Legislature(2019 - 2020)BELTZ 105 (TSBldg)

04/16/2019 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 52 ALCOHOLIC BEVERAGE CONTROL; ALCOHOL REG TELECONFERENCED
Moved CSSB 52(L&C) Out of Committee
-- Testimony <Invitation Only> --
*+ SB 50 EMPLOYMENT TAX FOR EDUCATION FACILITIES TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         April 16, 2019                                                                                         
                            1:32 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lora Reinbold, Chair                                                                                                    
Senator Mia Costello, Vice Chair                                                                                                
Senator Click Bishop                                                                                                            
Senator Chris Birch                                                                                                             
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Elvi Gray-Jackson                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 52                                                                                                              
"An  Act  relating  to   alcoholic  beverages;  relating  to  the                                                               
regulation  of  manufacturers,   wholesalers,  and  retailers  of                                                               
alcoholic  beverages;  relating  to  licenses, endorsements,  and                                                               
permits  involving   alcoholic  beverages;   relating  to  common                                                               
carrier  approval to  transport or  deliver  alcoholic beverages;                                                               
relating  to the  Alcoholic Beverage  Control Board;  relating to                                                               
offenses  involving  alcoholic  beverages;  amending Rule  17(h),                                                               
Alaska Rules  of Minor  Offense Procedure;  and providing  for an                                                               
effective date."                                                                                                                
                                                                                                                                
     - MOVED CSSB 52(L&C) OUT OF COMMITTEE                                                                                      
                                                                                                                                
SENATE BILL NO. 50                                                                                                              
"An  Act imposing  an annual  educational  facilities maintenance                                                               
and  construction tax  on net  earnings from  self-employment and                                                               
wages;  relating to  the  administration and  enforcement  of the                                                               
educational  facilities  maintenance  and  construction tax;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 52                                                                                                                   
SHORT TITLE: ALCOHOLIC BEVERAGE CONTROL; ALCOHOL REG                                                                            
SPONSOR(s): SENATOR(s) MICCICHE                                                                                                 
                                                                                                                                
02/11/19       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/11/19       (S)       L&C, JUD, FIN                                                                                          
03/26/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
03/26/19       (S)       Heard & Held                                                                                           
03/26/19       (S)       MINUTE(L&C)                                                                                            
03/28/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
03/28/19       (S)       Heard & Held                                                                                           
03/28/19       (S)       MINUTE(L&C)                                                                                            
04/02/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/02/19       (S)       Heard & Held                                                                                           
04/02/19       (S)       MINUTE(L&C)                                                                                            
04/04/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/04/19       (S)       -- MEETING CANCELED --                                                                                 
04/09/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/09/19       (S)       Heard & Held                                                                                           
04/09/19       (S)       MINUTE(L&C)                                                                                            
04/11/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/11/19       (S)       Heard & Held                                                                                           
04/11/19       (S)       MINUTE(L&C)                                                                                            
04/16/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
BILL: SB 50                                                                                                                   
SHORT TITLE: EMPLOYMENT TAX FOR EDUCATION FACILITIES                                                                            
SPONSOR(s): SENATOR(s) BISHOP                                                                                                   
                                                                                                                                
02/11/19       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/11/19       (S)       L&C, FIN                                                                                               
04/16/19       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
LEE ELLIS, President                                                                                                            
Brewers Guild of Alaska                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of SB 52.                                                                            
                                                                                                                                
ANNA BRAWLEY, Title 4 Project Review Coordinator                                                                                
Senior Associate                                                                                                                
Agnew Beck Consulting                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Answered questions during the discussion of                                                               
SB 52.                                                                                                                          
                                                                                                                                
TIFFANY HALL, Executive Director                                                                                                
Recover Alaska                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:                                                                                                           
                                                                                                                                
ERIKA MCCONNELL, Director                                                                                                       
Alcohol and Marijuana Control Office (AMCO)                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and answered  questions during the                                                             
hearing SB 52.                                                                                                                  
                                                                                                                                
