HB 91-APOC REGISTRATION FEES; LOBBYIST TAX  3:03:18 PM CHAIR KREISS-TOMKINS announced that the first order of business would be HOUSE BILL NO. 91, "An Act relating to fees for certain persons filing disclosure statements or other reports with the Alaska Public Offices Commission; relating to a tax on legislative lobbyists; and providing for an effective date." CHAIR KREISS-TOMKINS opened public testimony on HB 91. After ascertaining that there was no one who wished to testify, he closed public testimony. 3:04:29 PM REPRESENTATIVE SAM KITO, Alaska State Legislature, as prime sponsor of HB 91, expressed his concern that it is not clear that revenue generated from the lobbyist tax proposed in HB 91 would directly benefit the Alaska Public Offices Commission (APOC). He mentioned that staff is working on changes to the bill to rectify this issue and make other improvements. 3:05:51 PM CRYSTAL KOENEMAN, Staff, Representative Sam Kito, Alaska State Legislature, on behalf of Representative Kito, prime sponsor of HB 91, referred to discussions in the House State Affairs Standing Committee meeting of 02/09/17 regarding raising revenue for APOC to offset general fund dollars and doing so through a tax or a fee. She mentioned that amendments to HB 91 are forthcoming to respond to concerns expressed in the hearing. MS. KOENEMAN referred to Section 1 of HB 91, which states that a candidate, group, or nongroup entity is required to file reports with APOC. She said that in response to a request from APOC, staff will add "persons" to that section to broaden the intent to include additional groups such as labor unions, corporations, and other individuals. She stated that a candidate's registration fee would be for the full election cycle instead of just 12 months. She also noted the addition of language specifying the civil penalties for non-payment of filer registration fees, which was inadvertently left out of one section of HB 91. 3:08:40 PM REPRESENTATIVE BIRCH expressed that he doesn't support an income tax, but wouldn't oppose a flat rate, whether it be per lobbyist or per client. He opined that the flat fee is more manageable, and it is fair and equitable. 3:09:52 PM REPRESENTATIVE WOOL asked for the number of lobbyists. 3:10:24 PM HEATHER HEBDON, Executive Director, Alaska Public Offices Commission (APOC), responded that the five-year average number of registered lobbyists is approximately 132. 3:11:02 PM REPRESENTATIVE TUCK referred to the addition of "persons" to Section 1 of HB 91 and said that "persons" is one of the reasons we have Citizens United. He added that the courts haven't differentiated between natural beings and artificial beings; therefore, corporations have First Amendment rights and the ability to use their general funds for unlimited contributions. REPRESENTATIVE TUCK offered that the burden of overseeing the finances of lobbyists with larger revenue streams is greater than for the smaller groups, so it makes sense to have a fee structure based on revenue. 3:12:25 PM REPRESENTATIVE BIRCH cited the information on page 2 of the Department of Revenue's (DOR's) fiscal note: the average total fees paid to lobbyists were about $17 million and a 2.5 percent tax would generate about $425,000 in annual revenue. He asked for an explanation of the discrepancy between the amounts of anticipated revenue - $425,000 listed on the DOR fiscal note and $244,000 listed on the sponsor statement. He offered that 130 lobbyists, each paying a $2,000 fee, would generate an amount like that proposed. REPRESENTATIVE KITO explained that the sponsor statement was based on APOC information from a year and a half ago and DOR used current information. He stated that the DOR estimate of $425,000 does not acknowledge the removal of the existing lobbying fee proposed by HB 91, which amounts to about $106,000. He said deducting $106,000 from $425,000 yields about $380,000. He promised a revised sponsor statement with the committee substitute (CS). 