Legislature(2023 - 2024)ADAMS 519
02/08/2024 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB89 | |
| HB178 | |
| HB193 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 89 | TELECONFERENCED | |
| += | HB 193 | TELECONFERENCED | |
| += | HB 178 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 89
"An Act relating to the day care assistance program
and the child care grant program; and providing for an
effective date."
Co-Chair Foster reviewed the meeting agenda.
1:49:20 PM
Co-Chair Foster noted that there were two amendments.
1:49:31 PM
Representative Coulombe MOVED Amendment 1 (copy on file):
Page 22, line 4:
Delete "January l, 2025"
Insert "January 1, 2026"
Page 22, line 18:
Delete all material.
Renumber the following bill sections accordingly.
Page 22, lines 22 - 23:
Delete "secs. 40 and 41 of this Act, this Act takes
effect January 1, 2024"
Insert "sec. 40 of this Act, this Act takes effect
immediately under AS O 1.10.070( c )"
Co-Chair Foster OBJECTED for the purpose of discussion.
Representative Coulombe explained that the amendment would
change two dates. One date was an error in drafting and was
changed to 2026.
1:50:25 PM
LEAH VAN KIRK, HEALTHCARE POLICY ADVISOR, DEPARTMENT OF
HEALTH, indicated the department was requesting a date
change because it aligned with the federal childcare
development fund application deadline and approval. The
department would submit its 3-year plan in July 2024. There
was not a specified time for the Administration for
Children and Families to respond.
1:51:32 PM
Representative Josephson asked about the deadline for the
federal government to review whether the state could move
to a cost of care model. He deemed that it could not be
done within 6 months of the completion of the state's
supplementary report on July 2024. Ms. Van Kirk responded
that in discussions with the childcare program office, she
determined that the typical response time was approximately
six months. She noted that it could be implemented sooner
if the state was approved for an alternative methodology
prior to implementation.
Co-Chair Foster WITHDREW the OJBECTION. There being NO
OBJECTION, it was so ordered.
Amendment Number 1 was adopted.
1:52:48 PM
Representative Galvin MOVED amendment 2 (copy on file):
Page 1, line 2, following "facilities;":
Insert "establishing a child care grant program tax
credit;"
Page 6, following line 13:
Insert a new bill section to read:
"* Sec. 7. AS 43.20 is amended by adding a new section
to read:
Sec. 43.20.019. Child care grant program tax credit.
(a) A taxpayer is allowed a credit against the tax due
under this chapter for contributions of cash accepted
for the child care grant program established under AS
47.25.071.
(b) The amount of the credit is 100 percent of
contributions, not to exceed $3,000,000.
(c) A contribution claimed as a credit under this
section may not
(1) be the basis for a credit claimed under
another provision of this title;
(2) also be allowed as a deduction under 26
U.S.C. 170 against the tax imposed by this
chapter; and
(3) reduce a person's tax liability under this
chapter to below zero for any tax year; an
unused credit or portion of a credit not used
under this section for a tax year may not be
sold, traded, transferred, or applied in a
subsequent tax year.
(d) Beginning January 1, 2030, and every five years
thereafter, the Department of Labor and Workforce
Development shall adjust the dollar limit on credits
under
(a) of this section for inflation, using 100 percent
of the change over the preceding five calendar
years in the Consumer Price Index for all urban
consumers for urban Alaska, compiled by the 1
Bureau of Labor Statistics, United States
Department of Labor."
Renumber the following bill sections accordingly.
Page 21, line 28:
Delete "sec. 24"
Insert "sec. 25"
Page 21, line 31:
Delete "sec. 24"
Insert "sec. 25"
Page 22, line 7:
Delete "sec. 24"
Insert "sec. 25"
Page 22, line 18:
Delete "Section 39"
Insert "Section 40"
Page 22, line 19:
Delete "sec. 24"
Insert "sec. 25"
Page 22, line 22:
Delete "secs. 40 and 41"
Insert "secs. 41 and 42"
Co-Chair Foster OBJECTED for discussion
Representative Galvin was supportive of the bill and
thought it was a good start in addressing the lack of
childcare. She was grateful for all the work that had been
done. She thought the amendment would make the effort
stronger and expand it beyond the bills limited program
that supported employers and their beneficiaries' children.
