MINUTES  SENATE FINANCE COMMITTEE  April 19, 2000  9:53 PM TAPES SFC-00 # 100, Side A and Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:53 PM PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Dave Donley, Senator Lyda Green, Senator Randy Phillips, Senator Gary Wilken Also Attending: REPRESENTATIVE BILL HUDSON; JOE GELDHOF, Juneau Attorney; ROBERT REGIUS, Cruise Control; MELINDA HOFSTAD, staff to Representative Hudson; JOHN BARNETT, Board of Storage Tank Assistance; JOHNATHON LACK, staff to Representative Andrew Halcro; JOHN SEER, National Education Association (NEA)-Alaska; Attending via Teleconference: From Homer: JOE MCCULLOUGH; ALAN PARKS, Commercial Fisher; NOELLE MCCULLOUGH; MAKO HAGGERTY, Chair, Katchemak Bay State Parks Citizen's Advisory Board; CRAIG FOREST, USCG Auxiliary and lifelong Alaskan; From Fairbanks: MARIE SCHOLLE, Chair, Governor's Advisory Council on Safety, Representative, American Society of Safety Engineers; From Anchorage: MIKE FOLKERT, Chair, Alaska Boating Safety Advisory Council; CATHY GILLESPIE, Anchorage School Board; GUY BELL, Director, Division of Retirement and Benefits, Department of Administration SUMMARY INFORMATION SB 308-MARINE PASSENGER VESSELS The Committee heard testimony from an attorney contracted by the legislature to advise on this matter. The Committee also heard testimony from a non-profit organization. A committee substitute was adopted, four amendments were considered and three were adopted. The bill moved from Committee. HB 108-USE, REGULATION, AND OPERATION OF BOATS The Committee heard testimony from the sponsor and members of the public. An amendment was considered and adopted. The bill moved from Committee. HB 432-BOARD OF STORAGE TANK ASSISTANCE The Committee heard from the Board of Storage Tank Assistance. The bill was held in Committee. HB 277-RETIREMENT BENEFITS FOR REHIRED TEACHERS The Committee heard testimony from the sponsor, the Division of Retirement and Benefits, representatives from the teaching profession and the Anchorage School Board. The bill was held in Committee. SENATE BILL NO. 308 "An Act relating to certain passenger vessels operating in the marine waters of the state." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Parnell moved to adopt CS SB 308, 1-LS1617\D as a workdraft. There was no objection and the committee substitute was ADOPTED. JOE GELDHOF, Juneau Attorney, retained by the legislature to advise on constitutional issues relating to a tax on the cruise ship industry, explained the committee substitute. Mr. Geldhof told the Committee a proposed tax is contained in Section 1 of the committee substitute. He said this tax is simple and strait forward on passengers who come to Alaska in commercial cruise ships. Mr. Geldhof noted there are some legal concerns, such as an equal protection issue related to an exemption for vessels that have less than 50 berths. However, in his opinion, there is no problem with equal protection. He stated this is because the legislature has discretion to set certain standards and that this exemption is well within that constitutional authority. Mr. Geldhof explained the liability for payment of this tax falls on the vessels that are engaged in commercial activities within Alaskan waters. In that sense, he surmised this is a self-executing tax the operators collect on behalf or from the passengers and pay to the Department of Revenue. Mr. Geldhof pointed out that this legislation avoids some of the difficulties under the "nearly archaic and perhaps almost dead" tonnage clause in the US Constitution, since the tax is not related to the length or the weight of a vessel. He explained that under the clause, any revenues generated under a tonnage tax must be used to fund services, such as fireboats, that are directly related to the marine trade. Mr. Geldhof described how revenues generated by the tax proposed in this bill would be deposited into the general fund and would pre-empt municipalities and other local governments from engaging in other passenger head taxes. In this sense, he said, the state tax is rationalized because the industry is not subject to multiple tax schemes at different rates. Mr. Geldhof continued that this bill provides that the Department of Revenue directs a portion of the collected taxes to the affected communities where the cruise ships visited. Co-Chair Torgerson clarified that of the total tax collected for each passenger, $5 is given to the first five ports of call. Mr. Geldhof affirmed and emphasized that this legislation also places a prohibition on local levies. Co-Chair Torgerson wanted to know if the municipalities are also blocked from imposing a wharfing or docking fee. Mr. Geldhof answered the bill would not restrict municipal fees for those activities relating to providing a service, such as delivering water. Co-Chair Torgerson asked if this legislation would