Legislature(2003 - 2004)

04/03/2003 03:35 PM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 3, 2003                                                                                          
                           3:35 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Gary Stevens, Chair                                                                                                     
Senator John Cowdery, Vice Chair                                                                                                
Senator Fred Dyson                                                                                                              
Senator Gretchen Guess                                                                                                          
MEMBERS ABSENT                                                                                                                
Senator Lyman Hoffman                                                                                                           
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 117                                                                                                             
"An  Act  eliminating  the longevity  bonus  program  and  making                                                               
related  conforming  changes;  and  providing  for  an  effective                                                               
     MOVED SB 117 OUT OF COMMITTEE                                                                                              
SENATE BILL NO. 137                                                                                                             
"An  Act imposing  a  tax  on employment;  and  providing for  an                                                               
effective date."                                                                                                                
     MOVED CS SB 137 (STA) OUT OF COMMITTEE                                                                                     
SENATE BILL NO. 29                                                                                                              
"An Act establishing  a sunset date for each  department of state                                                               
government;  relating to  the review  of the  functions of  state                                                               
agencies,  certain  instrumentalities  of the  state,  and  other                                                               
persons and offices."                                                                                                           
     SCHEDULED BUT NOT HEARD                                                                                                    
SENATE BILL NO. 148                                                                                                             
"An Act  relating to  allowable absences  for certain  members of                                                               
the armed  forces and their  spouses and dependents  for purposes                                                               
of eligibility  for permanent fund  dividends; and  providing for                                                               
an effective date."                                                                                                             
     BILL POSTPONED TO 4/8/03                                                                                                   
PREVIOUS ACTION                                                                                                               
SB 117 - See State Affairs minutes dated 3/27/03                                                                                
SB 137 - No previous action to record.                                                                                          
WITNESS REGISTER                                                                                                              
Lorilyn Swanson                                                                                                                 
415 Willoughby Avenue                                                                                                           
Juneau, AK 99801                                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Doris Peck                                                                                                                      
3250 Tongass Blvd,                                                                                                              
Juneau, AK 99801                                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Doris Robbins                                                                                                                   
P.O. Box 21011                                                                                                                  
Juneau, AK 99802                                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Maxine Derr                                                                                                                     
701 Lori Dr.                                                                                                                    
Anchorage, AK 99504                                                                                                             
POSITION STATEMENT: Opposed to SB 117                                                                                         
Patricia Barber                                                                                                                 
2060 Belmont Dr.                                                                                                                
Anchorage, AK 99517                                                                                                             
POSITION STATEMENT: Opposed to SB 117                                                                                         
J.R. Hank Langman                                                                                                               
3921 Astro Circle                                                                                                               
Anchorage, AK 99517                                                                                                             
POSITION STATEMENT: Opposed to SB 117                                                                                         
John Webster                                                                                                                    
660 Coville Lane                                                                                                                
Palmer, AK 99645                                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Ernie Line                                                                                                                      
2645 Whispering Woods                                                                                                           
Wasilla, AK 99645                                                                                                               
POSITION STATEMENT: Opposed to SB 117                                                                                         
Louise Harris                                                                                                                   
P.O. Box 874287                                                                                                                 
Wasilla, AK 99645                                                                                                               
POSITION STATEMENT: Opposed to SB 117                                                                                         
Nancy Mendenhall                                                                                                                
1907 Yankovich                                                                                                                  
Fairbanks, AK 99709                                                                                                             
John Boulette                                                                                                                   
P.O. Box 56896                                                                                                                  
North Pole, AK 99705                                                                                                            
POSITION STATEMENT: Opposed to SB 117                                                                                         
Niilo Koponen                                                                                                                   
710 Chena Ridge Road                                                                                                            
Fairbanks, AK 99709                                                                                                             
POSITION STATEMENT: Opposed to SB 117                                                                                         
Geneneiva Pearson                                                                                                               
P.O. Box 669                                                                                                                    
