58 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:06 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Mike Dunleavy
Senator Peter Micciche
Senator Donny Olson
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Buddy Whitt, Staff, Senator Shelley Hughes; Juli Lucky,
Staff, Senator Anna MacKinnon; Representative Steve
Thompson, Sponsor; Senator Mia Costello, Sponsor; Juliana
Melin, Staff, Senator Mia Costello; Janey Hovenden,
Director, Division of Corporations, Business and
Professional Licensing, Department of Commerce, Community
and Economic Development; Pete Fellman, Staff, Senator
Click Bishop; Jerry Burnett, Deputy Commissioner, Treasury
Division, Department of Revenue.
PRESENT VIA TELECONFERENCE
Rob Carter, Division of Agriculture, Palmer; Joan Wilson,
Department of Law, Anchorage; Aaron Welerton, Alaska State
Homebuilders Association, Fairbanks; Kevin Saiki, MatSu
Home Builders Association, MatSu; David Owens, Owens
Inspection Services LLC, Palmer; Patrick Dalton, Self,
Delta Junction; Deborah Brollini, Self, Anchorage; Paul
Kendall, Self, Anchorage.
SUMMARY
SB 6 INDUSTRIAL HEMP PRODUCTION
CSSB 6(JUD) was REPORTED out of committee with
"no recommendation" and with one new fiscal
impact note by the Senate Finance Committee for
the Department of Natural Resources; and with
four previously published zero fiscal notes:
FN5(DPS), FN6(LAW), FN7(CED), and FN8(DPS).
SB 45 EXEMPTION: LICENSING OF CONTRACTORS
SB 45 was HEARD and HELD in committee for further
consideration.
SB 78 PERM FUND DIVIDEND CONTRIBUTIONS/LOTTERY
SB 78 was HEARD and HELD in committee for further
consideration.
HB 16 DRIV. LICENSE REQ;DISABILITY:ID &TRAINING
SCSHB 16(FIN) was REPORTED out of committee with
a "do pass" recommendation and with three zero
fiscal notes: FN1(ADM), FN3(DPS), and FN4(COR).
Co-Chair MacKinnon discussed the agenda for the meeting.
SENATE BILL NO. 6
"An Act relating to industrial hemp; and relating to
controlled substances."
9:08:29 AM
Co-Chair MacKinnon offered a brief history of previous
committee discussions of bill. She listed that available
invited testimony.
9:09:47 AM
Vice-Chair Bishop discussed the fiscal notes. He noted that
the four fiscal notes were from the Department of Public
Safety (DPS), Department of Law (DOL), Department of
Commerce, Community and Economic Development (DCCED), and
the Department of Natural Resources (DNR). He pointed out
that there would be one note DNR with fiscal impact of $25
thousand for an RSA with LAW to assist in drafting
regulations.
Co-Chair MacKinnon observed the lack of support documents
to justify the need for $25,000. She read the analysis from
FN9 and reiterated that the note was short on backup
analysis.
9:11:35 AM
ROB CARTER, DIVISION OF AGRICULTURE, PALMER (via
teleconference), explained that the estimated $25,000 had
been determined by LAW. He said that DNR would draft the
regulations, which would then be interpreted and vetted by
LAW. He relayed that the money would go to LAW and that any
further questions should be directed to that department.
9:12:47 AM
Co-Chair MacKinnon asked whether there was anyone from LAW
available to speak to the fiscal note.
Co-Chair MacKinnon proposed to zero-out the fiscal note.
9:13:12 AM
Senator Micciche asked whether there was a way to change
the note to receipt authority, at a lower number.
Co-Chair MacKinnon stated that $10,000 in designated
general fund receipts could be more appropriate proposal.
Senator Micciche believed that there would be some cost and
that $10,000 would be appropriate.
Co-Chair MacKinnon agreed with Senator Micciche. She
thought that zeroing out the note altogether might get the
department's attention to attend future hearings on the
bill.
9:14:13 AM
Senator von Imhof said that when the bill was heard in the
Senate Resources Committee, there had bee a zero DNR note
attached. She understood that the $25,000 had been recently
added.