3:14:37 PM REPRESENTATIVE KNOPP offered that besides passing legislation to raise revenue, it is the responsibility of legislators to examine how departments conduct their business and then consider modifications. He asserted that the legislative body has not had that discussion, nor has it taken a balanced approach to the budget process. He suggested that APOC fees and reporting requirements discourage candidates and appointees of boards and commissions from seeking public office. REPRESENTATIVE KNOPP referred to the sponsor statement, which states that APOC's budget was reduced from $1.3 million in fiscal year 2015 (FY 15) to $866,000 in FY 16. He asserted that the reduced amount occurred only in that one year. He referred to the APOC funding document in the committee packet, titled "Multi-year Allocation Totals with Funding - Operating Budget - FY 2017 Conf Committee Structure," and noted funding for 2017 at $1.033 million, with $1,050 million in the FY 18 governor's budget. He reiterated his belief that the legislature needs to have discussions about conducting business and a balanced approach to the budget, not just for APOC but for all the state's agencies and departments. He asked if those discussions have taken place. REPRESENTATIVE KITO asserted that APOC's budget was reduced and the agency is struggling to meet its statutory obligations. He said that the legislature authorized additional program receipts - the $1,033 million figure on the document - which represents what the legislature considered to be the appropriate level of funding for APOC. He went on to say that his primary motivation for introducing HB 91 is to create a mechanism for APOC to collect receipts more than $106,000 and up to the $240,000 authorized by the legislature. His secondary motivation, he said, is to increase APOC staff in Juneau to provide adequate oversight of lobbying activities. 3:18:21 PM REPRESENTATIVE KNOPP expressed his concern that there would be additional oversight requirements for APOC and fees would escalate. REPRESENTATIVE KITO responded that APOC operated at a stable staffing level before reductions put pressure on its ability to do some of the audits. He mentioned that he did not foresee uncontrolled growth for the organization. He said that the legislature would continue to review the APOC budget and assess APOC's performance annually through the Department of Administration (DOA). He added that the legislature may audit the agency to determine if it is performing the statutorily designated functions. He emphasized the importance of allowing APOC to collect revenue up to the receipt authority amount and the need for additional support to perform its lobbying oversight activities. 3:20:15 PM CHAIR KREISS-TOMKINS asked what oversight activities APOC has been unable to fulfill. REPRESENTATIVE KITO replied that his understanding is there is a need to hire a professional who can understand and interpret statute and provide advice to lobbyists filing reports. Currently there is just a clerk performing those duties. 3:21:11 PM REPRESENTATIVE JOHNSON asked if Representative Kito anticipated that taxes on other professions would be "imbedded" in statute. She expressed her concern with maintaining simplicity regarding taxes in state law. REPRESENTATIVE KITO responded that the lobbying profession regulated under APOC is a unique function and is not related to other professions that are regulated under the Department of Commerce, Community & Economic Development (DCCED). He said that the professions performing licensing activities and investigations under DCCED are already required to "pay their own way," and the fees are adjusted every other year for those professions. All the activities associated with the boards are paid for by the licensees and registrants. He said that APOC has been supported by general fund revenue and the $250 per client fee, which has generated a little over $100,000 historically. He asserted that nothing requires that APOC operations are supported entirely by the professions that they regulate. He offered that such a requirement would greatly increase APOC fees. He maintained that HB 91 was proposed to raise revenue just to the level of program receipts authorized by the legislature and to provide for better oversight in the lobbying office. He speculated that requiring the professions regulated by APOC to pay their own way would result in much higher fees than those proposed in HB 91. 3:24:17 PM REPRESENTATIVE WOOL cited the financial disclosure reporting fee of $50 in HB 91 and asked what the current fee was for financial disclosure. REPRESENTATIVE KITO responded that there is not currently a fee for financial disclosure reporting. REPRESENTATIVE WOOL asked what the current candidate fee was for filing with APOC. REPRESENTATIVE KITO replied that there is currently not an APOC candidate fee. The $100 filing fee in HB 91 would be a new fee. REPRESENTATIVE WOOL suggested that other professional groups with similar membership size are self-funded, and fees include investigations; whereas, APOC's expenses are higher because investigations are ongoing. He offered that investigations involving the