prohibit a municipality from charging a disembarking tax. Mr. Geldhof responded that there are a variety of different ways to describe this type of charge, such as fees, taxes, embarkation, disembarkation, etc. but that "a tax is a tax." He stated that this legislation creates the state tax and prohibits municipalities from imposing a similar charge although a portion of the revenues would be shared with those municipalities. Mr. Geldhof next addressed the definitions prescribed in the bill. He said the intent is to enact this legislation directed at the large cruise ships that travel in Alaska. He noted that the language specifically exempts dayboats and the small vessels that have 50 berths or less. Mr. Geldhof shared that an argument could be made that the vessel size stipulations violate the US Commerce clause, but countered that no violation is committed so long as favor is not granted to local commerce. He commented that legislatures repeatedly get into trouble when they try to favor local commerce over businesses from other states. Co-Chair Torgerson said the remainder of the bill, beginning on page three, addresses environmental concerns and provide record keeping requirements and emissions. Mr. Geldhof affirmed but stated that he was not knowledgeable on this portion of the bill. Senator Phillips asked how much revenue this tax would generate. Mr. Geldhof responded that although a fiscal note had not yet been prepared, he knew that approximately 600,000 passengers passed through Juneau, which is the largest port of call in the state. Senator Phillips asked if $30 million was the approximate amount that this tax would collect. Mr. Geldhof replied that amount is a useful approximate figure. Co-Chair Torgerson clarified that the legislation imposes a $50 fee per passenger per voyage. He continued that the first five ports the vessel visits would receive $5 each from the $50. Mr. Geldhof affirmed. Co-Chair Torgerson asked if some vessels visited less than five ports would the tax remain $50. Mr. Geldhof said the tax would be the same amount regardless of the number of stops a vessel makes. He explained this bill puts an excise tax on the commodity of Alaska. He stressed that the cruise ship is responsible to pay the $50 tax even if the vessel begins its voyage in Canada, travels directly to Glacier Bay without making any ports of call. However, he noted that no municipality would receive a $5 portion of that fee. He explained that the state is still "selling the water." Amendment #1: This amendment makes the following changes to the committee substitute. Page 1, line 4 Insert new bill sections to read: Sec. 1. AS 43.20 is amended to read: Sec. 43.20.021. Internal Revenue Code adopted by reference. (a) Sections 26 U.S.C. 1 - 1399 and 6001 - 7872 (Internal Revenue Code) as amended, are adopted by reference as part of this chapter. These portions of the Internal Revenue Code have full force and effect under this chapter unless excepted to or modified by other provisions of this chapter. (However, nothing in this chapter or in AS 43.19 {multistate tax compact} may be construed as an exception to or modification of 26 U.S.C. 883.) Sec. 43.20.074. All business income of a taxpayer engaged in the cruise ship industry derived from gambling operations and activities as allowed by federal law in the State Of Alaska shall be taxed at the rate of 2% of the gross revenues of the gambling operations and activities conducted in Alaska. Renumber following sections accordingly. Senator Adams moved for adoption. Co-Chair Torgerson objected. Senator Adams explained this amendment allows the cruise ship industry an opportunity to provide an "entertainment donation" by imposing a tax on the proceeds of gambling operations conducted on board ships. He spoke to the well- defined restrictions on gambling in Alaska except for the unknown amount of gambling done aboard cruise ships traveling in state waters. He told the Committee how the US Congress allowed gambling in Alaska waters at the request of the cruise ship industry. He was concerned about the federal government's interjection on this matter saying it raises issues about state sovereignty since congress authorized an activity that the state does not endorse. He thought it important that the state extract a small portion of the wealth generated by gambling within the state's waters that otherwise goes to foreign-owned corporations. Senator Adams continued that funds collected could be used for future cleanup of oil spills or other pollution damage or perhaps to fund ports and harbor facilities. He reminded the Committee that this issue was considered in 1998 at which time it was estimated this tax would generate between $3 to $8.5 million. However, he pointed out that with the increase in cruise ship activity the minimum amount collected would be $8.5 million. A roll call was