DARWIN PETERSON, Staff                                                                                                          
Senator Click Bishop                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on behalf of  the sponsor, Senator                                                             
Click Bishop during the hearing on SB 50.                                                                                       
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:32:27 PM                                                                                                                    
CHAIR  LORA  REINBOLD  called   the  Senate  Labor  and  Commerce                                                             
Standing Committee  meeting to order at 1:32  p.m. Present at the                                                               
call to  order were Senators  Birch, Bishop,  Costello, and Chair                                                               
Reinbold.                                                                                                                       
                                                                                                                                
          SB 52-ALCOHOLIC BEVERAGE CONTROL; ALCOHOL REG                                                                     
                                                                                                                                
1:33:11 PM                                                                                                                    
CHAIR REINBOLD  announced that the first  order of business would                                                               
be SENATE BILL  NO. 52, "An Act  relating to alcoholic beverages;                                                               
relating  to the  regulation of  manufacturers,  wholesalers, and                                                               
retailers   of  alcoholic   beverages;   relating   to  licenses,                                                               
endorsements,   and   permits   involving  alcoholic   beverages;                                                               
relating  to  common carrier  approval  to  transport  or deliver                                                               
alcoholic beverages;  relating to the  Alcoholic Beverage Control                                                               
Board;  relating  to   offenses  involving  alcoholic  beverages;                                                               
amending  Rule 17(h),  Alaska Rules  of Minor  Offense Procedure;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
1:34:20 PM                                                                                                                    
SENATOR  COSTELLO moved  to  adopt  Amendment 7,  work  order 31-                                                               
LS0004\U.8, Bruce, 4/5/19:                                                                                                      
                                                                                                                                
                           AMENDMENT 7                                                                                        
                                                                                                                                
     Page 6, line 13:                                                                                                           
          Delete "At least 80 percent of each final product                                                                     
     that contains"                                                                                                             
          Insert "The fermentation process of all"                                                                              
                                                                                                                                
     Page 6, line 14:                                                                                                           
          Delete "be manufactured"                                                                                              
          Insert "occur"                                                                                                        
                                                                                                                                
     Page 6, line 20:                                                                                                           
          Delete "At least 80 percent of each final product                                                                     
     that contains"                                                                                                             
          Insert "The fermentation process of all"                                                                              
                                                                                                                                
     Page 6, line 21:                                                                                                           
          Delete "be manufactured"                                                                                              
          Insert "occur"                                                                                                        
                                                                                                                                
CHAIR REINBOLD objected for discussion purposes.                                                                                
                                                                                                                                
1:34:36 PM                                                                                                                    
SENATOR MICCICHE  said that  Amendment 7  would address  an issue                                                               
that arose  last year. He  stated that AS  04.09.020 (c) contains                                                               
language  that  defines  a  manufacturer  in Alaska.  This  would                                                               
clarify that  any business  in Alaska manufacturing  alcohol must                                                               
manufacture  the  alcoholic  product  in  Alaska  and not  simply                                                               
import  and  relabel it.  Federal  law  currently  prohibits this                                                               
activity,  but  state law  does  not.  This  would  protect small                                                               
business  owners  since  SB  52  clearly  defines  regulation  of                                                               
manufacturers  in  Alaska.  This  language  seeks  to to  protect                                                               
consumers who  want to purchase locally  made beverages. It would                                                               
also protect the limited  license system related to tasting rooms                                                               
from being monopolized  by large manufacturers.  It would close a                                                               
loophole allowing  a large manufacturer that  would otherwise not                                                               
be allowed to sell direct  to consumers, own a tasting room, or a                                                               
licensed premise  from creating a subsidiary  company and selling                                                               
the  parent company's  product  under a  subsidiary  name thereby                                                               
creating a "shell brewery."  These large outside companies desire                                                               
to take over the industry in Alaska, he said.                                                                                   
                                                                                                                                
1:37:56 PM                                                                                                                    
SENATOR  COSTELLO   asked  whether  industry   has  provided  any                                                               
negative response.                                                                                                              
                                                                                                                                