BUDDY WHITT, STAFF, SENATOR SHELLEY HUGHES, answered in the
affirmative. He stated that the latest iteration of the
bill, out of Senate Judiciary Committee, changed wording
from "may" to "shall" establish regulations, which resulted
in the new fiscal note.
Senator von Imhof relayed that the earlier conversation in
committee had reflected that the change in regulation could
be absorbed by the department.
Mr. Whitt understood that there had been some additional
regulatory stipulations added to the bill in the Senate
Judiciary Committee. He relayed that changing the wording
from "may" to "shall" establish regulations, had resulted
in the new note.
9:16:03 AM
Senator von Imhof wondered about the possible impact in one
year's time if the committee changed the fiscal note to
zero and then revisited the issue at a later date.
Co-Chair MacKinnon explained the path that the fiscal note
would travel through the bill hearing process. She shared
that LAW was online to defend the note.
9:16:59 AM
Vice-Chair Bishop estimated that the fiscal note
represented approximately 150 work hours by LAW to draft
the regulations.
Co-Chair MacKinnon reiterated that there was not much
backup available to justify the $25,000 note.
9:17:52 AM
JOAN WILSON, DEPARTMENT OF LAW, ANCHORAGE (via
teleconference), stated that the issue of separating hemp
from marijuana and the issues that stemmed from both,
criminal and civil, were new territory for the department.
She said that a pilot program would be established by the
bill, also the protocol on how seeds and growers would be
approved. She added that a way to monitor sees and growers
and determining how the Department of Agriculture would be
involved in the processes was unchartered territory. She
shared that the fiscal note reflected the past cost for the
Department of Natural Resources (DNR) for legislative
regulatory projects. She explained that it had been a long
time since DNR had visited these past costs, that the
estimate they gave had not been helpful. She relayed that
LAW had looked back
9:20:42 AM
Vice-Chair Bishop asked how many other states practiced
industrial hemp production.
Mr. Whitt recalled that there were 31 states that had some
sort of industrial hemp program.
Vice-Chair Bishop suggested that the department research
what was done in other states.
9:21:26 AM
Co-Chair MacKinnon asked whether there were resources
available to LAW to assist in the development of the
regulations.
Ms. Wilson mentioned Colorado, Kentucky, Vermont, and
Maine. She relayed that she was unaware whether the laws in
those states reflected what Alaska was planning.
9:22:35 AM
Mr. Whitt stated that he would like to double check his
previous statement that 31 other states had industrial hemp
programs.
Co-Chair MacKinnon solicited conversation on the fiscal
note. She referred to public testimony that had suggested
that other states had not been able to pay for the programs
with program receipts. She noted that supplemental requests
were not ideal and that the department should submit a
fiscal note that reflected the maximum amount of money that
could be spent to implement any program going forward.
9:24:33 AM
Senator Micciche stated that he was amendable to changing
the fiscal note to $10,000 in DGF. He did not think that
the state could afford to fund the regulations. He thought
that the regulations for marijuana could be applied to
industrial hemp.
9:25:00 AM
Senator von Imhof expressed agreement with the previous two
speakers. She added that industrial hemp could provide
economic opportunity to the state and that a $10,000
investment seemed reasonable.
9:25:43 AM
AT EASE
9:28:16 AM
RECONVENED
Co-Chair MacKinnon offered further clarification on
changing the fiscal note. She amended the note to reflect
the $10,000 from DGF.
9:29:19 AM
Mr. Whitt clarified that 30 states had legalized industrial
hemp and 16 states that had set up pilot programs.
9:30:27 AM
AT EASE
9:31:28 AM
RECONVENED
Co-Chair MacKinnon clarified that the DGF code was 1005 and
that a new fiscal note with appropriate classifications
would be forthcoming.
Vice-Chair Bishop MOVED to report CSSB 6(JUD) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSSB 6(JUD) was REPORTED out of committee with "no
recommendation" and with one new fiscal impact note by the
Senate Finance Committee for the Department of Natural
Resources; and with four previously published zero fiscal
notes: FN5(DPS), FN6(LAW), FN7(CED), and FN8(DPS).