taken on the motion. IN FAVOR: Senator Phillips, Senator Leman, Senator Adams, OPPOSED: Senator Wilken, Senator P. Kelly, Senator Green, Co-Chair Parnell and Co-Chair Torgerson ABSENT: Senator Donley The motion FAILED (3-5-1) The amendment FAILED to be adopted. Amendment #2: This amendment changes the title of the committee substitute and adds a new bill section as follows. Page 1, line 1 Delete: "An Act relating to certain passenger vessels operating in the marine waters of the state." Insert: "An Act relating to certain vessels operating in the marine waters of the state." Page 1, line 4 Insert a new bill section to read: Section 1. AS 46.03 is amended by adding a new section to read: Sec. 46.03.072. Exception for certain United States Navy vessels from state marine water quality standards applicable to the discharge of hydrocarbons. (a) Until September 1, 2010 the state's water quality standards, adopted as regulations under authority of AS 46.03.020(10) to effectuate the purposes of this chapter and under authority of other sections of this chapter, establishing limits on the total aqueous hydrocarbons and total aromatic hydrocarbons permissible in the marine water column that are more stringent than the requirements of comparable water quality standards set out in federal law or adopted in federal regulation do not apply to a vessel of the United States Navy operating in the marine waters of the state if the vessel uses a seawater compensation system. (b) Notwithstanding the exemption provided by (a) of this section, a vessel of the United States Navy operating in the marine waters of the state that uses a seawater compensation system may not discharge oil into state waters in violation of 33 U.S.C. 1321 (sec. 311, Federal Water Pollution Control Act, as amended) and regulations adopted under authority of that section. Senator Leman moved for adoption. Co-Chair Torgerson objected for an explanation. Senator Leman explained that current Department of Environmental Conservation regulations require that discharged sea water used by marine vessels for stability contain less than 15 parts per billion hydrocarbons. He stated that this standard is significantly more stringent than federal law, which dictate that no vessel may leave a visible sheen. He said that in recent years, the US Navy has curtailed operations in Alaska because of the strict regulations. He listed the three classes of Navel vessels equipped with seawater compensating systems and saying that this amendment is an opportunity to invite the Navy back to the state. In response to the department's concerns with this amendment, Senator Leman said he found part of the argument compelling. Senator Leman moved to amend the amendment to change the sunset date of the exemption from "2010" to "2005". He said this would provide ample opportunity to conduct the necessary scientific studies to determine if a further extension would be necessary. Without objection the amendment was AMENDED. There was no objection and the amended amendment was ADOPTED. Amendment #3: This amendment adds a new subsection to the committee substitute as follows. Page 2, line 6 Insert: (a) The proceeds from the tax on travel on commercial passenger vessels providing overnight accommodations in the state's marine water shall be deposited in a special commercial vessel passenger tax account in the general fund. The legislature may appropriate money from this account for the purposes described in (b) of this section and for state-owned port and harbor facilities. (b) Senator Phillips moved for adoption and stated this issue is commonly called "a white picket fence approach." He explained it isn't exactly a dedicated fund but does indicate to future legislatures that the money may be appropriated for the purposes of state-owned ports and harbor facilities. He expressed that because the tax is derived from vessels, it is appropriate to use the funds for facilities the vessels use. Co-Chair Parnell asked if this amendment applies only to the portion of the head tax retained by the state and if it in any way circumvents the local government's portion. Senator Phillips surmised that the amendment would not utilize the local portion of the tax because of the word "may" in the language. The amendment was ADOPTED without objection. Amendment #4: This amendment adds an effective date of July 1, 2000 to the legislation. Co-Chair Parnell moved for adoption. Co-Chair Torgerson explained this amendment establishes the effective date of the bill. There was no objection and the amendment was ADOPTED. ROBERT REGIUS, Attorney, spoke in favor of the bill on behalf of the non-profit organization, Cruise Control. He told of his 15 years practicing environmental and natural resources law. He stated that he is pleased with Section 1 and that the state is "stepping up to the plate" to get fair market value for