Legislature(2011 - 2012)SENATE FINANCE 532
04/04/2012 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB100 | |
| SCR24 | |
| HB129 | |
| SB192 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 192 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 100 | TELECONFERENCED | |
| += | SB 203 | TELECONFERENCED | |
| += | SCR 24 | TELECONFERENCED | |
| += | HB 129 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
April 4, 2012
9:05 a.m.
9:05:57 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:05 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lesil McGuire, Vice-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Senator Joe Paskvan; Tim Lamkin, Staff, Senator Gary
Stevens; Ted Madsen, Staff, Representative Max Gruenberg;
Janak Mayer, Manager, Upstream & Gas, PFC Energy;
SUMMARY
SCR 24 COMMISSION ON 100TH ANNIV. OF LEGISLATURE
SCR 24 was REPORTED out of committee with a "do
pass" recommendation and with a new fiscal impact
note from Legislative Council.
SB 100 PERS TERMINATION COSTS
CSSB 100(FIN) was REPORTED out of committee with
a "do pass" recommendation and with a new fiscal
impact note from the Department of
Administration.
SB 192 OIL AND GAS PRODUCTION TAX RATES
SB 192 was HEARD and HELD in committee for
further consideration.
SB 203 ENERGY ASSISTANCE PROGRAM & VOUCHERS
SB 203 was was SCHEDULED but not HEARD.
CSHB 129(FIN) DECEASED VETERAN DEATH CERTIFICATE
SCS CSHB 129(STA) was REPORTED out of committee
with a "do pass" recommendation and with a
previously published fiscal impact note:
FN2(DHSS).
SENATE BILL NO. 100
"An Act relating to employer contributions to the
Public Employees' Retirement System of Alaska;
relating to requirements that employers who terminate
some or all participation in the Public Employees'
Retirement System of Alaska pay termination costs; and
making the changes retroactive."
9:07:29 AM
Co-Chair Hoffman MOVED to ADOPT the proposed committee
substitute for SB 100, Work Draft 27-LS0272\E (Wayne,
4/3/12.)
9:07:48 AM
Co-Chair Stedman OBJECTED for the purpose of discussion.
9:07:55 AM
SENATOR JOE PASKVAN, explained that the CS was introduced
in response to concerns raised by committee members. He
related that the most important change was found in Section
1, of the CS that related to AS 39.35.255a, which
established a "floor" for base salaries, as of June 30,
2008. He noted that the provision was left unchanged. He
reported that Section 2 and Section 5 allowed a municipal
employer to exclude up to 20 percent of its employees
[participation in the retirement plan] without triggering
termination costs. He shared that the Alaska Municipal
League felt the changes in the CS were a "reasonable"
compromise. He concluded that the intent of the CS was to
include the "20 percent rule", [20 percent partial
termination rule] and maintain the salary base.
9:10:44 AM
Co-Chair Stedman REMOVED his OBJECTION. There being NO
FURTHER OBJECTION, Work Draft 27-LS0272\E was ADOPTED.
Senator Paskvan summarized SB 100. He explained that the
legislature passed a law [SB 125 enacted in 2008] which
attempted to pay off the unfunded liability in the
retirement system [Public Employees' Retirement System
(PERS)] over time. The law required that municipal
employers paid a 22 percent contribution rate on the
greater amount of either a combined defined contribution
and defined benefit salary base or total payroll beginning
on June 30, 2008. The established floor addressed a concern
that employers might convert PERS positions to contacted
positions in order to reduce their PERS costs and transfer
an unfair burden of the unfunded liability to the employees
who remained in the system. The legislation allowed
municipalities to transfer up to 20 percent of its
employees to a different plan without the statutorily
induced consequences of paying the costs of a termination
study and the potential assessment of double the 22 percent
for the terminated employees.
Senator Egan wondered if the provisions in the CS would
still alleviate the concerns of small communities like
Anderson. Senator Paskvan could not remember the details
but thought the CS would provide relief.
Co-Chair Stedman noted that the fiscal note (FN 2 ADM) from
the Department of Administration in the amount of $86.6
thousand in FY 3013, reimbursed the department for cost
related to the retroactivity clause in Section 9 and
Section 10 of the legislation.
Co-Chair Hoffman MOVED to report CSSB 100(FIN) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
9:15:38 AM
CSSB 100(FIN) was REPORTED out of committee with a "do
pass" recommendation and with a new fiscal impact note from
the Department of Administration.
SENATE CONCURRENT RESOLUTION NO. 24
Establishing the Alaska Legislative Celebration
Commission to organize events to commemorate the 100th
anniversary of the first convening of the legislative
branch of government in Alaska.
9:16:18 AM
TIM LAMKIN, STAFF, SENATOR GARY STEVENS, explained that the
resolution established a small commission comprised of four
legislators and three public members to plan and coordinate
the 100th anniversary commemoration of the state
legislature. The first territorial legislature convened on
March 3, 1913.
Co-Chair Stedman discussed the fiscal note (FN 1 LEG). He
reported that the fiscal note appropriated $103 thousand in
general funds to cover travel and per diem costs for the
commission members.