Kodiak, AK 99615                                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Evan Cundiff                                                                                                                    
41115 Sterling Hwy                                                                                                              
Homer, AK 99603                                                                                                                 
POSITION STATEMENT: Opposed to SB 117                                                                                         
Earl Glanville                                                                                                                  
38290 Sterling Hwy                                                                                                              
Anchor Point, AK 99556                                                                                                          
POSITION STATEMENT: Opposed to SB 117                                                                                         
Vi Jerrel                                                                                                                       
P.O. Box 938                                                                                                                    
Homer, AK 99603                                                                                                                 
POSITION STATEMENT: Opposed to SB 117                                                                                         
Ed Zastrow                                                                                                                      
3530 Denali Ave                                                                                                                 
Ketchikan, AK 99901                                                                                                             
POSITION STATEMENT: Opposed to SB 117                                                                                         
Guy Townsend                                                                                                                    
830 Peterson Street                                                                                                             
Ketchikan, AK 99901                                                                                                             
POSITION STATEMENT: Opposed to SB 117                                                                                         
Lenore Jones                                                                                                                    
5125 Silver Salmon Drive                                                                                                        
Kenai, AK 99611                                                                                                                 
POSITION STATEMENT: Opposed to SB 117                                                                                         
Vivian Swanson                                                                                                                  
P.O. Box 1483 Soldotna, AK 99669                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Monty Richardson                                                                                                                
Seward, AK 99664                                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Robert Montegue                                                                                                                 
Anchorage Pioneer Home                                                                                                          
POSITION STATEMENT: Opposed to SB 117                                                                                         
Tom Davis                                                                                                                       
P.O. Box 877730                                                                                                                 
Wasilla, AK 99687                                                                                                               
POSITION STATEMENT: Opposed to SB 117                                                                                         
Robert Thibodeau                                                                                                                
1616 Glacier Ave                                                                                                                
Juneau, AK 99801                                                                                                                
POSITION STATEMENT: Opposed to SB 117                                                                                         
Larry Persily                                                                                                                   
Deputy Commissioner                                                                                                             
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT: Testified on SB 137                                                                                       
Jim Sykes                                                                                                                       
P.O. Box 696                                                                                                                    
Palmer, AK 99645                                                                                                                
POSITION STATEMENT: Testified on SB 137                                                                                       
ACTION NARRATIVE                                                                                                              
TAPE 03-14, SIDE A                                                                                                            
CHAIR GARY called the Senate State Affairs Standing Committee                                                                 
meeting to order at 3:35 p.m. Present were Senators Dyson, Guess                                                                
and Chair Gary Stevens. Senator Cowdery arrived momentarily.                                                                    
The first order of business was SB 117.                                                                                         
           SB 117-ELIMINATING LONGEVITY BONUS PROGRAM                                                                       
CHAIR GARY STEVENS  announced this was the second  hearing for SB
117  and  he  would  take   testimony  for  one  hour.  He  asked                                                               
individuals  who  spoke  during  the previous  hearing  to  allow                                                               
others the opportunity  to express their views. He  said he would                                                               
rotate testimony among the different sites.                                                                                     
LORILYN SWANSON, the manager of Fireweed Place in Juneau,                                                                       
opposed SB 117 and read the following into the record:                                                                          
     Last week I presented written  testimony to you but had                                                                    
     to leave prior to testifying.                                                                                              
     My one  suggestion to  you in  that testimony  was that                                                                    
     you  consider  contacting   the  Longevity  Office  for                                                                    
     addresses of constituents in your  district so that you                                                                    
     could contact them first hand  and get an overall sense                                                                    
     of how important  this monthly income is  to them. This                                                                    
     went along with the fact  that the Governor's office is                                                                    
     stating and still is that  they are hearing more on the                                                                    
     pull-tab legislation  and very  little from  seniors on                                                                    
     the longevity  bonus issue. I  hope that you  have been                                                                    
     able  to contact  some of  your  constituents prior  to                                                                    
     making  a  decision  to  pass this  bill  out  of  your                                                                    
     committee today.                                                                                                           
     This past  week seniors  receiving the  longevity bonus                                                                    
     received a letter  from the Governor on  the safety net                                                                    
