Legislature(2019 - 2020)BELTZ 105 (TSBldg)
04/16/2019 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB52 | |
| SB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 52 | TELECONFERENCED | |
| *+ | SB 50 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 50-EMPLOYMENT TAX FOR EDUCATION FACILITIES
1:55:40 PM
CHAIR REINBOLD reconvened the meeting and announced that the
final order of business would be SENATE BILL NO. 50, "An Act
imposing an annual educational facilities maintenance and
construction tax on net earnings from self-employment and wages;
relating to the administration and enforcement of the
educational facilities maintenance and construction tax; and
providing for an effective date."
1:56:31 PM
SENATOR BISHOP made opening remarks. He said that SB 50 has been
around since 1970s. He paraphrased his sponsor statement:
From 1919-1980, Alaska had an annual employment head
tax for the purpose of collecting revenues to fund
schools. The tax went through numerous
transformations, but it always charged an equal amount
to each employed individual. When it was repealed in
1980, the tax was $10 per person which has the
equivalent value of $30 today.
SB 50 proposes to revive the repealed head tax on
employed individuals, both resident and nonresident,
with income from a source in Alaska. The "Alaska
Education Facilities, Maintenance, and Construction
Tax" would collect $30 from each person employed in
the state. The tax would be withheld from an
employee's first paycheck each year while self-
employed individuals would be required to remit
payment to the Alaska Department of Revenue. The tax
would be deductible on an individual's federal income
tax return.
According to the most recent statistics from the
Alaska Department of Labor and Workforce Development
and the U.S. Census Bureau, there are approximately
441,596 employed individuals in Alaska. Roughly 20% of
those workers who earn their living in Alaska do not
reside here resulting in $2.5 billion in nonresident
income that leaves Alaska's economy each year and, in
most cases, gets taxed by a nonresident's home state.
It is estimated that this tax would generate $13
million each year. The revenue collected would be
deposited into the state's general fund and accounted
for separately to pay for the growing maintenance and
construction needs of Alaska's schools.
1:58:34 PM
SENATOR BISHOP said the state has had a minimal budget for
the past five years. He expressed concern about the level
of deferred maintenance for schools in disrepair. In 1980,
the head tax was repealed. However, a bill to recreate the
head tax has been introduced in the legislature 15 times.
In fact, he has introduced this concept in the last three
legislatures.
He reported that the Department of Education and Early
Development (DEED) indicates that the state has $112
million in deferred maintenance and $190 million in school
construction debt. He said that $2.5 billion in nonresident
income leaves Alaska's economy each year. These
nonresidents are most likely taxed in their home states and
those taxes help provide education in their home states.
The state has had limited capital budgets based on federal
matching funds. The deferred maintenance is not getting
better, he said. He remarked that he worked for Joe
Jackovich when he attended high school. Mr. Jackovich
explained to him that the $5 school tax helped pay for his
high school education.
2:02:00 PM
DARWIN PETERSON, Staff, Senator Click Bishop, Alaska State
Legislature, Juneau, on behalf of the sponsor, reiterated that
from 1919 to 1980 Alaska had an annual employment head tax for
the purpose of collecting revenues to help fund its schools. The
tax was established to charge an equal amount to each employed
individual. When it was repealed in 1980, the tax was $10 per
person, which would be equivalent to $30 today, if adjusted for
inflation. SB 50 proposes to revive the repealed head tax on
those employed, both residents and nonresidents.
MR. PETERSON said that this bill would collect $30 withheld from
the first paycheck each calendar year and is deductible on
federal income tax returns.
He provided statistics from Department of Labor & Workforce
Development and the U.S. Census Bureau, such that 20.0 percent or
85,000 of 441,596 employees are nonresidents, which results in
$2.5 billion leaving the state's economy each year. In 2017,
407,255 of the 441,596 employees were wage and salary workers. He
said that 11,329 of the self-employed Alaskans work in the
business sector and the remainder are self-employed in non-
incorporated businesses.
MR. PETERSON said that based on those figures, the education head
tax would bring in $13 million in revenue per year to the state's
general fund to pay for growing maintenance and construction
needs. The Department of Education and Early Development (DEED)
indicates that the state's share of the FY 2020 major school
maintenance list totals $112-113 million and the FY 2020 school
construction list totals $190 million totaling over $300 million.
He pointed out that it costs districts money to place something
on the list, so the total does not reflect all of the needs. He
referred to members' packets and letters of support.
2:06:41 PM
SENATOR COSTELLO asked whether this is considered a dedicated
fund, and if not, how does the legislature avoid it.
MR. PETERSON answered no. He referred to page 4, lines 13-19, to
language that states it does not create a dedicated fund. AS
43.45.061 read:
(a) The tax and penalties collected by the department
under this chapter shall be deposited into the general
fund and accounted for separately.
(b) The legislature may appropriate the estimated
amounts to be collected and separately accounted for
under (a) of this section into the educational
facilities maintenance and construction fund
established under AS 37.05.560. Nothing in this
section creates a dedicated fund.
MR. PETERSON explained that the legislature is constitutionally
prohibited from creating dedicated funds. The legislature may
appropriate and separately account for and place the funds in an
account with the intent to pay for construction and deferred
maintenance.
SENATOR COSTELLO asked whether this would be considered an
income tax.
MR. PETERSON agreed that it would create an income tax, but it
is a flat tax, not a bracketed income tax.
SENATOR COSTELLO asked for further clarification as to why
maintenance was not included as part of school construction.