SENATOR MICCICHE  answered no. He  said that that  he worked with                                                               
industry on this language and has not had any opposition.                                                                       
                                                                                                                                
1:38:28 PM                                                                                                                    
SENATOR BIRCH asked  whether anyone in Alaska  brings in a barrel                                                               
of Everclear  grain alcohol  to use  as a  base. He  recalled his                                                               
relative  made  cranberry  liqueur  using  it. He  asked  whether                                                               
Amendment 7 would prevent  someone from making home liqueur as an                                                               
unintended consequence.                                                                                                         
                                                                                                                                
SENATOR  MICCICHE related  his  understanding  that manufacturers                                                               
use local materials,  but it was not  possible to ferment without                                                               
bringing  in some  products. That  was the  rationale for  the 80                                                               
percent  language, he  said. He  said that  spruce tip,  hops and                                                               
Mat-Su Valley grains  are used, but Alaska  is limited in what it                                                               
can grow due to its short growing season.                                                                                       
                                                                                                                                
1:40:03 PM                                                                                                                    
CHAIR  REINBOLD  expressed   concern  about  the  language,  "The                                                               
fermentation  process  of  all."  She  asked  whether this  would                                                               
adversely impact wineries or distilleries.                                                                                      
                                                                                                                                
SENATOR MICCICHE answered  that it would not.  He said this means                                                               
the  fermentation process  must  happen in  Alaska.  He explained                                                               
that it was difficult to  meet the 80 percent threshold. It would                                                               
free manufacturers  since it does not  limit where the businesses                                                               
purchase the raw materials.                                                                                                     
                                                                                                                                
1:41:25 PM                                                                                                                    
LEE ELLIS, President, Brewers  Guild of Alaska, Anchorage, stated                                                               
that  the industry  asked for  a language  change from  the 80/20                                                               
percent because  it is confusing to  determine. He explained that                                                               
fermentation  is the production  of alcohol.  He related  that 90                                                               
percent of the product  is water and the remaining percentage was                                                               
malt and  hops. Ingredients  like berries  and spruce  tips would                                                               
fall under  the Federal Drug  Administration (FDA).  He said that                                                               
the guild is very happy with this language.                                                                                     
                                                                                                                                
MR.  ELLIS  related   his  understanding  that  the  distilleries                                                               
retained the 80/20 language.  The federal Alcohol and Tobacco Tax                                                               
and Trade Bureau (TTB)  and FDA regulate the ingredients that can                                                               
be used, he said. He  did not believe that Amendment 7 would have                                                               
negative  consequences since  it more  clearly  defines who  is a                                                               
manufacturer.  Amendment  7 was  developed  because  a distillery                                                               
brought alcohol in from the  Lower 48, mixed in spices and resold                                                               
it as "Alaskan made."  He cautioned that if manufacturers are not                                                               
regulated that  issues arise  in managing the  three-tier system.                                                               
In  response  to  a   question,  he  stated  that  he  absolutely                                                               
supported  Amendment   1.  He   said  he  could   not  speak  for                                                               
distilleries  or wineries,  but it  will  work for  breweries. He                                                               
related  that   distilleries  sometimes   import  wash   for  the                                                               
distillation  process, so  distilleries chose  to keep  the 80/20                                                               
ratio.                                                                                                                          
                                                                                                                                
1:44:49 PM                                                                                                                    
CHAIR REINBOLD removed her objection.                                                                                           
                                                                                                                                
1:45:18 PM                                                                                                                    
SENATOR BISHOP  reviewed the fiscal  note from  the Department of                                                               
Commerce,  Community and  Economic Development  (DCCED), Division                                                               
of  Corporations, Businesses,  and Professional  Licensing (CBPL)                                                               
zero  fiscal  note  prepared  by  Sara  Chambers.  The Office  of                                                               
Management  and  Budget (OMB)  component  is  2360,  he  said. He                                                               
reviewed the fiscal analysis:                                                                                                   
                                                                                                                                
