Legislature(2019 - 2020)BELTZ 105 (TSBldg)
04/19/2019 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SJR4 | |
| SB33 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SJR 3 | TELECONFERENCED | |
| += | SJR 4 | TELECONFERENCED | |
| += | SB 33 | TELECONFERENCED | |
SJR 4-CONST. AM: STATE TAX; INTIATIVE
1:39:10 PM
CHAIR HUGHES announced that the first order of business would be
SENATE JOINT RESOLUTION NO. 4, Proposing amendments to the
Constitution of the State of Alaska prohibiting the
establishment of, or increase to, a state tax without the
approval of the voters of the state; and relating to the
initiative process.
[Before the committee was CSSJR 4(STA), Version U].
CHAIR HUGHES made opening remarks.
1:40:35 PM
WILLIAM MILKS, Attorney, Labor & State Affairs, Civil Division,
Department of Law, Juneau, stated that the Department of Law
provided a memo to the committee dated April 15, 2019, that
addresses certain issues raised by the Legislative Legal
Services, Legislative Affairs Agency. The first question relates
to the administration's intent related to the definition of new
taxes and increased tax rates. The changes to deductions,
exemptions, or credits from an existing state tax would not be
covered by SJR 4, so it would not trigger a vote by the people,
he said. The department has one suggested change that will be
considered by the committee later, which would insert the word
"nominal" in front of tax rate to clarify that the intent is not
to increase the nominal tax rate or an individual's tax rate. He
related an example, that if the number was 10 that changes to it
would trigger the constitutional amendment.
1:42:33 PM
CHAIR HUGHES related her understanding that an initiative to
change tax credits or deductions would effectively change the
tax rate, but [SJR 4] would not apply.
MR. MILKS answered that is correct. He said that questions arose
regarding various scenarios and how this provision would work if
a bill created several new taxes as well as a regulatory
program. If a bill were to pass the legislature that creates
multiple taxes, each of the new taxes would be presented to the
voters to consider separately. Since this resolution focuses
solely on taxes, only the portion related to taxes would be
subject to the provisions of SJR 4 if a program was passed by
law that created a new tax or increased an existing tax that had
regulatory changes.
MR. MILKS said another question that was raised related to the
circumstance in which a bill decreased a tax and a referendum by
the voters rejected it. This would mean the state would revert
to an existing tax. This circumstance would not be covered by
SJR 4, which does not speak to a referendum in that
circumstance. Instead, it would speak to a tax rate or a new tax
passed by the legislature or by the voters via an initiative, he
said.
MR. MILKS said that two additional issues were raised that the
committee will consider. One concerned Article IX Section 1,
which is a specification related to the effective date of an
initiative law. He said that initiative laws become effective
pursuant to constitutional provision in Article XI, Section 6,
except for subjects related to tax changes. In those
circumstances SJR 4 would govern, which means the initiative law
would not become final law 90 days later, but it would be
subject to the process by which the legislature would review the
law.
1:46:26 PM
MR. MILKS said that another issue was to clarify questions
related to the tax year when establishing a new tax. He said
that the department suggests amending SJR 4 to change the
effective date to January 1 of the following fiscal year to
avoid a new tax becoming effective mid-year.
MR. MILKS related that a question was raised as to whether the
legislature's Uniform Rules would need to be modified if SJR 4
were to pass. He said it is possible, but he did not think it
would impact SJR 4. [Uniform Rules] would not be addressed in
SJR 4, he added.
MR. MILKS said that the memo outlines the department's response
to technical issues and further explanations, reiterating the
scope of SJR 4.
1:47:35 PM
CHAIR HUGHES noted that the memo from the Legislative Legal
Services, Emily Nauman, legal counsel, brought up important
issues to consider. She said that one of the issues she raised
is the effect of SJR 4 on a new group of taxpayers or product.
MR. MILKS related his understanding that SJR 4 would apply if a
new tax would be applied to a new product.
CHAIR HUGHES asked whether SJR 4 would apply to a new group of
taxpayers.
MR. MILKS answered that SJR 4 would also apply to the new group
of taxpayers.
1:49:16 PM
SENATOR MICCICHE related his understanding Ms. Nauman believes
that SJR 4 is not an amendment [but is a revision] to the
Constitution of the State of Alaska.
1:49:29 PM
EMILY NAUMAN, Deputy Director, Legislative Legal Services,
Legislative Affairs Agency, Juneau, responded that is correct.