9:32:17 AM
AT EASE
9:34:45 AM
RECONVENED
HOUSE BILL NO. 16
"An Act relating to training regarding disabilities for
police officers, probation officers, parole officers,
correctional officers, and village public safety officers;
relating to guidelines for drivers when encountering or
being stopped by a peace officer; relating to driver's
license examinations; and relating to a voluntary
disability designation on a state identification card and a
driver's license."
9:34:48 AM
9:34:59 AM
AT EASE
9:35:09 AM
RECONVENED
Vice-Chair Bishop MOVED to ADOPT proposed committee
substitute for HB 16, Work Draft 30-LS0194\J (Martin,
4/6/17).
Co-Chair MacKinnon OBJECTED for the purpose of discussion.
9:35:13 AM
AT EASE
9:35:35 AM
RECONVENED
JULI LUCKY, STAFF, SENATOR ANNA MACKINNON, discussed the
document "Explanation of Changes" (copy on file):
Page 3, lines 8-9: "as a naturopath under AS 08.45"
was added. This conforms AS 18.65.310 (m), relating to
identification cards to a change made in Senate State
Affairs to AS 28.15.111 (d), relating to driver's
licenses.
9:36:39 AM
REPRESENTATIVE STEVE THOMPSON, SPONSOR, had no objection to
the change in the CS.
Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO
further OBJECTION, it was so ordered.
9:37:11 AM
Senator Olson asked whether the sponsor was in favor of
having a naturopath sign off on issues related to traumatic
brain injuries.
Representative Thompson replied in the affirmative.
Senator Olson asked why it had not been considered in the
original bill version.
Representative Thompson responded that he had been unaware
of the naturopath issue at the time the bull had been
originally drafted. He related that the designation did not
offer any privilege; the driver's test still needed to be
passed, in addition to other requirements, the designation
would simply provide awareness.
9:38:38 AM
Vice-Chair Bishop noted that the fiscal notes had been
discussed in the previous bill hearing.
9:39:28 AM
Vice-Chair Bishop MOVED to report SCSHB 16(FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it
was so ordered.
SCSHB 16(FIN) was REPORTED out of committee with a "do
pass" recommendation and with three zero fiscal notes:
FN1(ADM), FN3(DPS), and FN4(COR).
9:39:52 AM
AT EASE
9:41:26 AM
RECONVENED
SENATE BILL NO. 45
"An Act relating to an exemption from the regulation
of construction contractors."
9:41:28 AM
SENATOR MIA COSTELLO, SPONSOR, provided context for the
bill, and discussed the economy and job losses in the
state. She presented her sponsor statement:
Senate Bill 45 provides better protections for
consumers purchasing a home from an unlicensed
builder.
Following the housing market crash of the 1980
Alaska State Legislature raised the standards for
homebuilders. Residential contractors were required to
obtain a state-license, a residential endorsement,
bonding, and insurance. In addition, programs on
energy ratings and efficiency were established through
the Alaska Housing Finance Corporation. These efforts
helped Alaska develop a home construction industry
that offers quality options for home buyers that are
efficient and affordable.
Currently state law provides an exemption that allows
individuals to build structures without a contractor
license. Alaska law AS 08.18.161 allows anyone to
build one structure every two years without a license.
While the exemption was intended to allow Alaskans to
build their own home, the industry is seeing a growing
number of individuals using the exemption to operate
construction businesses.
In 2013, the Mat-Su Home Building Association
estimated that almost one-half of all new construction
home sales in their area were from unlicensed
construction companies. Without a construction
contractor license, unlicensed builders avoid
requirements for bonding and insurance that apply to
licensed builders. The wording of the exemption
creates enforcement problems and allows for potential
abuse by those who would seek to build homes for sale
without the required state license. Senate Bill 45
helps prevent abuse of this exemption. The bill would
require anyone who builds and sells a home without a
contractor license to disclose the fact that they do
not have a license to the state within two years of
completing construction.
Senate Bill 45 does not prohibit owner-builder
construction or require any form of state approval, it
simply calls for disclosure to the Department of
Commerce, Community & Economic Development for
builders selling structures without a license.
SB 45 is supported by the Alaska State Home Building
Association.
