Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/16/2016 06:00 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB133 | |
| SB131 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 131 | TELECONFERENCED | |
| += | SB 133 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 131-ELECTRONIC TAX RETURNS & ALCOHOL TAX
7:00:59 PM
CHAIR COSTELLO reconvened the meeting and announced the
committee would hear public testimony on SB 131.
JEFF JESSE, Chief Executive Officer, Alaska Mental Health Trust,
Juneau, Alaska, testified in support of SB 131. He directed
attention to a spreadsheet from the Division of Behavioral
Health that shows that the state spent over $41 million for
alcohol treatment and prevention. Additionally, other general
fund costs due to alcohol are substantial.
A survey by the McDowell Group found that the 2010 general fund
spending for alcohol-related healthcare costs totaled $170
million; $9.5 million for public assistance; $50.5 million for
traffic accidents; $156.7 million for the criminal justice and
Office of Children's Services systems of care. Together that is
a $387 million cost to the general fund from alcohol. That is
larger than every department and every budget component except
the foundation formula and the Medicaid program. He pointed out
that this cost will be paid through user fees, as contemplated
by SB 131, or it will be passed on to all Alaskans through other
taxes and decreased dividend payments.
To further emphasize the magnitude of the problem, he pointed
out that the loss of productivity due to alcohol is $500 million
per year. He emphasized that the alcohol tax is one of the
fairest ever devised.
7:05:13 PM
BANDON HOWARD, Amalga Distillery, Juneau, Alaska, testified in
opposition to SB 131. He is starting a new distillery in an
industry that is growing quickly. In 2003 there were about 40
licensed producers in the U.S. and now there are close to 600.
He suggested that growth is a better way to generate revenue
than increasing taxes. The industry has both capital and
administrative barriers and the proposed tax will add to those.
If SB 131 were to pass and become law, he will pay about
$8/bottle in state excise tax. He'll pass that on, but it will
make his business less able to compete with producers outside
the state.
7:07:35 PM
ROBERT MCCORMICK, Director, Glacier Brew House, Chugiak, Alaska,
testified in opposition SB 131. He said he appreciates the need
to find new sources of revenue for the state, but he believes
that any tax should be broad based and not come from sources
where Alaskans already pay more than average. Alaska has among
the highest liquor taxes in the nation and doubling them doesn't
make sense. While the tax is levied at the wholesale level, it's
exponential from there with everyone adding their markup. A 3
ounce martini will likely cost the customer $2.25 more, not 45
cents more, he said.
He pointed out that the brewing industry is one of the few
industries in Alaska that is growing and it's grown without
incentives from the state. Doubling the excise tax will only
hurt the industry and drive sales online, he said
7:11:11 PM
MARCY LARSON, co-founder, Alaskan Brewing Company, Juneau,
Alaska, stated that SB 131 has unintended consequences for the
entire hospitality industry, not just the producers. She agreed
with Mr. McCormick that the tax is exponential because it goes
up every step along the way. That includes the city sales tax,
which will be raised five percent. She opined that the extreme
nature of the proposed tax will affect the health of the
hospitality industry and "make it no longer hospitable."
MS. LARSON pointed out that the existing excise tax on alcohol
makes it possible for someone in Oregon to buy Alaskan beer at
the same price as in Alaska. If the tax is doubled, it will be
cheaper to purchase Alaskan beer in Oregon than here where it's
made. She proposed not raising the tax to such extreme levels so
the hospitality industry can stay strong.
7:14:08 PM
SASSAN MOSSANEN, founding partner, Denali Brewing Company,
Talkeetna, Alaska, testified in opposition to SB 131. He shared
the history of the company and its robust growth over the last
seven years. All their available capital is reinvested in
Alaska. With 27 year-round employees they are the largest
employer in Talkeetna and the largest consumer of energy.
He expressed concern that an unintended consequence will be that
people will figure out a way to circumvent the system. He
maintained that to create and maintain mental health, people
need to be engaged in their community. "When you create a
prohibitive state where people hide, it makes it harder to keep
track of who is consuming what." He pointed out that during
Prohibition, people drank more and community costs went up.
MR. MOSSANEN reported that Denali Brewing was approached last
year by the state Division of Economic Development and the U.S.
counterpart to engage in talks about increasing Arctic commerce.
As a result, they collaborated with a brewery in Norway in an
effort to further the economic benefits of alcoholic beverages
produced in Alaska. He encouraged the committee to consider
creating an exemption for wineries and distilleries that small
breweries currently enjoy.
