HB 91-APOC REGISTRATION FEES; LOBBYIST TAX  3:07:00 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." 3:08:01 PM REPRESENTATIVE SAM KITO, Alaska State Legislature, as prime sponsor of HB 91, stated that staff is exploring alternate methods for collecting program receipts for the Alaska Public Offices Commission (APOC). He suggested that replacing the "income tax" in HB 91 with a "fee" would provide a more direct path to generating program receipts. He emphasized that the goal is to generate money for APOC to support its operations, to satisfy the program receipt authority, and to provide savings for the State of Alaska. 3:09:33 PM CRYSTAL KOENEMAN, Staff, Representative Sam Kito, Alaska State Legislature, on behalf of Representative Kito, prime sponsor of HG 91, relayed that staff is considering a "stair-step" approach for generating revenue for APOC: the lower the contract amount, the fewer the filings with APOC and the less work; as the contract amount increases, more work is associated with APOC filings. She stated that the new proposal under HB 91 would consist of: a $350 fee for contracts under $30,000; a $650 fee for contracts between $30,000 and [$60,000]; and an $850 fee for contracts [$60,000] and over. She asserted that the resulting revenue under this proposal is estimated to be $259,150, based on 2015 and 2016 data provided by APOC. She went on to say that after adding in the estimated $106,600 in revenue generated through the proposed registration fees for candidate, groups, and non-group entities and the proposed financial disclosure fees for legislators and public officials, the total estimated revenue is $365,750. She maintained that this amount is much closer to the estimated amount [of $329,750] in the sponsor statement. She asserted that collection of these fees into the designated general fund (DGF) would reduce the 2018 operating budget request by approximately $120,000. 3:11:54 PM REPRESENTATIVE LEDOUX asked why a smaller contract would be necessarily less complicated than a larger contract, and what would be required of APOC pertaining to a contract of less than $30,000 compared with a contract of greater than $60,000. REPRESENTATIVE KITO responded that one difference is the work that the lobbyist is providing the client. He conceded that sometimes contracts overstate or understate the amount of work. He explained, however, that under a $10,000 contract, the likelihood of extensive billings for lobbyist activities needing reconciliation by APOC, such as taking clients out to dinner, is less than for a $60,000 contract. REPRESENTATIVE LEDOUX stated that what she has observed is that the client, not the lobbyist, is paying for the dinners. She added that some lobbyists entertain clients in their homes. She pointed out that in neither of these cases do the expenses show up in APOC reports. Representative LeDoux asked what APOC would be looking for with a higher priced client. 3:16:23 PM HEATHER HEBDON, Executive Director, Alaska Public Offices Commission (APOC), responded that her understanding is that the stair-step approach for fees, which is being considered for HB 91, is based on the volume of reports that come into APOC, and that volume relates to the amount of a contract. She stated that the assumption is that larger contracts require more reporting. She explained that fees are not based necessarily on a single registration fee for a single lobbyist, since a single lobbyist may have a dozen different clients. She offered that the lobbyists making more money would have more clients and, therefore, would require more reporting. REPRESENTATIVE LEDOUX asked if a lobbyist with one client paying $61,000 is likely to have less reports than a lobbyist with one client paying $10,000. MS. HEBDON replied no, that is not her understanding. She said that the amounts referenced by the three contract ranges, are not based on the individual lobbyist, but rather on the amount that the lobbyist is making from lobbying activities. She conceded that a single lobbyist could have one client paying $60,000, but the expectation is that the single lobbyist makes $60,000 with ten clients, and there are separate reports for each of the ten clients. REPRESENTATIVE LEDOUX suggested that Representative Kito's intention is that under HB 91 every lobbyist would pay a registration fee, and if the contract amount for any given client is more than $60,000, the registration fee would be $850. She added that if the contract were $10,000 or less, the registration fee would be $350. She expressed her belief that the fee was not intended to be based on "the entire book of clients" for a lobbyist. 3:20:22 PM REPRESENTATIVE KITO responded that the fees for lobbyists are currently assessed at $250 per client. He explained that if a lobbyist has multiple clients, then he/she pays that fee on each client. He added that if a client contracts with multiple lobbyists, each lobbyist is paying a fee on that client. He stated that the goal for restructuring APOC fees is to generate enough revenue for APOC to be able to fulfill its duties. REPRESENTATIVE LEDOUX conceded that a client paying $60,000 for lobbying services can more afford the $850 fee than a client paying $10,000 for lobbying services. She stated that she is not sure that the $60,000 client necessarily engenders more for any lobbyist than does the $10,000 client. CHAIR KREISS-TOMKINS suggested that assigning fees in this way is comparable to the Alaska Court System assessing court fees based on the size of a tort claim, even though a smaller claim may require more in court services than a larger claim. He offered that the size of a claim or contract is used as a blunt metric for assessing a fee. 3:22:37 PM REPRESENTATIVE BIRCH referred to the sponsor