other boards are performed as needed. REPRESENTATIVE KITO responded that he does not believe APOC's oversight of regulation or licensing functions is comparable to the Division of Corporations, Business, and Professional Licensing (CBPL). He stated that there are two components to APOC activity: one is oversight of the 132 lobbyists representing the 400-plus clients accessing the legislature; and the other is oversight of the group of candidates running for political office. He said that for oversight of all the registered candidates and groups, the estimated revenue is less than $20,000. He attested that APOC would not have enough money for candidate review and would still need general funds. He offered that through HB 91, there would be an opportunity to generate funds from professional lobbying to pay for the oversight of their reporting requirements. 3:27:45 PM CHAIR KREISS-TOMKINS opened public testimony on HB 91. 3:28:21 PM PAM GOODE testified that she opposes HB 91. She expressed her belief that APOC should be downsized, as it has a very bad reputation among anyone running for office. She opined that APOC discourages "good" people from running for office. She mentioned that when APOC was formed in 1976, there were no computers, and now it is in violation of Article I, Section 22. She asserted that APOC requests information that is not even required by the IRS and publishes it on the Internet. She opined that "the reason APOC is overloaded is because they do petty things." She mentioned that APOC has wasted her time on very simple matters, and it audits filings that are less than $100. She offered that instead of looking for ways to fund agencies, the legislature should look at ways "to release them of the pettiness." She asserted that APOC is supposed to be "going after the bad guys" and not deterring people from participating. She opined that people running for office and commissioners "won't step up" because of what is required from APOC. She mentioned that her husband warned her against running for office because of what APOC is doing. She relayed that she let APOC "violate" her privacy so that she could "do the right thing" and run for office. 3:31:14 PM CHAIR KREISS-TOMKINS closed public testimony on HB 91. 3:31:34 PM REPRESENTATIVE JOSEPHSON commented that his experience with APOC has not been unfavorable, nor did he think the commission's requirements unreasonable. He expressed his alarm over the level of funding for APOC in the budget that was before him last March [2016] and said he appreciated that some of the money was restored. He opined that it would be impossible for the agency to perform its work successfully with that [reduced] level of funding. REPRESENTATIVE JOSEPHSON cited the U.S. District Court decision of 2016 upholding the constitutionality of Alaska's $500 annual personal campaign contribution limit, which has now been appealed. He mentioned that the presence of money in campaigns is only going to increase and "soft" money is growing every election cycle. He stated the importance of information to the public. He suggested that there be a waiver system for candidate filing fees in the case of a plea of poverty. He contended that in such a case, the money could not be raised prior to filing. He expressed the need for creative funding and for a fiscal plan. 3:34:17 PM REPRESENTATIVE BIRCH stated that $17 million in average annual fees paid to lobbyists comes to $266,000 per legislator. He asked for the number of lobbyist clients. MS. HEBDON answered that there are 480 clients, and APOC raises about $120,000 per year through the $250 per client registration fee. REPRESENTATIVE BIRCH asked if the client pays the $250 fee. MS. HEBDON responded that lobbyists pay the $250 for each of their clients. REPRESENTATIVE BIRCH asked if lobbyists pay an additional fee. MS. HEBDON responded no. 3:36:24 PM REPRESENTATIVE WOOL asked if "$250 per client per lobbyist" means that if a client hires four lobbyists, then four times $250 is paid. MS. HEBDON responded that is correct. REPRESENTATIVE WOOL asked if HB 91 and a state income tax together would result in the "double taxing" of lobbyists. REPRESENTATIVE KITO conceded that to be one of the complications of two taxes. He stated that the gross receipts that would be taxed at 2.5 percent would be independent of the income a lobbyist claims on his tax form, which is subject to income adjustments. He asserted that a forthcoming CS will address the issue of the 2.5 percent income tax in HB 91 to avoid the perception of double taxation. [HB 91 was held over.]