7:18:38 PM
GARY SUPERMAN, co-owner, Hunger Hut Bar and Liquor Store,
Nikiski, Alaska, testified in opposition to SB 131. He shared
the history of his career and described himself as "strictly
blue collar, working class." He lives among folks that get by on
$30,000-$50,000 per year; they build their own homes. His
perspective is that doubling the alcohol taxes is an assault on
the blue color working class in Alaska. He stressed that the
proposed alcohol and tobacco taxes coupled with the permanent
fund proposals will consume a significant portion of the working
class's disposable income. "If you're looking for a new revenue
stream, I suggest that you look elsewhere for the sake of
fairness," he said.
7:23:00 PM
KRISTEN MYLES, Director, Cook Inlet CHARR, Anchorage, Alaska,
testified in opposition to SB 131. She pointed out how this tax
will hurt those who serve alcohol. Speaking hypothetically, she
said if Senator Stevens' martini costs $8.50 he probably gives
the server $10. With the proposed tax the martini will cost
closer to $9.50. While the Senator is aware of the tax situation
and may adjust his spending so the server isn't punished, the
average patron likely won't give a thought to the dollar or so
the server is losing on each drink sale. "Now we're punishing
business owners, responsible consumers and employees," she said.
7:24:47 PM
RICK ARMSTRONG, owner, Baranof Island Brewing Company, and
President, Brewers Guild of Alaska, Sitka, Alaska, testified in
opposition to SB 131. He opined that the industry is already
doing its fair share when it collects over $40 million each year
for the state. The proposed tax places a burden on the only
small industry in Alaska that is growing and punishes
responsible adults who are trying to make an honest living.
Higher prices won't lower consumption, but force consumers to
buy lower priced products elsewhere. He agreed with previous
testimony that the dime a drink argument is inaccurate. If SB
131 passes and becomes law, Alaska will have the highest alcohol
taxes in the nation. "I strive to be number 1, but not in this
instance and I'm quite happy knowing that we're already at
number 2," he said.
7:26:58 PM
BILL BUBBEL, The Pump House Restaurant, Fairbanks, Alaska,
testified in opposition to SB 131. He maintained that even if
oil were to return to $100 per barrel, the tax wouldn't return
to the existing level because taxes never go down. He said the
distributor pays the tax initially and it trickles down to the
end user which ultimately inhibits sales. Municipalities often
compound the problem by following the state policy and raising
local taxes. He asked the committee to consider something more
manageable and perhaps take another look at casino gambling or a
Powerball lottery.
7:28:41 PM
TIFFANY HALL, Executive Director, Recover Alaska, Anchorage,
Alaska, testified in support of SB 131. She stated that
increasing the alcohol tax will generate needed revenue and
support long-standing public health and safety objectives. She
maintained that the increased tax will save money because the
cost of alcohol abuse to Alaskans totaled $1.2 billion in 2010.
She noted she would submit her sources via email. Beyond the
financial benefits, raising the alcohol tax will save lives,
improve the health of babies and reduce underage drinking.
She reported that the increases in the alcohol tax in 1983 and
2002 were followed by 29 percent and 11 percent decreases in the
number of alcohol related deaths in the state. Furthermore,
increased alcohol taxes has been found to reduce binge drinking
during pregnancy, decrease the incidence of fetal alcohol
syndrome, and significantly reduce youth alcohol consumption.
She stressed the importance of this, highlighting that youth
that drink before age 15 are 5 times more likely to abuse
alcohol as adults.
She noted that the U.S. surgeon general and a host of others
recommend increasing the excise tax on alcohol because research
indicates that it is directly related to decreased alcohol-
related deaths, traffic crashes, violent crime, and child abuse.
7:31:51 PM
MARK STAPLES, President, Midnight Sun Brewing, Anchorage,
Alaska, testified in opposition to SB 131. He said his brewery
employs over 50 people and sells product in four states in
addition to Alaska. It's been exciting to be part of this
growing industry, he said, but growth could cease and the
industry could be in peril if this tax goes forward. He
referenced the list of proposed new revenue components and
highlighted that with this legislation the alcohol industry will
be the third highest taxed industry in the state, which seems
unfair.
7:34:21 PM
TOM CHARD, Executive Director, Alaska Behavioral Health
Association, Juneau, Alaska, testified in support of SB 131. He
isn't opposed to responsible consumption, but as Mr. Jessee
pointed out, the tax increase ultimately ends with the consumer
and their relative consumption. His hope is that this will
mitigate the impact on business. He maintained that the tax
increases revenue to help address the budget shortfall,
decreases the costs associated with problem drinking, and raises
much needed revenue for prevention and treatment efforts.