     programs.  This letter  offended many.  They felt  that                                                                    
     they were  being told  to apply  for welfare.  Much has                                                                    
     been  said about  the so-called  safety  nets that  the                                                                    
     state has in place for  seniors. Much has not been said                                                                    
     about the  fact that any  senior cannot make  over $914                                                                    
     up  to $1,025.01  and special  income groups  $1,656 or                                                                    
     they  will not  qualify  for these  safety nets.  These                                                                    
     safety  nets are  not going  to help  most seniors  now                                                                    
     receiving the longevity bonus as  their income will not                                                                    
     fall to this poverty level but it will be close.                                                                           
     The permanent fund  is also at question  this year. Yes                                                                    
     this would  affect all Alaskans but  especially a major                                                                    
     loss to  low income seniors  should they also  lose the                                                                    
     longevity bonus.                                                                                                           
     This program  was an incentive  to seniors in  order to                                                                    
     allow them  to stay in  Alaska. We need the  seniors in                                                                    
     Alaska.  Listen to  your  constituents.  Listen to  the                                                                    
     seniors.  There  is  sense  of  panic  from  those  who                                                                    
     currently show the  bonus as 20 to 30  percent of their                                                                    
     income. You  have and will  hear more testimony  on how                                                                    
     the bonus is  used for necessities such  as rent, fuel,                                                                    
     electricity, and prescriptions. It is true.                                                                                
     Sooner or later someone is going  to have to step up to                                                                    
     the plate  and show seniors  that he or she  is willing                                                                    
     to make  a stand for them,  let it be you,  do not pass                                                                    
     SB 117 out of your committee today.                                                                                        
SENATOR JOHN  COWDERY questioned whether she  would favor placing                                                               
a question on the Permanent  Fund Dividend application asking the                                                               
applicant to  contribute part of  his or her dividend  to seniors                                                               
to continue the longevity bonus program.                                                                                        
MS. SWANSON thought  that would be a good idea.  She didn't think                                                               
cutting the program completely on July 1 was fair.                                                                              
DORIS PECK  from Juneau spoke for  those who are 75  and older to                                                               
oppose SB  117. Many  of these people  are struggling  with their                                                               
own budgets.  Few are able to  move into the work  force and none                                                               
that she  interviewed want to  step into the welfare  safety net.                                                               
She said,  "Please don't  jerk the rug  from beneath  the elders.                                                               
They live on budgets too."                                                                                                      
DORIS  ROBBINS   from  Juneau  represented  the   Retired  Public                                                               
Employees  of  Alaska.  She  does  not  receive  the  bonus,  but                                                               
believes  the  state should  keep  its  promise to  seniors.  The                                                               
program is phasing  itself out with the youngest  recipient at 72                                                               
years  old. Seniors  are important  to  Alaska's economy  because                                                               
they keep most of their  money circulating within the state. They                                                               
are  carriers of  our  Alaska  heritage and  serve  as good  role                                                               
models.  She  said  she  would  be willing  to  donate  from  her                                                               
permanent fund to keep the bonus program alive.                                                                                 
MAXINE DERR  from Anchorage opposed  SB 117. She is  thankful for                                                               
the program  because she  has no pension  even though  she worked                                                               
for many years. She favored a means based test.                                                                                 
PATRICIA BARBER  has lived in Alaska  for more than 40  years and                                                               
her husband  is a third  generation Alaskan. She wanted  to rebut                                                               
the comments made by the  Administration stating that the program                                                               
is  inequitable. She  doesn't receive  the bonus  but that  is no                                                               
reason to  cut it  for others; life  isn't always  equitable. The                                                               
Administration's logic is personally offensive  and others in her                                                               
same situation have similar feelings.                                                                                           
"Our seniors are  visible and in some  communities, vital... It's                                                               
a  win-win  situation. The  seniors  who  now receive  the  bonus                                                               
should continue to do so. Period, end of subject."                                                                              
J.R. HANK  LANGMAN has lived  in Alaska  since 1949 and  his wife                                                               
has been  an Alaskan since 1944.  He asked, "How can  you believe                                                               
that you can  remove from the economy of Alaska,  $47 million and                                                               
not hurt the economy?" The  safety net programs couldn't possibly                                                               
cushion the small communities across  the state against this loss                                                               
of revenue.                                                                                                                     
JOHN WEBSTER  from Palmer  is a  40 year  resident of  Alaska. He                                                               
spent  His  career  working  for   the  U.S.  Postal  Service  in                                                               
Anchorage. He is  distraught at the termination  of the longevity                                                               
bonus because  it reduces  his income 9  percent. He  pointed out                                                               
longevity dollars turn over many times creating jobs for others.                                                                
He  closed  saying,"  Take  my  longevity  and  make  an  instant                                                               
Democrat out of me."                                                                                                            
ERNIE LINE  from Wasilla opposed  SB 117.  He has been  in Alaska                                                               
since 1945 when Forth Avenue was  the only paved road in town. He                                                               
has  recently  suffered  a  number   of  illnesses  and  physical                                                               