     SB 52  modifies the exemption from  the Alaska business                                                                    
     licensing  requirement for  businesses  that  sell only                                                                    
     liquor to  reflect the updated  statutory reference. If                                                                    
     the  business  sells anything  in  addition  to liquor,                                                                    
     they  would be  required to  obtain an  Alaska business                                                                    
     license.                                                                                                                   
                                                                                                                                
     There is  no anticipated fiscal impact  to the Division                                                                    
     of Corporations,  Business, and Professional Licensing.                                                                    
     Business  licensing  fees are  set  per  AS  43.70, and                                                                    
     revenue  in  excess  of  authorized  budgeted  expenses                                                                    
     revert to the State of Alaska general fund.                                                                                
                                                                                                                                
1:46:21 PM                                                                                                                    
CHAIR REINBOLD  asked to put  on the record that  she was working                                                               
with the sponsor and the  Department of Law. Some changes will be                                                               
requested  during  the next  committee  of  referral,  the Senate                                                               
Judiciary Committee.  She noted  that the Legislative  Budget and                                                               
Audit Division  had several suggestions.  She would  also like to                                                               
resolve winery license fees for the half dozen wineries.                                                                        
                                                                                                                                
1:48:56 PM                                                                                                                    
ANNA  BRAWLEY,   Title  4  Project   Review  Coordinator,  Senior                                                               
Associate, Agnew Beck Consulting, Anchorage, echoed her thanks.                                                                 
                                                                                                                              
1:49:07 PM                                                                                                                    
TIFFANY  HALL,  Executive  Director,  Recover Alaska,  Anchorage,                                                               
expressed her sincere thanks to the committee.                                                                                  
                                                                                                                                
1:49:40 PM                                                                                                                    
ERIKA MCCONNELL,  Director, Alcohol and  Marijuana Control Office                                                               
(AMCO), Anchorage, echoed her thanks.                                                                                           
                                                                                                                                
1:50:04 PM                                                                                                                    
SENATOR BIRCH  said he was  supportive of passing  a similar bill                                                               
last year. He said thousands  of hours have been put forth by the                                                               
public, the industry  and stakeholders. He said  this bill cuts a                                                               
fine balance and was a good and positive step forward.                                                                          
                                                                                                                                
1:51:02 PM                                                                                                                    
SENATOR BISHOP asked whether this bill would raise new revenue.                                                                 
                                                                                                                                
SENATOR MICCICHE  agreed it  would raise  revenue, most  of which                                                               
would be put  towards better management of  alcohol sales and the                                                               
impacts of alcohol in Alaska.                                                                                                   
                                                                                                                                
SENATOR  BISHOP asked  whether the  state would  start recovering                                                               
some of the funds from internet sales.                                                                                          
                                                                                                                                
SENATOR MICCICHE  agreed that it  has a positive  fiscal note. He                                                               
related that  he began  working on  the bill because  alcohol was                                                               
about 95  percent of the  adverse substance abuse  problem in the                                                               
state.                                                                                                                          
                                                                                                                                
SENATOR BISHOP thanked the sponsor and staff.                                                                                   
                                                                                                                                
CHAIR  REINBOLD thanked  Senator  Costello  for her  work  on the                                                               
committee.                                                                                                                      
                                                                                                                                
1:53:01 PM                                                                                                                    
SENATOR COSTELLO  moved to report SB  52, Version 31-LS0004\U, as                                                               
amended,  from  committee  with  individual  recommendations  and                                                               
attached  fiscal note(s).  There being  no objection,  the CSSB52                                                               
(L&C) was  reported from the  Senate Labor  and Commerce Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
1:53:25 PM                                                                                                                    
At-ease.                                                                                                                        
                                                                                                                                