9:43:28 AM
JULIANA MELIN, STAFF, SENATOR MIA COSTELLO, stated that SB
45 was a consumer protection bill that addressed issues of
individuals using an exemption in state law to operate a
business that would otherwise require a license. She
relayed that AS 08.18.116 provided that individuals were
allowed to build a structure without a license, every two
years; the intent of the statue was to allow Alaskans to
build and live in their own homes. She stated that there
was a growing trend of individuals using the exemption to
operate a construction business while avoiding the
licensure insurance and bonding that licensed contractors
are required to obtain. She noted that in 2013 the Mat-Su
Homebuilding Association had indicated that one-half of all
new construction home sales in the area were being built by
unlicensed contractors. She relayed that the bill addressed
consumer protection against the future cost of a home that
has structural problems. She reiterated the sentiments of
the sponsor statement.
9:46:06 AM
Ms. Melin read from the Sectional Analysis (copy on file):
Section 1. Adds a new section of statue specifying the
Legislature's intent to support an individual's
freedom and ability to construct and sell their own
homes.
Section 2. Amends AS 08.18.116 by adding a new
subsection specifying when the Department shall
investigate and take action when it is found an owner
is operating a business that would otherwise require
contractor licensing.
Section 3. Amends 08.18.161 (Exemptions) with
conforming changes including numbering and clarifying
language. It adds new language requiring an owner
using the owner-builder to file with the department
indicating they are not engaged in illegal business in
selling or advertising the structure for sale within
two years after the beginning of construction.
Section 4. Adds a new section of statute on
applicability defining the "beginning of construction"
as either the time at which construction began, or,
when an agreement for labor or the supply of materials
is made between an owner and subcontractor for the
building of the structure.
9:47:47 AM
Co-Chair MacKinnon asked whether a loophole could be
created if the build occurred over two seasons without the
structure being put on the market. She expressed concern
that a builder could begin two separate projects and hold
their capital for the second year, bypassing compliance.
Ms. Melin relayed that the language defined "within two
years from the beginning of construction." She added that
if a sale was made, or advertised, within the two years
then it would be a violation of the law.
9:49:25 AM
Co-Chair MacKinnon OPENED public testimony.
9:49:45 AM
AARON WELERTON, ALASKA STATE HOMEBUILDERS ASSOCIATION,
FAIRBANKS (via teleconference), testified in support of the
bill. He believed that the disclosure forms required by the
bill would help with the promotion of quality construction
and fair practices. He believed that industry and other
stakeholders would need to work to make the disclosure
system a success. He said that the bill was small but would
help immensely.
9:51:18 AM
KEVIN SAIKI, MATSU HOME BUILDERS ASSOCIATION, MATSU (via
teleconference), spoke in support of the bill. He
appreciated the independence and freedom allowed in the
state for private home construction. He said that he had
been witness to both responsible and irresponsible
construction. He believed that the bill would offer
consumer protection. He shared that he had witnessed people
under the guise of an Owner/Builder operating illegally and
providing a substandard product. He believed that the bill
would help to protect legally operating contractors and the
investments of consumers.
9:53:19 AM
DAVID OWENS, OWENS INSPECTION SERVICES LLC, PALMER (via
teleconference), testified in support of the legislation.
He stressed the importance of protecting Owner/Builder
rights. He felt that the bill balanced the protections of
the public, the Owner/Builder, and the contractors.
9:54:41 AM
PATRICK DALTON, SELF, DELTA JUNCTION (via teleconference),
testified in opposition to the bill. He thought that
unorganized areas of the state needed the legislation more
than the organized areas. He lamented that the sponsor
statement failed to mention that the legislation targeted
rural areas of the state. He referred to the letter he had
sent to the committee (copy on file). He did not believe
that it was in the best interest of unorganized areas to be
regulated.
Co-Chair MacKinnon understood that the caller was in
opposition to the bill. She wondered what about the
process, proposed by the legislation, was not appropriate
for rural areas of the state.
10:00:32 AM
DEBORAH BROLLINI, SELF, ANCHORAGE (via teleconference),
spoke in opposition of the legislation. She expressed
concern with the disclosure process.
10:01:19 AM
Co-Chair MacKinnon CLOSED public testimony.
Co-Chair MacKinnon directed the committee to review Mr.