She elaborated that the state tax credit also applied to
the state child care grant program. The program was
currently in existence and the bill would remove the
existing cap. The amendment allowed for tax credits to be
issued if the private sector chose to utilize the state
childcare program. She felt that it was important, and it
could change the whole landscape for childcare
opportunities. A fully funded childcare grant program would
increase opportunities to expand new childcare facilities
at home or for faith based care. She pointed to the
Amendment 2 backup she provided titled "HB 89 Day Care
Assistance/Child Care Grant Program, Coulombe (H)FIN
DOH, PA Appropriation, Child Care Benefit Allocation" (copy
on file) that explained the amendment and provided an
example of the work that the childcare grant program could
accomplish based on how Juneau implemented a successful
similar program that was modeled after the state program.
She noted that the state program was not funded enough to
offer the same level of services as the Juneau program. The
Juneau program offered more opportunities for families that
needed the extra stipend, increased the number of childcare
providers, and increased the average salary for childcare
workers from $12 to $18 per hour. She related that the task
force identified wages as a major area of concern. The
success of the Juneau program was the impetus for
Representative Galvin to integrate the same opportunity
into HB 89. Her amendment offered that same sort of
public/private partnership as in the Alaska state run grant
program.
1:57:31 PM
Representative Coulombe spoke against the amendment. She
appreciated Representative Galvin's passion for the issue.
However, she would not support the amendment because she
was trying to get the private sector to take care of its
workers and to view childcare as a benefit. She did not
think it would be helpful to divert funding to a state fund
that was managed by a "middleman."
Representative Cronk asked if there would be any additional
fiscal notes with the amendment. Representative Galvin
responded in the negative. Representative Cronk asked
whether the proposal would need increased funding.
Representative Galvin replied that the program was already
in existence, and they would not need any new
administration to implement the proposal. She offered that
the funding would be diverted to the broader statewide
program versus the employee program.
1:58:58 PM
Representative Stapp was confused about the amendment
description. He asked for more information. He understood
that amendment 2 allowed the tax credits to go to the state
childcare grant program. He asked what the actual
difference was between the state and Juneau childcare grant
programs. Representative Galvin answered that the Juneau
program was not funded by the state program. She reiterated
that it was modeled after the state program. The goals were
the same in attempting to expand childcare opportunities in
Juneau. It was also administratively modeled the same way
as the state except it was managed by Southeast Alaska
Association for the Education of Young Children (SEAEYC).
The amendment would not take away the opportunity for
businesses to support their own employees in childcare.
Amendment 2 merely offered another option in case there was
a business entity that wanted to impact all childcare in
Alaska. The proposal was also built around a public private
partnership, which she endorsed.
2:00:50 PM
Representative Coulombe understood that the Juneau program
subsidized wages for childcare workers. Representative
Galvin responded that she did not think it was done that
way. She understood that the wage increases were due to
more dollars for childcare. She explained that the families
received a stipend and could afford to pay more for
childcare. The funding was also used to help childcare
startups by providing new materials for beginning childcare
businesses. Representative Coulombe noted that there was a
Juneau representative on the taskforce and recalled hearing
Juneau was subsidizing wages. She did not believe in
subsidizing wages, whether it was happening in the Juneau
program or not. She wanted the marketplace to fix the
problem. Representative Galvin countered that via the
program, average salaries increased from $12 to $18 per
hour. She did not receive any information that the wages
were subsidized.
2:03:10 PM
Representative Josephson supported the amendment. He was
concerned that the bill may be underutilized because of the
self-interest of the employers, which he understood. He
referenced subsidized wages and thought that indirectly,
wage increases were the desired result favored by many
legislators and Juneau had succeeded in that result. He
mentioned the generous grants received during COVID that
were applauded," including the $7.5 million awarded in the
current year and he mentioned concerns over losing that
funding. He remarked that THREAD, Alaska Childrens Trust,
and other stakeholders were seeking $30.5 million. The
legislation was effective in opening up opportunities, that
was done in part to encourage employment, which was not a
compulsion to pay $18 per hour, but a hope that one result
would be higher wages and help support the industry more
broadly.