          SB 50-EMPLOYMENT TAX FOR EDUCATION FACILITIES                                                                     
                                                                                                                                
1:55:40 PM                                                                                                                    
CHAIR  REINBOLD reconvened  the  meeting and  announced  that the                                                               
final order  of business  would be  SENATE BILL  NO. 50,  "An Act                                                               
imposing  an   annual  educational   facilities  maintenance  and                                                               
construction tax on net  earnings from self-employment and wages;                                                               
relating   to   the  administration   and   enforcement   of  the                                                               
educational  facilities  maintenance  and  construction tax;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
1:56:31 PM                                                                                                                    
SENATOR BISHOP made opening remarks. He said that SB 50 has been                                                                
around since 1970s. He paraphrased his sponsor statement:                                                                       
                                                                                                                                
     From 1919-1980,  Alaska had  an annual  employment head                                                                    
     tax  for the  purpose  of collecting  revenues  to fund                                                                    
     schools.    The     tax    went     through    numerous                                                                    
     transformations, but it  always charged an equal amount                                                                    
     to each  employed individual.  When it was  repealed in                                                                    
     1980,  the  tax  was  $10  per  person  which  has  the                                                                    
     equivalent value of $30 today.                                                                                             
                                                                                                                                
     SB  50 proposes  to  revive  the repealed  head  tax on                                                                    
     employed  individuals, both  resident  and nonresident,                                                                    
     with  income  from  a  source  in Alaska.  The  "Alaska                                                                    
     Education  Facilities,  Maintenance,  and  Construction                                                                    
     Tax"  would collect  $30 from  each person  employed in                                                                    
     the  state.   The  tax   would  be  withheld   from  an                                                                    
     employee's  first   paycheck  each   year  while  self-                                                                    
     employed  individuals   would  be   required  to  remit                                                                    
     payment to  the Alaska  Department of Revenue.  The tax                                                                    
     would be  deductible on an  individual's federal income                                                                    
     tax return.                                                                                                                
                                                                                                                                
     According  to  the  most  recent  statistics  from  the                                                                    
     Alaska  Department of  Labor and  Workforce Development                                                                    
     and  the U.S.  Census Bureau,  there  are approximately                                                                    
     441,596 employed individuals  in Alaska. Roughly 20% of                                                                    
     those workers  who earn their  living in  Alaska do not                                                                    
     reside  here resulting in  $2.5 billion  in nonresident                                                                    
     income that  leaves Alaska's economy each  year and, in                                                                    
     most cases,  gets taxed by a  nonresident's home state.                                                                    
     It  is  estimated  that  this  tax would  generate  $13                                                                    
     million  each  year.  The  revenue  collected would  be                                                                    
     deposited into  the state's general  fund and accounted                                                                    
     for separately  to pay for the  growing maintenance and                                                                    
     construction needs of Alaska's schools.                                                                                    
                                                                                                                                
1:58:34 PM                                                                                                                    
SENATOR BISHOP said  the state has had  a minimal budget for                                                                    
the past  five years. He  expressed concern  about the level                                                                    
of deferred  maintenance for schools in  disrepair. In 1980,                                                                    
the head tax  was repealed. However, a  bill to recreate the                                                                    
head tax  has been introduced  in the  legislature 15 times.                                                                    
In fact,  he has introduced  this concept in  the last three                                                                    
legislatures.                                                                                                                   
                                                                                                                                
He  reported  that the  Department  of  Education  and Early                                                                    
Development  (DEED)  indicates   that  the  state  has  $112                                                                    
million in  deferred maintenance and $190  million in school                                                                    
construction debt. He said  that $2.5 billion in nonresident                                                                    
income   leaves   Alaska's    economy   each   year.   These                                                                    
nonresidents are most likely  taxed in their home states and                                                                    
those  taxes help  provide education  in their  home states.                                                                    
The state has  had limited capital  budgets based on federal                                                                    
matching  funds.  The deferred  maintenance  is  not getting                                                                    
better,  he  said.  He  remarked  that  he  worked  for  Joe                                                                    
Jackovich  when  he  attended  high  school.  Mr.  Jackovich                                                                    
explained to him  that the $5 school tax  helped pay for his                                                                    
high school education.                                                                                                          
                                                                                                                                