Dalton's written testimony.
10:02:19 AM
Senator Micciche asked about the exemption contained in the
bill and wondered what limited the owner to building only
one structure every two years. He wondered how the
department would be able to track the number of structures
built.
JANEY HOVENDEN, DIRECTOR, DIVISION OF CORPORATIONS,
BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, stated that
the department's investigative unit was driven by
complaints. She informed that anytime that a complaint was
received it would be investigated. She added that the
department contracted with the Department of Labor to save
costs and when inspecting construction sites, the
investigators also checked for fulfillment of licensing
requirements.
Senator Micciche wondered whether the department was
limited to knowledge of construction sites that were
permitted for construction. He suggested that the rules
could be broken more easily in an unorganized borough.
Ms. Hovenden was unsure how far, or often, the Department
of Labor traveled into the unorganized boroughs.
10:05:00 AM
Senator von Imhof thought then when a buyer used
conventional financing, the bank would require an occupancy
certificate.
Ms. Hovenden concurred, and stated that under conventional
home loans, inspections would be required by the department
and the bank.
Senator von Imhof asked whether the loan could be an avenue
by which to gather information to track homebuilders that
were regularly building and selling houses.
Ms. Hovenden answered in the affirmative.
10:06:42 AM
Senator von Imhof queried whether banks cared whether the
house to be built would be located in an organized or
unorganized borough and whether there were uniform
requirements. She pondered if the bank's requirements were
uniform, a sort of certificate of occupancy, or related
document, would be necessary and could be used to track
homebuilders.
10:07:23 AM
Co-Chair MacKinnon understood that the bill was trying to
address the problem in some communities of labor being
brought in from out-of-state and building homes then sold
for cash, avoiding the banking system and selling sub-
standard housing. She recognized that unorganized areas of
the state took issue with the legislation because they
lacked resources to perform the logistical paperwork
process.
Co-Chair MacKinnon relayed that amendments would be due on
Monday at 5 PM.
10:09:14 AM
Vice-Chair Bishop discussed the fiscal notes. There was a
previously published zero fiscal note from the Department
of Commerce, Community and Economic Development.
SB 45 was HEARD and HELD in committee for further
consideration.
10:09:53 AM
AT EASE
10:16:47 AM
RECONVENED
SENATE BILL NO. 78
"An Act creating the education endowment fund and the
dividend lottery fund; authorizing contributions from the
permanent fund dividend to the dividend lottery fund;
relating to transfers from the dividend lottery fund and
the education endowment fund; relating to the definition of
'gambling'; and providing for an effective date."
10:16:52 AM
Vice-Chair Bishop introduced SB 78. He offered a brief
overview of the legislation. He spoke of a past mentor that
had highlighted the Education Head Tax taken out of his
first paycheck at 16 years old. He stated that SB 78 would
set up an education lottery as a fun way to raise money for
education. He believed that the bill would provide stable
funding for education while supporting economic
diversification in the state.
10:20:01 AM
PETE FELLMAN, STAFF, SENATOR CLICK BISHOP, relayed that the
bill proposed a voluntary program that allowed for the
option of donating to education via the permanent fund
dividend application. He added that the option would be
limited to applicants over 18 years old. He continued that
95 percent of the donated funds would be immediately used
for education or would be held for education in the future.
He relayed that half of all the donations would go directly
to the Public Education Fund for the respective year.
Additionally, 25 percent of the funds would go to establish
the Public Education Endowment, where it would grow through
investment. The remaining 25 percent would go into the
Education Lottery Fund, which would pay out a percentage
for prizes. Of the 25 percent of total donations, 20
percent would be used to pay lottery prizes through a
drawing, every year. He specified that 80 percent of the
lottery fund would remain and grow. He related that the
fund would grow and feed itself overtime.
10:24:13 AM
Mr. Fellman discussed the Sectional Summary for SB 78 (copy
on file):
Section 1: Amends the definition of "gambling" in AS
11.66.280(3) to exclude the permanent fund dividend
drawing in AS 43.23.064.