setbacks and the longevity bonus helps make ends meet.                                                                          
He questioned  why there is so  much antipathy to an  income tax.                                                               
He said, "Don't  pick on the seniors, we're not  really as bad as                                                               
some people make us out to be."                                                                                                 
LOUISE HARRIS,  President of  Palmer Senior  Center, is  89 years                                                               
old. The  bonus checks are  spent in Alaska and  provide economic                                                               
stimulus to communities. In addition,  the program probably costs                                                               
the  state less  than public  assistance and  certainly it  has a                                                               
different meaning  for older Alaskans.  People in their  70s, 80s                                                               
and  90s  shouldn't  be  expected to  reenter  the  workforce  to                                                               
replace the bonus checks.                                                                                                       
NANCY MENDENHALL from  Fairbanks opposed SB 117.  The program has                                                               
been  successful in  encouraging  retirees to  remain in  Alaska.                                                               
Seniors  invest considerable  time, money  and resources  to make                                                               
their communities better  places to live. She  asked whether data                                                               
was  available to  show  the contributions  made  by seniors  and                                                               
whether  they  wouldn't  more than  offset  the  longevity  bonus                                                               
JOHN BOULETTE  from North Pole  opposed SB  117. He has  lived in                                                               
Alaska for 39 year, is 72  years old and gets the smallest bonus.                                                               
It helps  pay for  his utilities and  prescription drugs.  He has                                                               
spent  the last  18 years  volunteering in  his community  and he                                                               
remembers when  there were  few volunteers  because no  one could                                                               
afford to live in Alaska when they weren't working.                                                                             
NIILO  KOPONEN opposed  SB  117. He  is a  former  member of  the                                                               
Legislature  and has  lived in  Alaska since  1952. He  remembers                                                               
when   the   program   was    instituted   during   the   Hammond                                                               
Administration.  The  phase-out  was  written  as  a  contractual                                                               
agreement  with the  people who  were then  receiving the  bonus.                                                               
Eliminating  the  program would  break  this  contract, it  would                                                               
adversely impact  small communities and it  would impact families                                                               
of seniors.                                                                                                                     
GENENEIVA DEE  DEE PEARSON from  Kodiak opposed SB 117.  She does                                                               
not receive the  bonus but still doesn't want to  see the program                                                               
cut. She  wondered whether the  Governor and  legislators weren't                                                               
counting  on  seniors being  around  for  the next  election.  An                                                               
income tax would be fair.                                                                                                       
EVAN CUNDIFF opposed  SB117. He and his wife have  lived in Homer                                                               
for  45  years and  they  plan  to  die  in Alaska.  He  believes                                                               
eliminating  the  longevity  bonus  program is  a  travesty.  The                                                               
letter from  the Governor stated that  no one should be  paid the                                                               
bonus since  more Alaskans over  65 don't receive the  bonus than                                                               
do  elicited  the  suggestion  to take  everyone  off  the  state                                                               
payroll  and  start over  again.  This  would include  all  state                                                               
employees as  well as  all state  legislators. He  closed saying,                                                               
"If  we must  conserve,  let's  put a  little  compassion in  our                                                               
EARL  GLANVILLE from  Anchor Point  opposed SB  117. He  moved to                                                               
Alaska in  1943. Because there  has been  such a rapid  growth in                                                               
state government, he asked that  the Governor eliminate all state                                                               
employees  that  do nothing  more  than  hold  down a  chair  and                                                               
shuffle papers.                                                                                                                 
VI  JERREL  from  Homer  opposed SB  117.  Although  she  doesn't                                                               
receive  a bonus  check, she  feels  it is  necessary to  protect                                                               
those seniors  who do get  a check. There  has been lots  of good                                                               
testimony  given in  defense of  the program.  There is  a public                                                               
perception that  the salaries  for the Governor  and many  of his                                                               
top  administrators  could be  reduced  and  added to  the  bonus                                                               
program. "If Governor Murkowski had  campaigned on his request to                                                               
eliminate  the  longevity  bonus  program, Fran  Ulmer  would  be                                                               
governor today."                                                                                                                
ED ZASTROW  from Ketchikan has lived  in Alaska for 45  years. He                                                               
spoke on  behalf of 30  seniors from the Ketchikan  Senior Center                                                               
whose  signatures were  faxed to  the Chair  as an  expression of                                                               
opposition to SB 117.                                                                                                           
He is also the president of  the local AARP chapter and all those                                                               
members  are opposed  to the  bill.  Representative Williams  and                                                               
Senator Taylor spent over two  hours in a pre legislative hearing                                                               
and are aware of the opposition.                                                                                                
GUY  TOWNSEND  from  Ketchikan  opposed SB  117.  He  arrived  in                                                               
Ketchikan in 1936  He wondered if this is the  start of longevity                                                               
recipients leaving Alaska.                                                                                                      
LENORE  JONES  from Kenai  opposed  SB  117.  When she  read  the                                                               
Governor's letter  that stated the bonus  program was inequitable                                                               
she was  amazed that the  Governor thought the  Legislature could                                                               
pass  laws to  make everyone  equal. Seniors  currently receiving                                                               
the bonus have already paid their dues to the state.                                                                            
VIVIAN SWANSON  from Kenai opposed  SB 117. She is  the president                                                               