Representative Ortiz asked if Representative Galvin used
the situation in Juneau as a model for the amendment and
how the wages in Juneau increased. He asked what the forces
were that caused it to happen if it was not a direct
subsidy. Representative Galvin responded that there was a
fund put together by the City and Borough of Juneau (CBJ).
She delineated that CBJ asked SEAEYC to manage the fund.
The fund was used to help licensed daycare providers to
purchase materials and provide subsidies for families who
could not afford childcare. The subsidies for infants was
$4 hundred for full-time care and for preschool it was $100
per month for full-time care. She understood that there
were more dollars in the entire universe of childcare in
Juneau and the program lowered the need. She announced that
there was no problem for families to be able to get
childcare in Juneau. She believed that it was a "huge
change" that happened within 4 years. Sometimes it took
money to solve a problem, and this was how Juneau
distributed it. She reported that the state had been hard
at work on the issue but the amount it could spend was
capped. She indicated that state dollars could currently go
straight into the fund or also to those who were
experiencing childcare problems throughout the state. The
amendment provided an option to impact the greater need.
She shared that children were showing up between one and
two years behind in kindergarten. She spoke of the
importance to have children ready for school. She would
love to see the state program funded to provide the same
results as Juneau.
2:08:33 PM
Representative Stapp opposed the amendment. The reason was
he viewed the problem as an employee benefit issue. He
liked that the bill preserved the tax reduction for the
employer. He deduced that there was a two-piece solution
via incentives for the employer to think about childcare
coupled with Section 125 Flexible Spending Accounts (FSA),
that allowed employees to use pre-tax earnings to pay for
dependent childcare costs, which was underutilized. He
shared that he asked his local Chamber of Commerce to poll
their own members to see if they used the program. He
believed that if HB 89 was adopted as the sponsor designed
it was a "really good package" incentivizing the employer.
He thought that childcare was an employee benefit. He felt
that more parents would start utilizing Section 125.
Representative Hannan spoke in support of the amendment.
She related that many employees in Juneau were state
employees. She believed that putting the money in the hands
of the parent allowed the childcare providers to increase
wages since it served private and public sector workers.
Increased wages were not a direct subsidy, but people were
able to pay a higher price for childcare. She noted that
the mines in Juneau were the largest private sector
employers, with a large non-resident workforce. However,
they could choose to either put the tax benefit into the
entire community or solely into their own employees via
Amendment 2.
Representative Tomaszewski was not in favor of the
amendment. He thought it sounded like a great idea but
without the proper fiscal note and actual cost laid out, he
could not vote for it. He thought the amendment would be
better as its own bill and be thoroughly vetted.
2:12:11 PM
Representative Galvin appreciated the discussion and
thought it was important to discuss the challenges of
childcare. She reiterated that the reason that it did not
have a fiscal note was because there were no extra
administrative costs since the state had a childcare grant
fund and the tax credits would go toward the state program.
The option for the employer to only support their employees
still existed. She believed that distributing funds to
parents created more demand for childcare and natural
market forces would increase the costs until supply
stabilized demand. She offered that supply would equalize
when the providers were making a living wage. She wanted to
benefit all Alaskans especially rural Alaskans. She was
grateful for the comments and was supportive of the bill.
2:14:08 PM
Co-Chair Foster WITHDREW the OBJECTION.
2:14:12 PM
Representative Stapp OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Galvin, Hannan, Josephson, Ortiz
OPPOSED: Edgmon, Foster, Johnson, Coulombe, Cronk, Stapp,
Tomaszewski
Amendment 2 FAILED 4/7.
2:15:11 PM
Co-Chair Foster noted that there were two fiscal notes and
asked for a review.