Alaskans of the "experience of a lifetime" that is sold to the hundreds of thousands of visitors. Mr. Regius next addressed Section 2 of the committee substitute emphasizing it is intended to ensure that non- Alaskans take as good of care of the state as local citizens do. He spoke of the other industries, including mining, oil development, municipal water supply, etc, that must provide information about the wastes produced by their operations. He stressed that this section of the bill does not impose performance standards. Co-Chair Parnell offered a motion to report from Committee, CS SB 308, 1-LS1617\D as amended. Senator Adams objected. He stated that he did not know the impact this legislation would have on tourism, and that no fiscal note was presented to show the revenues the tax would generate. A roll call was taken on the motion. IN FAVOR: Senator Green, Senator Phillips, Senator Leman, Senator Wilken, Co-Chair Parnell and Co-Chair Torgerson OPPOSED: Senator Adams, Senator P. Kelly and Senator Donley The motion PASSED (6-3) The bill MOVED from Committee. Senator Phillips asked if a fiscal note would be prepared for this bill. Co-Chair Torgerson answered a fiscal note would be available before the Senate body hears the bill. AT EASE 10:21 PM / 10:22 PM SENATE COMMITTEE SUBSTITUTE FOR COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 108(RES) "An Act relating to the use, operation, and regulation of boats; establishing a uniform state waterway marking system; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. REPRESENTATIVE BILL HUDSON, sponsor of the bill, testified that this bill establishes a comprehensive recreational boating safety program. He stressed that Alaska is the only state that does not have such a program. He stated the bill transfers vessel registration from the US Coast Guard (USCG) to the Division of Motor Vehicles (DMV) and would allow people to register their boat at any DMV office, through the Internet, by mail or through the dealer where they purchase the vessel. Representative Hudson continued that the regulatory authority for boat safety equipment required by federal, and in some cases, state statutes, would be transferred from the USCG to the State Of Alaska. He said the bill specifies the required safety equipment for boats by class, including fire extinguishers for powered boats, ventilation for those boats with enclosed engines, lights for night cruising, a sound producing device, and most important, life preservers for each person aboard. He added that the bill stipulates that life preservers must be worn by every child age 13 and under on an open boat. Representative Hudson stated that this bill combines the lifesaving forces of the USCG with new life saving forces of the state. He added that the bill would expand boat safety education into the schools, on the docks and continue the work of the Coast Guard auxiliary. He assured that the work of the USCG would not diminish, but would allow a safety program to be implemented. Representative Hudson stressed that no new state funds would be required for this legislation noting that federal funds and registration fees collected by the DMV would pay the program. Representative Hudson shared that the approximately $600,000 of federal marine fuel taxes Alaskans pay, leave the state and goes to other states that already have a boating safety education program. Under this legislation, he asserted this money would stay in the state and become the education fund that would be used to purchase life jackets and to provide boater safety education. Representative Hudson reiterated that the emphasis of this bill is education by Alaskans in area-appropriate manners. He gave the Kids Don't Float, loaner life jackets program, as an example of locally conducted programs. Representative Hudson told the Committee that Alaska suffers ten times the national average of marine recreational deaths. In the previous three years, he stated that 75 adults and children died of these causes. He attested that most other states that have inducted boater safety programs have reduced boater fatalities by one-half. He believed that with a longer coastline, more lakes and rivers than any other state, Alaskans should want to prepare its children and citizens with the best knowledge and equipment to help save their lives. By working with the USCG, Representative Hudson said volunteers would conduct courtesy vessel examinations for new boat owners and also halt reckless operations that pose a hazard to others. Representative Hudson addressed the vessel registration surmising that having a uniform system would aid in search and rescue operations. He noted that abandoned boats could be traced back to its owners and subsequent information could be gathered about the number and abilities of anyone who had been aboard that vessel. Representative Hudson shared that he spent