of the  local AARP chapter  and they believe those  receiving the                                                               
bonus depend on it as part of their monthly budget.                                                                             
MONTY  RICHARDSON from  Seward opposed  SB 117.  He and  his wife                                                               
receive  the bonus  and its  elimination combined  with new  user                                                               
fees  will considerably  impact their  economic status.  Although                                                               
they won't  be lined  up at  the welfare  office, there  are many                                                               
Alaskan seniors who  are barely scrimping by on  incomes close to                                                               
the poverty level. The children  of these low-income seniors will                                                               
suffer  and do  without if  the bonus  program is  eliminated. He                                                               
agreed with Mike  Doogan; those not receiving the  bonus have but                                                               
one leg  while those  currently receiving it  have two  legs. The                                                               
Governor's proposal is to see that everyone has just one leg.                                                                   
ROBERT  MONTEGUE  spoke  on  behalf   of  the  residents  of  the                                                               
Anchorage Pioneer  home to oppose  SB 117. Many of  the residents                                                               
have sent public opinion messages  to legislators and a letter to                                                               
the Governor as well.                                                                                                           
TOM DAVIS, the  director of the Chugiak  Senior Center, testified                                                               
for  the seniors  at the  center in  opposition to  SB 117.  They                                                               
asked that the bill be  thrown out as frivolous legislation. Many                                                               
of the Governor's  safety net programs can't  really be supported                                                               
as a  safety net  and the  Governor's proposed  budget recognizes                                                               
SIDE B                                                                                                                          
4:25 pm                                                                                                                         
ROBERT  THIBODEAU from  Juneau spoke  as a  member of  the Juneau                                                               
Commission  on  Aging  in  opposition  to SB  117.  He  read  the                                                               
conclusions  the McDowell  Group reached  regarding the  economic                                                               
impact of seniors.                                                                                                              
     Alaska seniors  are one of  the largest  single sources                                                                    
     of  money flowing  into  the  state. Senior  retirement                                                                    
     income   and  medical   payments  have   a  significant                                                                    
     beneficial  effect on  the state  economy. At  the same                                                                    
     time,   more  than   half   of   Alaska  seniors   live                                                                    
     precariously  on  the  edge   of  solvency.  For  some,                                                                    
     financial  considerations  may determine  whether  they                                                                    
     continue to  reside in  the state.  For many  others, a                                                                    
     combination of financial  benefits available from state                                                                    
     and municipal  governments is  critical to  their well-                                                                    
He  said his  parents came  here in  1922 and  they left  in 1953                                                               
because  seniors did  not  retire  in Alaska.  In  1988 just  two                                                               
percent of the senior population was in Alaska.                                                                                 
Seniors contribute  a great deal  to Alaska  and if the  state is                                                               
interested  in supporting  the tourist  industry and  the fishing                                                               
industry it should also support the senior citizen industry.                                                                    
CHAIR GARY STEVENS said he would  read the names of everyone that                                                               
signed up  to testify  but didn't get  the chance.  He encouraged                                                               
anyone who wanted to object  to anything that was said previously                                                               
to speak up. He read the following names:                                                                                       
JUNEAU:  Barbara Deboff,  Wallace  Deboff, Ralph  C. Hunt,  Betty                                                               
Hunt,  Maxine McCoy,  George Rogers,  Maurice Long,  Jim Carroll,                                                               
Jean Clayton,  Norma Sherwin, Alto  Van Sickle,  Ernestine Denny,                                                               
Ethel  Ryman, Julie  Morris, Rosalee  Walker,  Judy Wygant,  Mike                                                               
ANCHORAGE:  John Stripe,  Ron Hammett,  Jesse Wooten,  Ron Cowan,                                                               
Madge  Anderson, Ruth  Talley, David  Ring, Ervin  McKenzie, John                                                               
Anderson,  Gordon   Geiss,  Ed  Barber,  Nella   Wooten  and  six                                                               
MAT  SU:  Jim  Watenpaugh,  Jim Fleming,  Bill  Church,  Patricia                                                               
Fleming, Jim Sykes,                                                                                                             
FAIRBANKS:  Ed  Shellinger,  Glenn  Hackney,  Betty  Hufman,  Joe                                                               
Strunka, Glen  Franklin, Charlotte  Davis, George  Taylor, Walter                                                               
Shuros, Janette Hanneman and seven observers                                                                                    
KODIAK: Marjorie Thera                                                                                                          
KETCHIKAN:  Don  MacMillan,   Ernest  Smeltzer,  Mabel  Smeltzer,                                                               
Shirley Carlin                                                                                                                  
KENAI: Vivian Jolin, W.E. Jolin                                                                                                 
SEWARD: Florita Richardson, Margaret Anderson                                                                                   
There was  no one  that disagreed with  previous testimony  on SB
CHAIR GARY STEVENS  stated the testimony in opposition  to SB 117                                                               
was  enormous. He  thanked everyone  for their  testimony and  he                                                               
appreciated  the stories  and pioneer  experiences in  Alaska. He                                                               
expressed  appreciation for  the service  the seniors  have given                                                               
and continue to give to the state and nation.                                                                                   
He pointed out this is the  Governor's bill and the committee was                                                               
asked by both  the Administration and the  majority leadership to                                                               
move  the  bill  to  the  Finance  Committee  where  it  will  be                                                               
discussed with other fiscal items.                                                                                              
SENATOR COWDERY said  he didn't believe there would be  a do pass                                                               
in the  room but he  was going to  make a  motion to move  SB 117                                                               
from committee with individual recommendations.                                                                                 