2:02:00 PM                                                                                                                    
DARWIN  PETERSON,  Staff,  Senator  Click  Bishop,  Alaska  State                                                               
Legislature, Juneau,  on behalf  of the sponsor,  reiterated that                                                               
from 1919  to 1980 Alaska had  an annual employment  head tax for                                                               
the purpose of collecting  revenues to help fund its schools. The                                                               
tax was  established to charge  an equal amount  to each employed                                                               
individual. When  it was  repealed in 1980,  the tax  was $10 per                                                               
person, which would  be equivalent to $30  today, if adjusted for                                                               
inflation.  SB 50  proposes to  revive the  repealed head  tax on                                                               
those employed, both residents and nonresidents.                                                                                
                                                                                                                                
MR. PETERSON said  that this bill would collect  $30 withheld from                                                              
the  first  paycheck  each  calendar year  and  is  deductible  on                                                              
federal income tax returns.                                                                                                     
                                                                                                                                
He  provided  statistics  from Department  of  Labor  &  Workforce                                                              
Development and the U.S. Census Bureau,  such that 20.0 percent or                                                              
85,000 of  441,596 employees  are nonresidents,  which results  in                                                              
$2.5  billion leaving  the  state's economy  each  year. In  2017,                                                              
407,255 of the 441,596 employees  were wage and salary workers. He                                                              
said  that  11,329  of  the self-employed  Alaskans  work  in  the                                                              
business sector and the remainder are self-employed in non-                                                                     
incorporated businesses.                                                                                                        
                                                                                                                                
MR. PETERSON said that based on  those figures, the education head                                                              
tax would bring in $13 million in  revenue per year to the state's                                                              
general  fund to  pay  for  growing maintenance  and  construction                                                              
needs. The  Department of Education  and Early  Development (DEED)                                                              
indicates  that the  state's share  of  the FY  2020 major  school                                                              
maintenance list  totals $112-113 million  and the FY  2020 school                                                              
construction list totals $190  million totaling over $300 million.                                                              
He pointed  out that it costs  districts money to  place something                                                              
on the list,  so the total does  not reflect all of  the needs. He                                                              
referred to members' packets and letters of support.                                                                            
                                                                                                                                
2:06:41 PM                                                                                                                    
SENATOR  COSTELLO asked  whether this  is considered  a dedicated                                                               
fund, and if not, how does the legislature avoid it.                                                                            
                                                                                                                                
MR. PETERSON answered no. He  referred to page 4, lines 13-19, to                                                               
language  that states  it does  not create  a dedicated  fund. AS                                                               
43.45.061 read:                                                                                                                 
                                                                                                                                
     (a) The  tax and penalties collected  by the department                                                                    
     under this chapter  shall be deposited into the general                                                                    
     fund and accounted for separately.                                                                                         
                                                                                                                                
     (b)  The  legislature  may  appropriate  the  estimated                                                                    
     amounts  to be collected  and separately  accounted for                                                                    
     under  (a)   of  this  section   into  the  educational                                                                    
     facilities    maintenance    and   construction    fund                                                                    
     established  under   AS  37.05.560.   Nothing  in  this                                                                    
     section creates a dedicated fund.                                                                                          
                                                                                                                                
MR. PETERSON  explained that the  legislature is constitutionally                                                               
prohibited  from creating  dedicated funds.  The  legislature may                                                               
appropriate and separately account  for and place the funds in an                                                               
account  with the  intent to  pay  for construction  and deferred                                                               
maintenance.                                                                                                                    
                                                                                                                                
SENATOR  COSTELLO  asked  whether  this  would be  considered  an                                                               
income tax.                                                                                                                     
                                                                                                                                
MR. PETERSON  agreed that it  would create an income  tax, but it                                                               
is a flat tax, not a bracketed income tax.                                                                                      
                                                                                                                                
SENATOR  COSTELLO  asked  for  further  clarification  as to  why                                                               
maintenance was not included as part of school construction.                                                                    
                                                                                                                                