Co-Chair Hoffman MOVED to report SCR 24 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
SCR 24 was REPORTED out of committee with a "do pass"
recommendation and with a new fiscal impact note from
Legislative Council.
CS FOR HOUSE BILL NO. 129(FIN)
"An Act relating to providing a death certificate for
a deceased veteran without charge."
9:18:25 AM
TED MADSEN, STAFF, REPRESENTATIVE MAX GRUENBERG, explained
that the bill provided four copies of a death certificate
for a deceased veteran for the purposes of eligibility
benefits. The eligible individual was responsible for
acquiring the certificates from the Division of Public
Heath, (Department of Health and Social Services).
Co-Chair Stedman pointed out that the Department of Health
and Social Services fiscal note (FN 1 DHS) appropriated $75
thousand in general funds to replace the reduction in
program receipts for the Bureau of Vital Statistics.
Co-Chair Hoffman MOVED to report SCS CSHB 129(STA) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
9:19:53 AM
SCS CSHB 129(STA) was REPORTED out of committee with a "do
pass" recommendation and with a previously published fiscal
impact note: FN2 (DHSS)
9:20:08 AM
AT EASE
9:25:33 AM
RECONVENED
SENATE BILL NO. 192
"An Act relating to the oil and gas production tax;
and providing for an effective date."
9:26:56 AM
JANAK MAYER, MANAGER, UPSTREAM & GAS, PFC ENERGY, commented
that the presentation, "Discussion Slides: Alaska Senate
Finance Committee", (April 4 2012) (copy on file),
contained corrections to numbers from yesterday's
discussion on revenue comparisons, ("Discussion Slides:
Alaska Senate Finance Committee", (April 3 2012) (copy on
file), in an effort to uphold the accuracy of SB 192's
model data. He explained that the model did not include
property tax data which reduced the operating costs. He
discovered that property taxes were included in operating
costs in the Department of Revenue's (DOR) data in its
"Revenue Sources Book." The difference had relatively
little impact on the ACES (Alaska Clear and Equitable
Share) data. He noted a reduction of $50 million in
operating costs. He discovered that the inclusion of
property taxes had a large impact on the SB 192 data, which
reduced the level of revenue by $200 million at $110/bbl.
(per barrel) price of oil in FY 2013.
He turned to Slide 2, "FY 2013 Revenue Comparison." The
slide depicted two graphs that compared ACES, CSSB 192, and
HB 110 (HB 110-Production Tax on Oil and Gas) provisions.
The graphs illustrated revenues generated to the state from
production tax and cash to oil companies. He noted that the
HB 110 data illustrated significantly reduced revenue at
prices of $60/bbl. up to $200/bbl. The provisions in CSSB
192 provided the state with more revenue and mimicked ACES
up to $100/bbl. then diverged from ACES and showed a
revenue reduction with significant reduction at $130/bbl.
up to $200/bbl., which placed revenue for the state at a
middle point between HB110 and ACES. He cited the second
graph; cash to companies that depicted an exact inverse
when compared to state revenues. [The provisions of HB 110
provided more cash to companies, the least from ACES, with
CSSB 192 in between.]
9:31:47 AM
He identified Slide 3, "FY 2013 Revenue Comparison" that
portrayed two graphs comparing the "total state take" and
"total government take."
He explained slide 4 titled, "FY 2013 Revenue Comparison."
The chart depicted production tax, total state take, total
government take, cash to companies, and FY 2013 percentage
of government take at various prices per barrel of oil
under HB 110 , CSSB 192, and ACES. He relayed that at
$110/bbl. the production taxes were $4.782 billion under
ACES, $4.263 billion under CSSB 192, and 3.075 billion
under HB 110. He noted that HB 110 authorized that all
capital credits may be claimed under a single year instead
of spread over two years. He stated that the figure
represented the claimed capital credit allowance under HB
110. In the future production tax revenue would amount to
an additional $100 million to $200 million less than under
ACES.
Co-Chair Hoffman remarked that the industry sought
increased revenue at high oil prices. He referred to the
"cash to companies" column in the chart on slide 4 and
noted that at $110/bbl. industry received $4,582 billion
under ACES and $4,890 billion under CSSB 192. He added that
at $200/bbl. companies received $7,440 billion under ACES
and $9,170 billion under CSSB 192. He stated that at
$150/bbl. to $160/bbl. price of oil CSSB 192 granted
industry approximately $1 billion more over ACES. Mr. Mayer
agreed and stated that was how CSSB 192 was designed to
work. Progressivity was significantly reduced from ACES
levels beginning at $125/bbl.
Co-Chair Hoffman observed that CSSB 192 accomplished
reducing the disparity between industry and the state of
Alaska revenues as oil prices rise. Mr. Mayer agreed.
9:36:17 AM
Senator McGuire commented that she liked what CSSB 192
accomplished for the legacy fields, shown on the chart on
slide 4. She felt that a balance was struck between the
previous version of SB 192 and HB 110. She expressed
concern that the incentives in CSSB 192 did not accomplish
enough to stimulate new production. She requested
projections to the model increasing base rates to 15
percent and 20 percent for incentivizing new production.