CHAIR GARY STEVENS asked whether there were any objections.                                                                     
SENATOR GUESS objected  and asked to speak to  her objection. She                                                               
     I've actually been giving this a tremendous amount of                                                                      
       thought and I appreciate everyone's testimony and                                                                        
     thank you for recognizing what people put in.                                                                              
      The other day I told someone that I've never gotten                                                                       
     more e-mail correspondence and testimony on an issue.                                                                      
     I've only  been here three  years, but dealt  with most                                                                    
     of the controversial issues in those three years.                                                                          
     Someone  said, "Well  they must  be really  organized."                                                                    
     and  I  said no,  they're  scared.  I really  do  think                                                                    
     that's the  fact. I don't  honestly think  the Governor                                                                    
     has  the  support  and   Senator  Cowdery  pointed  out                                                                    
     there's not going to be a  do pass on this bill. No one                                                                    
     more than me  knows the fiscal problems  of this state.                                                                    
     I  think this  is  a shortsighted  policy, honestly.  I                                                                    
     think  it does  break a  promise and  I honestly  think                                                                    
     it's  just  plain mean,  but  I  don't want  to  impugn                                                                    
     everything. I don't think it was meant to be that way.                                                                     
     I  understand  the  pressure   to  support  a  Governor                                                                    
     especially  for the  majority but  I  truly believe  if                                                                    
     there's a  time to  stop a bill  it's this  time. There                                                                    
     areother bills that are more  financial bills, but this                                                                    
     one's keeping  people up at  night and I think  we just                                                                    
     need  to say,  "You know,  we respect  that you  put it                                                                    
     forward, but  it needs to  stop here." I  disagree with                                                                    
     moving it out.  I don't think it's the  right thing for                                                                    
     the committee.                                                                                                             
SENATOR  COWDERY informed  members he  and his  wife receive  the                                                               
SENATOR  GUESS informed  members her  mother-in-law receives  the                                                               
CHAIR GARY  STEVENS informed  members his  mother-in-law receives                                                               
the bonus.                                                                                                                      
CHAIR GARY STEVENS  called for a roll call vote  on the motion to                                                               
move SB  117 to  the Finance  Committee. Senators  Cowdery, Dyson                                                               
and Chair  Gary Stevens  voted yea and  Senator Guess  voted nay.                                                               
The motion passed and SB 117 moved from committee.                                                                              
CHAIR GARY  STEVENS called an  at-ease at 4:40 pm  and reconvened                                                               
the hearing at 4:45 pm.                                                                                                         
TAPE 03-15                                                                                                                    
SIDE A                                                                                                                        
4:45 pm                                                                                                                       
              SB 137-EMPLOYMENT TAX FOR EDUCATION                                                                           
CHAIR  GARY STEVENS  asked for  a motion  to adopt  the committee                                                               
substitute (CS).                                                                                                                
SENATOR JOHN COWDERY  made a motion to adopt the  CS \S Kurtz for                                                               
SB 137 for discussion purposes.  There being no objection, it was                                                               
so ordered.                                                                                                                     
CHAIR GARY STEVENS explained the bill  would impose a $100 a year                                                               
tax on each employed individual age  19 or older. The money would                                                               
be  deducted  in  $50  increments from  an  employees  first  two                                                               
paychecks after  July 1 of each  year and after the  first $1,000                                                               
in wages  was earned.  The Department  of Revenue  estimates this                                                               
bill  would  generate   $39  million  this  year   and  in  every                                                               
subsequent  year.  They  project  the  need  for  ten  full  time                                                               
permanent workers and ten temporary  clerks during the tax season                                                               
for operation.  The estimated operating  cost is $1.2  million in                                                               
year one and $820 thousand in subsequent years.                                                                                 
It is intended  to supplement educational funding  and reduce the                                                               
draw from  the Constitutional Budget  Reserve. It would  apply to                                                               
workers  from out  of state  and would  be part  of a  long-range                                                               
fiscal plan.                                                                                                                    
SENATOR COWDERY  asked if someone  that started work  in December                                                               
and earned $800 would be subject to the tax.                                                                                    
CHAIR  GARY STEVENS  explained the  accounting would  run through                                                               
the fiscal  year, from July 1  through June 30 and  if the worker                                                               
did not  meet the $1,000  threshold, they wouldn't be  subject to                                                               
the tax.                                                                                                                        
SENATOR COWDERY asked who would collect the tax.                                                                                
CHAIR GARY  STEVENS informed him  the employer would  collect the                                                               
tax and remit it to the  Department of Revenue. He then asked Mr.                                                               
Persily to come forward to speak to the issue.                                                                                  
LARRY PERSILY, Deputy Commissioner  of the Department of Revenue,                                                               
explained it would  be set up in  much the same way  as an income                                                               
tax even  though this was not  an income tax. The  employer would                                                               
withhold the money and send  in monthly reports to the Department                                                               
of Revenue. For  someone who works in two different  jobs and had                                                               