MR.  PETERSON  answered  that  over  the  last  five  years,  the                                                               
operations  are ongoing  but  capital  budgets can  be  held back                                                               
while the legislature waits for additional revenue.                                                                             
                                                                                                                                
2:09:57 PM                                                                                                                    
SENATOR  BISHOP  said  he likes  the  title  of  the bill,  which                                                               
relates to facilities and construction tax. It read:                                                                            
                                                                                                                                
     "An  Act  imposing  an  annual  educational  facilities                                                                    
     maintenance and  construction tax on  net earnings from                                                                    
     self-employment    and   wages;    relating    to   the                                                                    
     administration  and   enforcement  of  the  educational                                                                    
     facilities  maintenance   and  construction   tax;  and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
He characterized this matter as a policy question.                                                                              
                                                                                                                                
2:10:32 PM                                                                                                                    
SENATOR BIRCH  commended the sponsor  for bringing this  forward.                                                               
He also  recalled his first  pay stub signed  by Jim Dalton.  The                                                               
Dalton Highway was named after him. He recalled  the head tax was                                                               
$10  and  he  understood it  went  to  education.  He  said  that                                                               
maintenance  is  important  and  deferred  maintenance  needs  to                                                               
happen  but  can  be pushed  off  for  a  while.  These  deferred                                                               
maintenance costs are  significant ones in rural communities.  He                                                               
characterized this as a  step in the right direction. He  said he                                                               
thought it may help educate a new generation  of Alaskans that it                                                               
is necessary to pay for things.                                                                                                 
                                                                                                                                
2:12:34 PM                                                                                                                    
CHAIR REINBOLD raised  the concern that home schools  must absorb                                                               
property  taxes.  She  asked whether  this  tax  would  apply  to                                                               
everyone,  whether these  residents have  kids in  the system  or                                                               
not.                                                                                                                            
                                                                                                                                
MR. PETERSON answered yes. He said that everyone  who is employed                                                               
would be subject to a $30 head tax per  year. Not everyone in the                                                               
state has the ability to homeschool their  children. However, the                                                               
state is  constitutionally required  to provide  a public  school                                                               
system for all children, and everyone in the  state benefits from                                                               
having an educated population.                                                                                                  
                                                                                                                                
CHAIR REINBOLD argued  that it does not  mean that the state must                                                               
have 54 school districts and  a $2.2 billion budget, with some of                                                               
the lowest outcomes  in some areas.  She expressed frustration to                                                               
see "common  core" math standards that  she characterized as some                                                               
of the  worst possible. She  emphasized that she  is resistant to                                                               
increasing education  funding at this time.  She highlighted that                                                               
her constituents  question their  high property  taxes when other                                                               
residents pay  none. She  asked how to  track where  the money is                                                               
spent. Since  designated funds are prohibited,  this could result                                                               
in additional general fund monies.                                                                                              
                                                                                                                                
MR. PETERSON  pointed out that  employed rural  residents that do                                                               
not currently pay property taxes would be contributing $30.                                                                     
                                                                                                                                
CHAIR REINBOLD  expressed concern  that the funding  would not be                                                               
tied  to  the  local  community.  She  said she  preferred  local                                                               
community control.                                                                                                              
                                                                                                                                
MR. PETERSON  referred to the prioritized  DEED major maintenance                                                               
fund list and  school construction fund  list in members packets.                                                               
The funds would  be allocated towards  those projects in priority                                                               
order.                                                                                                                          
                                                                                                                                
CHAIR REINBOLD related her  understanding that there would not be                                                               
any guarantee that funds would  be spent in the area in which the                                                               
funds were collected.                                                                                                           
                                                                                                                                
MR. PETERSON agreed that it was a statewide effort.                                                                             
                                                                                                                                
2:15:47 PM                                                                                                                    
CHAIR  REINBOLD expressed  concern  that the  initial  fees could                                                               
dramatically  increase over  time.  She offered  her  belief that                                                               
government  always  wants  more,  so  this  could  just become  a                                                               
general bracketed income tax.                                                                                                   
                                                                                                                                