Mr. Mayer responded that there were a number of ways to
further incentivize new production. He reminded the
committee that the incentives for new production in CSSB
192 offered a maximum of 5 percent on the progressive gross
tax. He suggested that rescinding the 5 percent tax or
extending the 7 year limit were alternative ways to
increase the new production incentives. He warned that
changing the base rate on the profit based production tax
was much more difficult to accomplish. Administering
different base rates for separate streams of production was
complex and problematic. He offered that the only other way
to provide more incentives through a change in the base
rate was to lower the base rate for all production and try
to retain a desired level of government take through taxes
on the gross.
Senator McGuire referred to Slide 6, "Total Government Take
Comparison Including New Production Incentives" that
charted the percentages of government take in FY 2013 under
ACES, HB 110, and CSSB 192. She wanted the government take
on new production further reduced to 61 to 63 percent. She
requested additional hypothetical data modeling that
outcome.
Co-Chair Stedman noted that the committee viewed previous
data that modeled a tax structure without progressivity
which, significantly reduced government take to the low
sixty percent levels.
9:40:31 AM
Senator Ellis thought that the committee's goal for CSSB
was "cost neutrality at $100/bbl." He was uncertain that
the projections on the slide reflected the goal. He queried
whether that was still the objective. Co-Chair Stedman
answered, "yes." He stated that the goal was to accomplish
revenue neutrality at $100/bbl. He reiterated that the
model was adjusted for property taxes and shifted the
states position downward. He noted a $300 million dollar
difference as a result and wanted to rectify the gap.
Senator Ellis wondered what options existed to achieve
neutrality. Co-Chair Stedman advised that the progressivity
calculation could be raised. Senator Ellis asked for
confirmation that with further adjustments in the model,
the state remained revenue neutral at $100/bbl. Co-Chair
Stedman agreed and added that as the model was refined the
committee would revisit the position.
Senator Ellis stated that he appreciated the attention to
detail in the process. He worried that the floor of the
legislation did not fit the situation and requested an
improvement over the Resources Committee version of the
bill.
9:43:44 AM
Co-Chair Stedman related that he requested adjustments to
the model relating to the floor. The adjustments necessary
was the difference between the legacy fields and smaller
fields. He referenced the chart on slide 4, the section,
"Total State Take" at $40/bbl. The total state take under
ACES was $1.414 billion and $1.711 billion under CSSB 192.
He determined "that was the effect of the floor", and was
difficult to adjust. A prolonged price of $40/bbl. created
more problems than just the floor. He cited the total state
take at $100/bbl. under ACES was $7.629 billion and under
CSSB 192, $7.310 billion. He remarked that the difference
between the figures was the revenue neutral gap that needed
adjustment. He added that the data for the model needed
further scrutiny to determine what credits, impacts, and
oil fields were included in the figures to ensure accuracy.
Mr. Mayer turned to Slide 5 titled, "FY 2013 Revenue
Comparison - Adjusted for $400mm Credits Not Claimed
Against Current Production." He explained that the numbers
were adjusted down by $400 million from the chart on slide
4, to clarify the impact of the additional credits on
production tax and total state take.
He identified the slide on page 6 titled, "Total Government
Take Comparison Including New Production Incentives." He
reported that the graph and chart illustrated the
difference between the percentage of government take for
ACES, HB 110, and CSSB 192 for new production and existing
production. He offered that the percentages for HB 110
represented entirely new production. The definition of new
production for CSSB 192 was a work in progress. The
intention was to significantly expand the definition
compared to the designation of new production found in HB
110.
9:48:49 AM
In response to a question by Co-Chair Stedman, Senator
McGuire responded that she was convinced by further
testimony that adjustments to the base rate solely for new
production was detrimental to the model and withdrew her
earlier request.
Co-Chair Stedman wanted flexibility in the model. He
thought that if a new type of oil discovery needed further
incentive in the future, adjustments to progressivity or
other type of modification could be made instead of
necessitating changes to the structure that complicated the
accounting process.
Senator McGuire felt that the model enabled the analysis of
various types of incentives and how to achieve that with
progressivity. She requested that PFC model a 10 year
timeline instead of 7 year timeline. Co-Chair Stedman
believed that with the "time value of money" the longer the
timeline of an oil production curve the least impact was
felt.
Co-Chair Stedman remarked that a solution that dealt with
incremental production from the legacy fields was the last
big component in CSSB 192 that required consideration.
Various options were being examined and would be introduced
to the committee in a timely manner for discussion and
input from the administration, and industry.
SB 192 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
9:53:05 AM
The meeting was adjourned at 9:53 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 192 April 4 Alaska Senate Finance .pdf |
SFIN 4/4/2012 9:00:00 AM |
SB 192 |
| SB 100 New BLANK CS 040412.pdf |
SFIN 4/4/2012 9:00:00 AM |
SB 100 |