2:15:32 PM
Ms. Van Kirk discussed both fiscal notes from the
Department of Health. She referred to the fiscal note
allocated to Child Care Benefits dated February 7, 2024.
She explained that the new fiscal note amounted to
approximately $6.1 million. She pointed to the Grants and
Benefits line that represented the majority of the costs.
The expenses were for the cost of providing a subsidy to
families with income not exceeding 85 percent and up to 105
percent of the state median income. She detailed that
approximately 18,000 additional children aged 12 and under
would meet the eligibility criteria with the increase to
105 percent. The department developed a series of
assumptions to provide the projections based on the average
state rate and the 7 percent cash copay and calculated the
total based on a 7 percent utilization rate of all eligible
children, which mirrored the current childcare assistance
program utilization rate totaling $5.6 million. She
furthered that the Child Care Program Office required one
Accounting Technician 1 to administer the increase to
eligibility standards and process payments to the
providers. The Childcare program Office utilized grantee
organizations to determine eligibility, which required
increasing grant funding to four Child Care Assistance
Program grantees so each grantee can fund one new
Eligibility Technician to administer the program on behalf
of the state. In addition, one Program Coordinator 1
position was required to implement the program to partner
with private sector entities to create employer incentives
to develop onsite or near site childcare. She communicated
that the positions were eligible to be funded by 50 percent
federal funds and 50 percent general fund (GF) match.
Representative Josephson asked what the current grant
program budget was without the $6 million request. Ms. Van
Kirk answered that the Childcare Assistance Program
received approximately $22 million in federal funding, with
a required 75 percent for direct services, that were
subsidies for families. Representative Josephson
ascertained that currently the state contribution to the
$22 million was zero and under the bill GF would increase
to $6 million.
2:19:39 PM
Representative Stapp wondered whether the range 12
accounting technician would qualify for the childcare
grant. Ms. Van Kirk would make the assessment based on the
family size.
2:21:12 PM
MICHAEL WILLIAMS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE, ANCHORAGE (via teleconference), reviewed the
new fiscal note from the Department of Revenue (DOR)
allocated to the Tax Division dated February 9, 2024. He
read from the analysis on page 2 of the fiscal note.
Background
The education tax credit is a credit for qualifying
contributions to Alaska universities and accredited
nonprofit Alaska two- or four-year colleges for
facilities, direct instruction, research and
educational support purposes; donations to a school
district or a state- or regional-operated technical and
training school for vocational education courses,
programs and facilities; and donations for Alaska
Native cultural or heritage programs for public school
staff and students; and a facility in the state that
qualifies as a coastal ecosystem learning center under
the Coastal American Partnership.
The credit is available to be claimed against
insurance premiums tax, title insurance premiums tax,
corporate income tax, oil and gas production tax, oil
and gas property tax, mining license tax, fisheries
business tax, and fishery resource landing tax. The
credit for any one taxpayer cannot exceed $1 million
annually across all tax types. The credit is
currently scheduled to be repealed effective January
1, 2025.
This bill would expand the education tax credit to
include donations made to childcare facilities
(employer run or nonprofit) for the children of the
taxpayer's employees, or for payments made to an
employee of the taxpayer for the purpose of offsetting
the employee's childcare costs. The new provisions
would take effect 90 days from being signed into law
(est. July 1, 2024). This bill also would increase
the credit limit from $1 million to $3 million
annually per taxpayer. The bill extends the sunset
provisions to January 1, 2028.
Revenue Impact
The change in revenues reflected in this fiscal note
only include those eligible tax programs administered
by the Department. The bill's fiscal impacts can be
divided into three categories: (1) expansion of the
education tax credit to childcare facilities and
employer costs, (2) increase to the annual tax credit
limit, and (3) extending the credit repeal date.
(1) The revenue impact of the expansion of the credit
to childcare facilities and costs cannot be determined
because the Department of Revenue does not have
Alaska-specific data to estimate how many taxpayers
will claim the expansion of the credit, how many
taxpayers currently pay their employees' child care
costs or make donations to child care facilities for
the children of their employees, or how many taxpayers
will start paying their employees' child care costs or
making donations to child care facilities for the
children of their employees.