MR. PETERSON agreed that  it was always the prerogative of future                                                               
legislatures.  Future legislatures  could  abandon  this approach                                                               
and impose  an income tax based  on net income.  He remarked that                                                               
doing nothing was not an answer, either.                                                                                        
                                                                                                                                
CHAIR  REINBOLD said  this  sets  up the  framework  for  a full-                                                               
fledged  income tax  so it  could become  a  vehicle for  that to                                                               
occur.                                                                                                                          
                                                                                                                                
SENATOR BISHOP did  not disagree. However, he  said that he could                                                               
not  in good  conscious propose  addressing  the issue  by taking                                                               
funding out  of savings. He  emphasized that he was  trying to do                                                               
something to  address deferred  maintenance. He  pointed out that                                                               
some school kids  in his district have  not had drinking water in                                                               
three  years. He  maintained  that it  was  not an  option  to do                                                               
nothing.                                                                                                                        
                                                                                                                                
2:18:02 PM                                                                                                                    
CHAIR REINBOLD  said she appreciated  his courage  since there is                                                               
significant resistance  to taxes. She expressed  concern over the                                                               
inequalities  in school  districts, such  that some  schools have                                                               
great facilities whereas others  do not. She would like a program                                                               
that  engages students  to care  for  school lawns  and encourage                                                               
school pride.  She said that  one thing she liked  about the bill                                                               
is that the fees were the same fee for everyone.                                                                                
                                                                                                                                
[SB 50 was held in committee.]                                                                                                  
                                                                                                                                
2:20:57 PM                                                                                                                    
CHAIR REINBOLD reviewed upcoming committee announcements.                                                                       
                                                                                                                                
2:21:41 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Reinbold adjourned the Senate Labor and Commerce Standing                                                                 
Committee meeting at 2:21 p.m.                                                                                                

Document Name Date/Time Subjects
SB 50 ver. M.pdf SL&C 4/16/2019 1:30:00 PM
SL&C 1/28/2020 1:30:00 PM
SB 50
SB 50 Sponsor Statement ver. S.pdf SL&C 4/16/2019 1:30:00 PM
SL&C 1/28/2020 1:30:00 PM
SL&C 1/30/2020 1:30:00 PM
SB 50
SB 50 Sectional Analysis ver. M.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB 50 - FY20 Major Maintenance Final List.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB 50 - FY20 School Construction Final List.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB 50 - Nonresidents Working in Alaska 2017 Alaska Department of Labor and Workforce Development.pdf SL&C 4/16/2019 1:30:00 PM
SL&C 1/28/2020 1:30:00 PM
SL&C 1/30/2020 1:30:00 PM
SB 50
SB 50 - YKSD Resolution 19-06.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB 50 Denali Borough Resolution 19-08.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB 50 Denali Borough School District Reso.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB 50 News-Miner Editorial.pdf SL&C 4/16/2019 1:30:00 PM
SL&C 1/28/2020 1:30:00 PM
SL&C 1/30/2020 1:30:00 PM
SB 50
SB 50 News-Miner opinion.pdf SL&C 4/16/2019 1:30:00 PM
SL&C 1/28/2020 1:30:00 PM
SL&C 1/30/2020 1:30:00 PM
SB 50
SB 50 - ASA support letter.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB050 DRAFT Fiscal Note DOLWD-UI 04-12-19.pdf SL&C 4/16/2019 1:30:00 PM
SL&C 1/28/2020 1:30:00 PM
SB050-DOR-TAX-2-15-2019.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB050-DOR-TAX-4-16-2019.pdf SL&C 4/16/2019 1:30:00 PM
SB 50
SB 52 DCCED Response 04.15.19.pdf SL&C 4/16/2019 1:30:00 PM
SB 52
SB 52 Amendment U.8.pdf SL&C 4/16/2019 1:30:00 PM
SB 52
04.16.19 SB 52 Support Letters.pdf SL&C 4/16/2019 1:30:00 PM
SB 52