MR. PETERSON answered that over the last five years, the
operations are ongoing but capital budgets can be held back
while the legislature waits for additional revenue.
2:09:57 PM
SENATOR BISHOP said he likes the title of the bill, which
relates to facilities and construction tax. It read:
"An Act imposing an annual educational facilities
maintenance and construction tax on net earnings from
self-employment and wages; relating to the
administration and enforcement of the educational
facilities maintenance and construction tax; and
providing for an effective date."
He characterized this matter as a policy question.
2:10:32 PM
SENATOR BIRCH commended the sponsor for bringing this forward.
He also recalled his first pay stub signed by Jim Dalton. The
Dalton Highway was named after him. He recalled the head tax was
$10 and he understood it went to education. He said that
maintenance is important and deferred maintenance needs to
happen but can be pushed off for a while. These deferred
maintenance costs are significant ones in rural communities. He
characterized this as a step in the right direction. He said he
thought it may help educate a new generation of Alaskans that it
is necessary to pay for things.
2:12:34 PM
CHAIR REINBOLD raised the concern that home schools must absorb
property taxes. She asked whether this tax would apply to
everyone, whether these residents have kids in the system or
not.
MR. PETERSON answered yes. He said that everyone who is employed
would be subject to a $30 head tax per year. Not everyone in the
state has the ability to homeschool their children. However, the
state is constitutionally required to provide a public school
system for all children, and everyone in the state benefits from
having an educated population.
CHAIR REINBOLD argued that it does not mean that the state must
have 54 school districts and a $2.2 billion budget, with some of
the lowest outcomes in some areas. She expressed frustration to
see "common core" math standards that she characterized as some
of the worst possible. She emphasized that she is resistant to
increasing education funding at this time. She highlighted that
her constituents question their high property taxes when other
residents pay none. She asked how to track where the money is
spent. Since designated funds are prohibited, this could result
in additional general fund monies.
MR. PETERSON pointed out that employed rural residents that do
not currently pay property taxes would be contributing $30.
CHAIR REINBOLD expressed concern that the funding would not be
tied to the local community. She said she preferred local
community control.
MR. PETERSON referred to the prioritized DEED major maintenance
fund list and school construction fund list in members packets.
The funds would be allocated towards those projects in priority
order.
CHAIR REINBOLD related her understanding that there would not be
any guarantee that funds would be spent in the area in which the
funds were collected.
MR. PETERSON agreed that it was a statewide effort.
2:15:47 PM
CHAIR REINBOLD expressed concern that the initial fees could
dramatically increase over time. She offered her belief that
government always wants more, so this could just become a
general bracketed income tax.
MR. PETERSON agreed that it was always the prerogative of future
legislatures. Future legislatures could abandon this approach
and impose an income tax based on net income. He remarked that
doing nothing was not an answer, either.
CHAIR REINBOLD said this sets up the framework for a full-
fledged income tax so it could become a vehicle for that to
occur.
SENATOR BISHOP did not disagree. However, he said that he could
not in good conscious propose addressing the issue by taking
funding out of savings. He emphasized that he was trying to do
something to address deferred maintenance. He pointed out that
some school kids in his district have not had drinking water in
three years. He maintained that it was not an option to do
nothing.
2:18:02 PM
CHAIR REINBOLD said she appreciated his courage since there is
significant resistance to taxes. She expressed concern over the
inequalities in school districts, such that some schools have
great facilities whereas others do not. She would like a program
that engages students to care for school lawns and encourage
school pride. She said that one thing she liked about the bill
is that the fees were the same fee for everyone.
[SB 50 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 50 ver. M.pdf |
SL&C 4/16/2019 1:30:00 PM SL&C 1/28/2020 1:30:00 PM |
SB 50 |
| SB 50 Sponsor Statement ver. S.pdf |
SL&C 4/16/2019 1:30:00 PM SL&C 1/28/2020 1:30:00 PM SL&C 1/30/2020 1:30:00 PM |
SB 50 |
| SB 50 Sectional Analysis ver. M.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB 50 - FY20 Major Maintenance Final List.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB 50 - FY20 School Construction Final List.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB 50 - Nonresidents Working in Alaska 2017 Alaska Department of Labor and Workforce Development.pdf |
SL&C 4/16/2019 1:30:00 PM SL&C 1/28/2020 1:30:00 PM SL&C 1/30/2020 1:30:00 PM |
SB 50 |
| SB 50 - YKSD Resolution 19-06.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB 50 Denali Borough Resolution 19-08.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB 50 Denali Borough School District Reso.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB 50 News-Miner Editorial.pdf |
SL&C 4/16/2019 1:30:00 PM SL&C 1/28/2020 1:30:00 PM SL&C 1/30/2020 1:30:00 PM |
SB 50 |
| SB 50 News-Miner opinion.pdf |
SL&C 4/16/2019 1:30:00 PM SL&C 1/28/2020 1:30:00 PM SL&C 1/30/2020 1:30:00 PM |
SB 50 |
| SB 50 - ASA support letter.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB050 DRAFT Fiscal Note DOLWD-UI 04-12-19.pdf |
SL&C 4/16/2019 1:30:00 PM SL&C 1/28/2020 1:30:00 PM |
|
| SB050-DOR-TAX-2-15-2019.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB050-DOR-TAX-4-16-2019.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 50 |
| SB 52 DCCED Response 04.15.19.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 52 |
| SB 52 Amendment U.8.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 52 |
| 04.16.19 SB 52 Support Letters.pdf |
SL&C 4/16/2019 1:30:00 PM |
SB 52 |