many years in the USCG performing search and rescue operations. Representative Hudson assured that the intent of the bill is not to police boating activities but to rather educate boaters. He stated that 75 percent of the funds returned to the state from the USCG would be used for education. JOE MCCULLOUGH testified via teleconference from Homer in support of the bill saying there was no doubt in his mind that this bill would save lives and would facilitate a smarter user group. ALAN PARKS, Commercial Fisher, testified via teleconference from Homer about how the education he received from the Commercial Fishing Safety Act saved his life during a boating accident. NOELLE MCCULLOUGH testified via teleconference from Homer saying that the children of the state would benefit from the kinds of water safety training this bill would provide. MAKO HAGGERTY, Chair, Katchemak Bay State Parks Citizen's Advisory Board, testified via teleconference from Homer that the board passed a resolution supporting this bill. CRAIG FOREST, lifelong Alaskan testified via teleconference from Homer representing the USCG Auxiliary and himself told about his own and his family's extensive boating experiences. He said the bill would accomplish two important things, receiving funding for education programs and instituting safety equipment and practices into law. MARIE SCHOLLE, Chair, Governor's Advisory Council on Safety, Representative, American Society of Safety Engineers, and 32-year Alaska resident, testified via teleconference from Fairbanks in support of the bill. She emphasized that this bill would provide the necessary funds to provide boater education to rural sites. MIKE FOLKERT, Chair, Alaska Boating Safety Advisory Council testified via teleconference from Anchorage in favor of the bill and about the lives that would be saved by comprehensive boater safety education. Co-Chair Torgerson listed others available via teleconference to answer questions. Amendment #1: This amendment inserts a new section in the committee substitute as follows. Page 7, following line 25 Insert: Sec. 05.25.052. Uniform state waterway marking system. The department shall develop and adopt regulations establishing a uniform state waterway marking system for the placement of regulatory markers. The regulations must be compatible with the system of aids to navigation prescribed by the United States Coast Guard. This amendment also makes conforming changes elsewhere in the committee substitute as appropriate. Co-Chair Parnell moved for adoption and explained the Uniform State Waterways Marking System is a system of marking waterways with navigation aids and includes such markers as the familiar red and green buoys. He assured that inclusion of this provision in the bill does not require Alaska to implement waterway markers, but rather indicates that if the state deems navigational markers necessary on a particular waterway, the uniform systems can be utilized. He noted that the chair of the Senate Resources Committee is in agreement to this amendment and that this provision was inadvertently removed from the bill by the Senate Resources committee substitute. There was no objection and the amendment was ADOPTED. Senator Wilken asked how the requirement for children to wear a personal floatation device (PFD) was established at age 13. Representative Hudson replied the age is set in current state law. Senator Wilken commented that he thought 13 years is too old to require PFDs to be worn. He verified that changing this would not hamper federal funding. Senator Wilken asked if the bill contains a requirement for boat owners to carry insurance. Representative Hudson answered there is no such provision. Senator Wilken next asked if the Department of Public Safety is the only agency that is authorized to enforce the laws proposed in bill. Tape: SFC - 00 #100, Side B 10:40 PM Representative Hudson responded that the Department of Public Safety could grant enforcement authority to park rangers at the Department of Natural Resources. Senator Wilken referred to the fiscal note and said he was surprised that no impact is indicated for the Division of Fish and Wildlife Protection. MELINDA HOFSTAD, staff to Representative Hudson replied that she had talked to a representative of the division to verify that there would in fact be no increased costs with this legislation. Senator Wilken commented that he was raised on a lake outside Fairbanks and had yet to see a death occurring in the area. While he thought this bill is necessary for saltwater areas, but not appropriate for those areas where boaters can never leave sight of shore. He appreciated and agreed with the sponsor's intent, but thought it was not in the best interest of those in the district he represents. He asserted that the bill is "too much government." He stated that he would not object to moving the bill from