Studies show the link between increased alcohol tax and
decreased consumption, particularly among youth. He cited the
McDowell report that found that the impact of alcohol on the
system totaled $1.2 billion. He noted that last year a group
gathered in Anchorage to talk about drug and alcohol treatment
options. Last night about 400 people gathered to talk about how
the 14 detox beds in Anchorage can serve a population of
300,000.
7:36:56 PM
PAM WATTS, Member, Alaska Behavioral Health Association, Juneau,
Alaska, testified in support of SB 131. Having worked in the
behavioral health field for over 30 years, she can attest to the
damage that alcohol has caused to individuals, families and
communities and the cost to the state. Over time and with flat
funding access to treatment and detox has been reduced.
Treatment costs money but without treatment and resources to
help people become healthy and productive, even more money is
spent on public safety, court costs, prisons, and spiraling
healthcare costs. Alaska has the distinction of being the first
in the nation in alcoholism, alcohol-related deaths, fetal
alcohol spectrum disorder, and alcohol-related domestic
violence, rape and suicide. Changing those numbers takes money
and the increased excise tax on alcohol will help, she said.
7:38:33 PM
MICHAEL CERVANTES, owner/operator, The Banks Alehouse,
Fairbanks, Alaska, testified in opposition to SB 131. He works
with 15 different breweries in Alaska and employs 55 people. The
proposed tax will have a ripple effect. He'll pass the tax along
to the consumers and they will go elsewhere. That may force him
to look for other breweries outside the state with cheaper
products.
7:40:35 PM
CARMEN LUNDE, Director, Kodiak CHARR, Kodiak, Alaska, testified
in opposition to SB 131. She related that when the alcohol
industry was taxed some years ago she didn't believe she'd live
long enough to see another proposed hike. That made Alaska the
highest in the nation for alcohol taxes with a couple of small
exceptions. She said the alcohol tax brings the state $40
million per year and she doesn't believe the state should be
looking at the hospitality industry for more money. The industry
already pays far more than the national average and the proposal
to double the tax is outrageous. She suggested cutting
government spending, revisiting the tax cuts for oil, having a
state lottery, but not touching the permanent fund.
7:43:05 PM
ROBIN MINARD, Director, Public Affairs, Matsu Health Foundation,
Wasilla, Alaska, testified in support of SB 131, pointing to the
many benefits it offers. She highlighted that a substantial body
of evidence demonstrates that an increase in the tax on alcohol
results in reduced alcohol consumption and improvements in
various health outcomes, particularly for youth. She pointed out
that alcohol consumption contributes to the three leading causes
of death for adolescents, and that it is a risk factor for a
host of negative behaviors and experiences. She cited 2009 data
showing that Alaska's youth consumed 17.9 percent of alcohol
sold in the state that year, and noted that the surgeon general
and the Institute of Medicine have specifically advocated for
increases of excise taxes for alcohol as a means to reduce
underage drinking. She also discussed the documented benefit to
adults of increased excise taxes on alcohol.
MS. MINARD summarized that the proposed tax increase will help
keep underage drinking indicators moving in the right direction,
reduce deaths caused by alcohol and save babies, all while
helping reduce costs in corrections, youth justice, and
healthcare.
7:45:10 PM
PHILLIP LICHT, Chair-elect, Advisory Board on Alcoholism and
Drug Abuse (ABADA), Palmer, Alaska, testified in support of SB
131 on behalf of the ABADA Board, the Alaska Mental Health
Board, and Thrive MatSu. He noted that he submitted written
comments. He asked the committee to consider SB 131 as part of a
comprehensive effort to address the budget deficit and not a tax
bill targeting a single industry. "It's really part of a larger
effort to reduce spending, increase revenue, and contain costs
through reform," he said. SB 131 provides revenue that is needed
to maintain access to substance abuse treatment and prevention
efforts along with health and safety services.
7:47:15 PM
JIM PSENAK, Alpine Inn, Sutton, Alaska, testified in opposition
to SB 131. He directed attention to Section 3 of the bill and
questioned the reason that retailers are mentioned because the
tax will be levied before it reaches the retail level. Next, he
asked if the committee understands that he will incur a $40.58
increase on each case of distilled beverage he purchases. He
estimated that the up-front cost of the additional tax will be
$1,000 to $1,200 per week. He questioned how the State of Alaska
can give away between $700 million and $2.4 billion every year
in the permanent fund dividend and then expect private industry
to support the government. He warned that at some point the
federal government will reevaluate what it sends to Alaska.
7:50:20 PM
Finding no further comments, Chair Costello closed public
testimony on SB 131 and held the bill in committee.