the money  withheld both  times, the  department would  process a                                                               
refund for that person.                                                                                                         
CHAIR GARY STEVENS  asked if there would be a  form available for                                                               
the employee to  show subsequent employers that  they had already                                                               
paid the tax.                                                                                                                   
DEPUTY  COMMISSIONER PERSILY  elaborated  saying  either the  pay                                                               
stub would show the money had been  paid or there would be a form                                                               
that  the  employer  would fill  out  for  subsequent  employers.                                                               
People holding down two jobs might  be charged more than once and                                                               
require a refund. The department  would expect to process several                                                               
thousand refunds,  but they would do  everything possible through                                                               
employer education to keep the  number to a minimum because there                                                               
is a cost to a refund.                                                                                                          
CHAIR GARY STEVENS asked if employers  would be able to check on-                                                               
line to determine that an employee had already paid.                                                                            
DEPUTY  COMMISSIONER PERSILY  advised the  department would  make                                                               
the process as automated as possible.  Prior to 1980, the $10 tax                                                               
was added to the state income  tax due which made collection very                                                               
easy. Without an income tax, the  department would have to set up                                                               
a procedure.                                                                                                                    
SENATOR  COWDERY asked  if  the employee  couldn't  carry a  card                                                               
showing they had paid just like those with insured cars.                                                                        
DEPUTY  COMMISSIONER PERSILY  said they  would develop  a similar                                                               
procedure that would  save the state the expense of  a refund and                                                               
employers the  expense of  withholding when  they didn't  need to                                                               
SENATOR GRETCHEN  GUESS asked if  there was any estimate  for the                                                               
cost to businesses.                                                                                                             
DEPUTY  COMMISSIONER   PERSILY  said  they  did   not  have  that                                                               
information.  Businesses   are  already  withholding   for  state                                                               
unemployment, federal taxes and FICA  so it wouldn't be difficult                                                               
to add another line to their  withholding, but there would be the                                                               
cost of  one more form and  one more government entity  to send a                                                               
payment to.                                                                                                                     
He   pointed  out   the  original   fiscal  note   addressed  the                                                               
traditional  January 1  to December  31 tax  year and  would take                                                               
effect in January 1, 2004. This  would give the department six or                                                               
seven months to develop a tax  program. Because the CS has a July                                                               
1, 2003  effective date, the  department would need to  amend the                                                               
fiscal  note to  reflect increased  FY  03 expenses  to have  the                                                               
program in  place June 30. He  warned this is a  tight time frame                                                               
and everyone needs to understand  that all the pieces wouldn't be                                                               
ready on  June 30.  Increased outsourcing  would be  necessary to                                                               
fit the adjusted  timeframe but the department would  do its best                                                               
to  get  the  program  in  place  in  60  days  if  that  is  the                                                               
legislative intent so the revenue would be available in FY 04.                                                                  
CHAIR GARY  STEVENS asked Mr.  Persily to confirm he  would amend                                                               
the  fiscal  note  before  the  bill was  heard  in  the  Finance                                                               
DEPUTY COMMISSIONER  PERSILY agreed to submit  the revised fiscal                                                               
note to the Chair by the following day.                                                                                         
SENATOR  GUESS asked  if sole  proprietors and  partnerships were                                                               
CHAIR GARY  STEVENS replied  they are  responsible for  paying as                                                               
DEPUTY  COMMISSIONER PERSILY  said anyone  receiving compensation                                                               
would  have  to   pay.  If  not  through   wage  withholding  the                                                               
individual would have  to issue the department a  check for $100.                                                               
He  added,   the  self-employed  people  would   be  the  biggest                                                               
enforcement issue.                                                                                                              
CHAIR GARY  STEVENS followed  up and  asked if  the self-employed                                                               
paid the $10 head tax the state collected in the 70s.                                                                           
DEPUTY COMMISSIONER  PERSILY replied they  did pay. At  that time                                                               
there was  a state  income tax so  it was easy  for the  state to                                                               
collect  when   the  return  was  filed.   Anyone  that  receives                                                               
compensation in the state would be subject to the tax.                                                                          
SENATOR GUESS  asked the Chair  whether this would  include trust                                                               
fund income.                                                                                                                    
CHAIR  GARY  STEVENS replied  the  tax  targets compensation  for                                                               
personal services.                                                                                                              
DEPUTY COMMISSIONER PERSILY agreed.                                                                                             
SENATOR GUESS  said she  asked the  question because  Mr. Persily                                                               
said this isn't  an income tax. She added this  seems to be worse                                                               
than an  income tax  since it's  collected only  if you  work and                                                               
surmised that was why he made the comment.                                                                                      
DEPUTY COMMISSIONER  PERSILY replied he made  the comment because                                                               
the Administration doesn't favor an income tax.                                                                                 
SENATOR GUESS asked why the $1,000 figure was selected.                                                                         
CHAIR  GARY STEVENS  said  it was  somewhat  arbitrary, but  they                                                               
didn't want someone  to lose $100 from his or  her first paycheck                                                               