Section 2: Adds new sections to AS 43.23:
Sec. 43.23.063: Creates an education endowment
fund in the general fund. The fund consists of
contributions to the fund from permanent fund
dividends (dividends) under AS 43.23.064(b),
transfers to the fund under AS 43.23.064(c),
interest, and any other money appropriated to the
fund. Makes the commissioner of revenue the
fiduciary of the fund. Sets the requirements for
the commissioner to manage the fund. When the
average market value of the fund exceeds
$1,000,000,000, 4.5 percent of the average
fiscal-year-end market value of the balance of
the fund for the last five fiscal years is
transferred to the public education fund, subject
to appropriation.
Sec. 43.23.064: Creates the dividend lottery fund
as an account in the general fund. Requires the
commissioner of revenue to manage the fund. The
fund consists of appropriations from dividends,
interest and income earnings shall also be
appropriated to the fund. This section allows the
commissioner to use the fund without further
appropriation to pay for prizes and to pay the
cost of administering the fund. When the balance
of the dividend lottery fund exceeds $500,000,000
at the end of the fiscal year, the commissioner
transfers the amount above $500,000,000 to the
education endowment fund. Allows a person to
contribute all or a portion of the person's
dividend in increments of $100 or more. 25
percent of the contributions may be appropriated
to the education endowment fund, 25 percent of
the contributions may be appropriated to the
dividend lottery fund, and 50 percent of the
contributions may be appropriated to the public
education fund. Entitles each $100 contribution
to one entry into the drawing. The prizes are
based on a percentage of the balance of the
lottery fund.
Section 3: Provides an effective date of January 1,
2018.
10:25:34 AM
Senator Micciche extrapolated that if 50,000 residents
participated in the first year then $5 million would be
generated. He continued that $2.5 million would go directly
into the Public Education Fund, with 25 percent going into
the endowment and 25 percent would go into the lottery
fund. The lottery find would pay out at 20, 15, 10, and 5
percent. He understood that once the lottery fund reached
$1 billion, the POMV would be deposited into the education
fund.
Mr. Fellman answered in the affirmative. He furthered that
once the lottery fund reached the $500 million mark,
everything above that mark would be deposited into the
education fund.
10:27:19 AM
Co-Chair MacKinnon wondered about the determination of
adult status for 18-year-old residents.
Mr. Fellman replied that he did not know the answer.
Co-Chair MacKinnon expressed concern that parents could use
a child's dividend inappropriately on the raffle. She
wondered how many adult applications were received each
year.
10:28:41 AM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, stated that the Permanent Fund
Dividend Annual Report would break down the number of
application between children and adults. He said that in
2016 there were approximately 493,000 adult applications.
He clarified that any resident over the age of 18 would
fill out an adult application. He stressed that
applications for children could not be used for a person
who was over 18 years of age.
Co-Chair MacKinnon wondered whether any transitional
language was necessary for an individual who would reach
the age of 18 by the time of distribution but not 18 at the
time of the application.
Mr. Burnett replied that he had not fully reviewed the bill
language but believed that the bill specified an adult
application should be used. He thought it was possible for
adjustments in the language to accommodate for retroactive
entrance into the lottery if a resident turned 18 after the
application date but before the distribution date.
10:30:57 AM
Senator Dunleavy asked whether the lottery would be limited
to Alaskans that qualified for the permanent fund dividend.
Mr. Fellman affirmed that the bill proposed a limited
lottery.
Senator Dunleavy referred to a document "SB 78 - Education
Lottery,"(copy on file) which indicated prize levels. He
questioned the prize value 10 years out.
Mr. Fellman replied that by year 10 the grand prize would
be $15 million.
10:32:18 AM
Senator Dunleavy appreciated the magnitude of the prizes.
He thought that the prize levels could be cause for the
lottery to be opened to non-residents.
Co-Chair MacKinnon agreed with Senator Dunleavy's concerns.
She thought that smaller prizes, spread to more people,
could be more beneficial to Alaskans.
Senator Dunleavy countered that he appreciated the current
prize structure.
10:34:06 AM
AT EASE
10:35:34 AM
RECONVENED
Co-Chair MacKinnon noted that under the legislation if the
lottery fund were to grow to $500 million there would be
one winner at $50 million when the maximum number was hit.