Committee, but he would vote against its passage from the Senate. Representative Hudson advised that one-third of all drowning deaths in Alaska occur on freshwater. Senator Leman asked about the safety equipment required for open vessels, such as skiffs. Representative Hudson replied that if a boat has a motor, a fire extinguisher is required. He clarified that the safety equipment requirements are established and enforced by the USCG and are in effect whether this bill passes or not. He added that the USCG and state statute also requires a light that can be displayed when operating at night. Senator Leman commented that he requires all passengers in his boat to actually wear a PFD. He noted the bill requires an additional PFD that can be thrown and asked for a definition. Representative Hudson answered that a PFD device that can be thrown, either a ring or a floatation cushion is required in federal law. Senator Leman shared that the reason he questioned the requirement is because many smaller vessels have very limited space to carry items. Representative Hudson responded that the safety gear could be accommodated if the boat is loaded correctly. He attested to the lifesaving benefits of a throwable PFD. Senator Phillips offered a motion to report from Committee, SCS CS HB 108 (RES) as amended. [NOTE: The sound system was inadvertently disconnected and the remainder of the meeting was not recorded. No action was taken on the bills heard.] COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 432(FIN) "An Act extending the termination date of the Board of Storage Tank Assistance; expanding the authority of the board to issue recommendations concerning cleanup decisions; relating to the eligibility of certain nonprofit entities for financial assistance under the tank cleanup grant program and the tank upgrading and closure program; and providing for an effective date." JOHN BARNETT, Board of Storage Tank Assistance, testified to the bill. Co-Chair Torgerson asked if it would take the board four more years to complete its business. Mr. Barnett asserted there is always trouble when working with the Department of Environmental Conservation. He noted that most cleanups are undertaken in phases, thus extending the time required for completion. Senator Leman supported an extension of the cleanup date. Co-Chair Torgerson ordered the bill HELD in Committee. COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 277(FIN) "An Act relating to payment of retirement benefits for certain subsequently reemployed retired members of the teachers' retirement system; and providing for an effective date." JOHNATHON LACK, staff to Representative Andrew Halcro, presented the bill. Mr. Lack referred to the sponsor statement, which reads as follows. The pool of qualified teachers in Alaska is shrinking dramatically. The situation is particularly dire in the area of special education. To address this shortage I have sponsored HB 277. This legislation would allow teachers who have retired to return to teaching in the public schools without forfeiting their retirement benefits. Retired teachers would be able to be re-employed by a school district. They would continue to receive their retirement benefits, thus reducing the cost to school districts, but compensating experienced teachers through a combination of pay and benefits. Presently, teachers, once retired, may only work 40% of full-time in a school district without forgoing their benefits. HB 277 would provide school districts with the opportunity to rehire experienced teachers at a lower cost to the public. JOHN SEER, National Education Association (NEA)-Alaska, testified in support of the bill. CATHY GILLESPIE, Anchorage School Board, commented on concerns she had with the bill. She requested a delay in implementing such a program. Senator Adams stressed the teacher shortage in rural Alaska. GUY BELL, Director, Division of Retirement and Benefits, Department of Administration testified on the following points. ΠSpeaking from the perspective of the Teacher's Retirement Fund (TRS). ΠThe division submitted a fiscal note with an indeterminate fiscal impact, because the cost to the retirement system will depend on how many retirees are rehired under the provision of HB 277. ΠApproximately 1,200 of 9,400 active Alaska teachers have 20 or more years of TRS service. ΠIf a significant number of these people retire and are rehired under the provisions of HB 277, there will be a material cost to the TRS fund. Cost increases to the TRS fund result in increased employer rates. ΠOn the other hand, if school districts make a determination of shortage for only a handful of teacher positions and, therefore, only rehire a few retirees, the fiscal impact on the TRS will be immaterial. Co-Chair Torgerson ordered the bill HELD in Committee. ## ADJOURNED Senator Torgerson adjourned the meeting at 10:58 PM.