if that's all they earned.                                                                                                      
SENATOR GUESS  advised she  took issue  with the  education smoke                                                               
screen because  this was about  supplanting funds  not additional                                                               
funds. The  bill contains no  language that these  are additional                                                               
funds. This  is a worker tax  and not a tax  for education, which                                                               
is  confusing to  people because  they are  led to  believe there                                                               
would be more money for schools.  However, because of the way the                                                               
constitution is written,  this money can't be  used directly that                                                               
way and it's unfortunate that perception is continued.                                                                          
SENATOR COWDERY  asked for further clarification  of what revenue                                                               
would be taxed.                                                                                                                 
DEPUTY  COMMISSIONER  PERSILY replied  he  was  speaking to  work                                                               
draft   Q  that   defines   compensation   as  wages,   salaries,                                                               
commissions,  tips or  remuneration paid  for personal  services.                                                               
Individuals living  on a  trust fund  or retirement  wouldn't pay                                                               
this tax.                                                                                                                       
SENATOR COWDERY  added Social Security  would be exempt  as would                                                               
mortgage income.                                                                                                                
DEPUTY  COMMISSIONER PERSILY  didn't  believe  those would  apply                                                               
because  they  aren't  compensation   for  payment  for  personal                                                               
SENATOR  COWDERY  then asked  how  the  department would  enforce                                                               
payment.  For instance,  what would  happen if  an employee  paid                                                               
twice  and one  of  the  employers withheld  the  money from  the                                                               
DEPUTY COMMISSIONER  PERSILY assured him employees  seem to track                                                               
their  paychecks closely  and the  department  would take  action                                                               
against any  employer that collected  the money and  didn't remit                                                               
it to the state.                                                                                                                
SENATOR COWDERY commented he likes  to hire youths for summer odd                                                               
jobs and  he pays them  in cash  and wondered how  those payments                                                               
would be handled.                                                                                                               
DEPUTY COMMISSIONER PERSILY admitted  those types of compensation                                                               
would  probably  slip  through. The  department  wouldn't  target                                                               
youths that  wash cars,  mow lawn and  shovel snow  because there                                                               
are larger issues to go after.                                                                                                  
SENATOR COWDERY said he agreed but wanted that stated.                                                                          
CHAIR GARY STEVENS stated for the  record that the \S version was                                                               
being discussed.                                                                                                                
SENATOR GUESS asked why 19 years  of age was selected rather than                                                               
DEPUTY  COMMISSIONER  PERSILY  wasn't   sure  why  that  age  was                                                               
selected  since  18  is  the  age  of  emancipation.  It  was  an                                                               
arbitrary decision.                                                                                                             
JIM  SYKES from  Palmer advised  he had  version \H  and realized                                                               
this  wasn't  the  latest  draft,  but wanted  to  know  how  the                                                               
department would know  that out of state workers hired  by out of                                                               
state  corporations  that operate  in  Alaska  would collect  and                                                               
remit  the tax.  Although  he doesn't  agree  with Senator  Guess                                                               
regarding dedicated funds, he thought  perhaps the bill should be                                                               
given a new  title to call it a worker's  tax. Second he wondered                                                               
whether  this was  contemplated as  part of  another tax  package                                                               
because  education and  the  elderly appear  to  be targeted.  He                                                               
doesn't  see  any  kind  of legislation  to  get  extra  windfall                                                               
profits from  the high  price of  oil. That  would bring  in much                                                               
more  than SB  137 could  in  every year  that the  price of  oil                                                               
exceeded $18 per barrel. He would  like to see a package of taxes                                                               
so everyone, summer guest workers,  residents and businesses that                                                               
operate in Alaska share the tax burden fairly.                                                                                  
CHAIR  GARY STEVENS  asked Mr.  Persily to  respond to  the first                                                               
DEPUTY COMMISSIONER  PERSILY explained out of  state corporations                                                               
already pay  a corporate income tax  so the state knows  who they                                                               
are.  Also they  file quarterly  returns with  the Department  of                                                               
Labor  for  unemployment  insurance. The  Department  of  Revenue                                                               
would  run data  checks with  the  Department of  Labor and  with                                                               
corporate  taxes, but  employer compliance  is generally  good on                                                               
this type  of tax because it  is so easy to  catch companies that                                                               
are non-compliant and the penalties are steep.                                                                                  
CHAIR GARY STEVENS added this is  not part of a package of taxes.                                                               
It is  one tax  requested by  the Governor in  his speech  to the                                                               
Legislature where  he asked for  consideration of a sales  tax or                                                               
this head tax for education.                                                                                                    
There were no further questions and he asked for a motion.                                                                      
SENATOR COWDERY made a motion to move CSSB 137 \S version from                                                                  
committee with unanimous consent and attached fiscal note.                                                                      
SENATOR GUESS objected.                                                                                                         
Senators Dyson, Cowdery and Chair Stevens voted yea and Senator                                                                 
Guess voted nay. The motion passed and CSSB 137 (STA) moved from                                                                
CHAIR GARY STEVENS adjourned the meeting at 5:00 pm.                                                                            

Document Name Date/Time Subjects