She added that it would take a very long time for the fund
to grow to that size, even with high participation. She
asked how the public would be informed of participation in
the lottery.
Vice-Chair Bishop deferred to Mr. Fellman.
10:37:32 AM
Mr. Fellman hoped that Department of Revenue would
contribute funds for advertising in the initial years and
thought that in subsequent years the program would
advertise itself. He noted that 2 percent of the fund would
be used for advertising. He believed that the odds were
very good, there would be four winners each year. He said
that if the cap were reached there would be winners at $50
million, $25 million, $12.5 million, and so on. He stressed
that 95 percent of the donations would go directly into
education in one form or another.
Co-Chair MacKinnon thought that the likelihood of winner
would be greater if there were more winners overall.
Mr. Fellman agreed.
10:39:22 AM
Co-Chair MacKinnon noted that the current Pick.Click.Give
option was offered when finalizing the permanent fund
application. She wondered whether there would be cost to
modifying the application process to incorporate the
lottery.
Mr. Burnett stated that there was an $8,000 fiscal note
from the permanent fund division that estimated the one-
time cost of making the change to the application process.
He said that the department would add the extra lottery
information to the advertising efforts already established.
He stated that additional advertising could be added but
the exact costs would be hard to determine at this point.
He assured the committee that getting the information out
to the public would be of minimal cost.
10:41:45 AM
Co-Chair MacKinnon related that the current program
required a 501, a tax deductible, charitable donation. She
probed the how the relationship with donations and gambling
would work in the legal sense.
Mr. Burnett replied that 25 percent of the donation would
not be tax deductible because that would be the percentage
entrance into the lottery. He related that donations to the
state would be tax deductible, or the remaining 75 percent
of the donation, voluntary payments to government would be
deductible.
Co-Chair MacKinnon asked whether the consumer would be
informed that only $.75 on each dollar would be tax
deductible.
Mr. Burnett thought that it would be easy to inform the
public; the 1099 form would show the donated amount and the
breakdown of that donation.
Co-Chair MacKinnon thought that the administrative fee
could come out of the other fund.
Mr. Burnett agreed.
10:44:27 AM
Senator von Imhof queried the maximum limit a person could
participate in the lottery per year.
Mr. Fellman indicated that it was possible to give your
entire permanent fund dividend in $100 increments.
Senator von Imhof wondered whether how the state would make
more than it paid into the lottery from year to year.
Mr. Fellman clarified that of the 25 percent donated to the
lottery fund, only 20 percent was used to pay for the
prizes. He explained that 80 percent would sit in the fund.
He furthered that 25 percent of all the donations received
in the following year would be added to the 80 percent;
there would always be 80 percent from the previous year to
build on in subsequent years.
Senator von Imhof asked how the annual payout would be
calculated. She wondered whether the payout was based on
the money invested per year and not the value of the fund
at $500 million.
Mr. Fellman replied in the affirmative. He stated that if
no bets were placed, there would be no payout.
She questioned what would happen if there were no
participants in a given year.
Mr. Fellman replied that if no one participated, there
would be no payout.
10:48:08 AM
Co-Chair MacKinnon opined that the issue remained unclear.
She relayed that a 10 percent winner would not qualify for
$50 million; if only 20 percent of the $500 million fund
was available for distribution, the maximum payout would be
approximately $10 million and not $50 million.
Mr. Fellman replied that if there was $500 million in the
fund, the state would pay out 20 percent of the $500
million in prizes.
Co-Chair MacKinnon clarified that $50 million was the total
payout, but not to one individual.
Co-Chair MacKinnon OPENED public testimony.
10:49:44 AM
PAUL KENDALL, SELF, ANCHORAGE (via teleconference),
testified in opposition to the bill. He lamented that the
legislative process was difficult for the public to
navigate. He felt that the legislature was dysfunctional.
He felt that the "education sector" of Alaska was hording
the state's money. He was in opposition to the cost of
education.
Co-Chair MacKinnon CLOSED public testimony.
10:55:23 AM
Vice-Chair Bishop expressed appreciation for the committee
hearing the bill. He emphasized that the bill proposed a
donation to the future of Alaska's children.
SB 78 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:55:55 AM
The meeting was adjourned at 10:56 a.m.