statement, which estimates revenue of $60,000 through the $50 financial disclosure filing fees. He asked if besides the 60 legislators, there were 1,100 other people submitting annual financial disclosure forms. MS. HEBDON said that AS 24.60.200 requires a significant number of people to file financial disclosure statements. She mentioned that the five-year average of public official financial disclosures (POFDs) received by APOC was approximately 1,300 per year. She said that number includes those in the executive branch and governor's office, members of boards and commissions, and legislators. She added that municipal filers in communities with populations greater than 15,000, who are subject to APOC's electronic reporting requirements, are also included in the five-year annual average. She expressed her desire for more clarification in Section 4, on page 3 of HB 91, to better define the group of filers from whom APOC would be collecting fees. REPRESENTATIVE BIRCH asked how much effort is required for APOC to manage the financial disclosure filings. MS. HEBDON replied that the majority of APOC's budget is for personnel. She said the online filing system alone requires a fulltime analyst programmer. She mentioned that direct services to the public consume most of APOC personnel's time - answering phone calls, answering emails, assisting filers with the online filing system, and auditing reports. She added that currently APOC is statutorily required to audit every report coming into the office, but it doesn't have the staff to do so. 3:26:09 PM REPRESENTATIVE WOOL asked for confirmation that instead of the income tax specified in the original bill or the flat fee of $250 currently in statute, the new version of HB 91 will include a fee on a sliding scale that is progressive - the higher the value of the contract, the higher the fee. MS. KOENEMAN confirmed that the fee would be on a sliding scale based on [lobbyist] income [from] the client. REPRESENTATIVE WOOL offered that the [new proposed] fee was per contract, whereas the previous 2.5 percent tax would have been on the lobbyist's gross amount derived from all the contracts. REPRESENTATIVE KITO responded that the mechanism for applying the tax versus the fee would be the same. He stated that the 2.5 percent tax for each lobbyist would have applied to each lobbyist contract. He went on to say that this would be a change from a tax to a fee. He said that the fee is set at a sliding scale, not a percentage; for all of those below $30,000 is one fee, between $30,000 and $60,000 is another fee, and above $60,000 is another fee. 3:27:44 PM REPRESENTATIVE KNOPP noted APOC's reduction in revenue, from $1,300,000 in 2015 to $866,000 in 2016, and reduction in fulltime staff, from 12 positions authorized in fiscal year 2017 (FY 17) to 8 positions shown in the current organization chart. He asked if APOC is currently operating with eight full-time employees. MS. HEBDON responded that APOC currently has eight position control numbers (PCNs), and the analyst programmer position and one other position are currently vacant. REPRESENTATIVE KNOPP asked if those two positions have been vacant for some time. MS. HEBDON replied yes. She said that when the former executive director left, she became the executive director and has not yet recruited for her former position. REPRESENTATIVE KITO confirmed in response to Representative Knopp that the legislature authorized receipt authority up to $240,000, but by statute the only fee that could be collected was $250 per client per lobbyist, which raised about $106,000. 3:30:20 PM REPRESENTATIVE KNOPP referred to the document, titled "Multi- year Allocation Totals with Funding - Operating Budget - FY 2017 Conf Committee Structure," included in the committee packet, and asked if the amounts shown in the budget were amounts authorized but not necessarily received by APOC for operations. MS. KOENEMAN referred to the column, titled "FY 16 Actual," to point out that the legislature had appropriated $758,500 in unrestricted general funds (UGF), but APOC was only able to utilize $107,500, because that was the limit of its receipt authority. She then referred to the amounts listed under the column, titled "FY 16 Final," and pointed out that $240,000 was appropriated by the legislature, but it turned out to be "hollow" authority because APOC did not have the statutory authority to collect fees up to that amount. She added that the legislature thought it was giving APOC additional funds; however, the revenue generated by APOC fees was substantially lower than the amount authorized. REPRESENTATIVE KNOPP asked if the legislature was giving APOC authority to spend an amount that it was not able to collect. MS. KOENEMAN replied, "Basically, yes." REPRESENTATIVE KNOPP referred to the $242,600 listed under the column, titled "FY 17 Auth," and asked if APOC would be able to collect this amount only if HB 91 passed. MS. KOENEMAN confirmed that APOC would not be able to generate $242,600 in funds, but only the approximately $107,000, depending on the number of filers. She reiterated that the intent of HB 91 is to raise the statutory fee authority allowing APOC to collect more revenue. 3:33:15 PM REPRESENTATIVE KNOPP commented that with the possibility of filing fees, he believes that people appointed to boards and commissions should be exempt from APOC filing. He relayed that there are about 360 people who fall into these categories, and they are not necessarily compensated. He asserted that the exemption would alleviate APOC of some of its workload. CHAIR KREISS-TOMKINS offered that the Department of Administration Finance Subcommittee was considering reducing the number of public officials who are required to file POFDs. [HB 91 was held over.]