(2) The revenue impact of the increase in the credit
limit is estimated by applying historical information
at higher credit limits and interpolating the impact
of the $3 million annual credit limit. See the table
below.
(3) The revenue impact of the increase in the
extension of the repeal date is estimated by using the
average of the last three years of actual credits
claimed as a basis going forward. See the table below
[The table contained the estimated revenue impact in
millions of dollars from FY 2025 through half of FY 20228.]
Other sources of uncertainty stem from the high
contribution limits and high cost of care in Alaska,
as well as the fact that the credit is available
against multiple tax types in Alaska.
Implementation Cost
This legislation would require the Department of
Revenue to make minor changes to its Tax Revenue
Management System ("TRMS"). Resources required to
implement this bill would include staff time to
updated tax forms, TRMS, and Revenue Online, and other
miscellaneous costs when applicable. These costs will
be absorbed by the Tax Division using existing
Mr. Williams noted that the fiscal note would be updated to
reflect the adopted amendment.
2:25:11 PM
Representative Josephson recounted that Amendment 2 would
have constrained the credit by noting that the deduction
was not also allowed under 26 usc 170 [any charitable
contribution under the U.S. Tax code] and the deduction was
disallowed to drive the liability under zero dollars. He
cited that the language was in Section 5 of the bill but
not elsewhere. He wondered whether there was a concern
regarding the language in the failed amendment that was not
included in the bill. Mr. Williams responded that most of
the statutory language in AS 43.220.014 of the corporate
income tax code stating the constraint under 26 usc 170
remained unchanged by the proposed language of the bill.
The constraint remained in law with passage of HB 89.
2:26:45 PM
Representative Stapp relayed an antidote regarding an
unrelated employee pretax deduction. He wondered if an
employer who operated its own childcare and deducted their
state corporate income tax and their employees dependent
care pretax was legal. Mr. Williams offered to provide the
answer after researching the matter.
Representative Galvin referenced the analysis stating that
it was difficult to predict the rate of participation and
therefore difficult to predict the amount of decreased
revenue. Mr. Williams confirmed the statement.
Representative Galvin asked how many corporations had a
corporate tax bill of $3 million or larger. Mr. Williams
would provide the information.
2:29:59 PM
Co-Chair Johnson MOVED to REPORT HB 89 as amended from
committee with individual recommendations and accompanying
fiscal notes and allow Legislative Legal services make
technical and conforming changes.
2:30:23 PM
Co-Chair Foster OBJECTED for the purpose of discussion.
Representative Josephson was grateful for the bill, and
thought it opened up some beneficial avenues for childcare.
He expressed concern regarding Representative Stapp's
remarks that he viewed it as an employee benefit issue. He
was concerned about economic sectors like retail and how
their employees' children would benefit from the tax
credits in the bill. He wanted something more than an
employee benefit bill and believed that people would be
left out. However, he concluded that the legislation was
headed in the right direction.
2:31:59 PM
Representative Galvin appreciated the bill and felt that
the childcare benefits to families was expanding as well as
the need for childcare. She deduced that the corporate
credits would help with the expanded need to a certain
degree. She viewed it as a first step in ensuring children
were getting high quality childcare and there was much more
work to do.
Representative Tomaszewski remarked that Representative
Coulombe had worked arduously on the bill and thanked her
for the work.
Co-Chair Foster WITHDREW the objection. There being no
other OBJECTION, it was so ordered
HB 89 was REPORTED out of committee with seven "do pass"
recommendations, three "no recommendations", and one
"amend" recommendations and with two new fiscal impact
notes from the Department of Health and the Department of
Revenue.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 89 Amendments 1-2.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 89 |
| HB 89 Galvin Amendment 2 Explanation.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 89 |
| HB 193 Public Testimony Rec'd by 020824.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 193 |
| HB 178 DEC Letter re Best Practices VSW 012524.pdf |
HFIN 2/8/2024 1:30:00 PM |
HB 178 |