SENATOR MICCICHE asked whether this would make a political
statement or if it does not matter. In this case it is a
substantial shift and the power of taxation should never be
surrendered or contracted away. He offered his belief that the
legislature would be surrendering and contracting away the power
of taxation and [SJR 4] would result in a tax being implemented
sooner. He said he has put on the record that the only people
losing rights in SJR 4 are the people of Alaska in the
initiative process. He said, "On a bumper sticker this sounds
like a really good idea for conservatives that think they're
gaining something but the reality of it is they're losing
substantially."
CHAIR HUGHES suggested that one of the amendments will address
his concern a bit. She said that the Senate Finance Standing
Committee could also consider the matter. She said that SJR 4
would really just move up the timeline instead of having the
two-year delay in place with an initiative.
1:51:16 PM
CHAIR HUGHES moved to adopt Amendment 1, work order 31-
GS1070\U.2, Nauman, 4/5/19.
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR HUGHES
TO: CSSJR 4(STA)
Page 1, line 3, following "state;":
Insert "relating to effective dates of laws;"
Page 1, following line 4:
Insert a new bill section to read:
"* Section 1. Article II, sec. 18, Constitution of
the State of Alaska, is amended to read:
Section 18. Effective Date. Laws passed by the
legislature become effective ninety days after
enactment. The legislature may, by concurrence of two-
thirds of the membership of each house, provide for
another effective date. This section does not apply to
a law establishing a state tax or increasing a state
tax under Section 1(b) of Article IX."
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 1, line 11:
Delete "Notwithstanding Section 18 of Article II,
a"
Insert "A"
Page 2, lines 2 - 3:
Delete "the later of ninety days after"
Insert "January 1 of the fiscal year following
the fiscal year in which"
Page 2, lines 3 - 4:
Delete "or an effective date provided for by
concurrence of two-thirds of the membership of each
house"
Page 2, line 12:
Delete "ninety days after approval"
Insert "January 1 of the fiscal year following
the fiscal year in which the initiated law is
approved"
SENATOR MICCICHE objected for discussion purposes.
1:51:34 PM
MR. WHITT explained that Amendment 1 speaks to the issue the
Department of Law raised and would address concerns related to
the effective date. Amendment 1 would add a line to Article II,
sec. 18 of the Constitution of the State of Alaska to read,
"This section does not apply to a law establishing a state tax
or increasing a state tax under Section 1(b) of Article IX." It
would also change the effective date to January 1 of the fiscal
year following the statewide voter [initiative]. He explained
the timeline, that following a November statewide election when
the legislature reconvenes in January, it would make a decision
regarding the [initiated law]. Thus, the effective date would be
the following January 1. In response to Chair Hughes, he agreed
it related to a voter initiative. He said this would provide
nearly a year for the administration to take actions to
administer the new tax.
1:53:15 PM
SENATOR KIEHL said Amendment 1 is cleaner than the original
draft. He related a scenario with seasonal activities and
industries that occur in the winter. However, January 1 falls in
the middle of the season. He asked whether any provision exists
for the legislature or voters to adjust to a different start
date.
MR. WHITT surmised that provisions would be in place for
agencies and businesses to gear up to implement a new tax that
would begin on January 1 and run through December 31. This would
not be the first time a new tax was implemented.
CHAIR HUGHES added that she thought this reflects a fairly
typical January 1 to December 31 timeframe.
1:55:25 PM
MIKE BARNHILL, Policy Director, Office of Management and Budget,
Office of the Governor, Juneau, stated that Amendment 1 would
establish the effective date on January 1. For example, a new
Heli-ski company whose season begins on October 1 would be tax
free for three months. He did not envision any tax
administrative issues, but rather that the division would use
its standard practice to implement the new tax.
1:56:01 PM
SENATOR KIEHL said he was hoping for more. He asked for further
clarification on the mechanics of Amendment 1. He recalled that
the legislature has sometimes implemented retroactive changes to
the tax code. He further recalled that the Alaska Supreme Court
has said "that retroactivity is not an effective date." He asked
whether it would be available under the language in Amendment 1.
MR. BARNHILL deferred to the Department of Law.
CHAIR HUGHES offered to follow up with the department on that
specific question.
1:57:00 PM
SENATOR MICCICHE said that Amendment 1 would make it impossible
for the legislature to respond to a substantial drop in the
price of oil. He said that assuming the legislature puts a full
dividend in the Constitution of the State of Alaska, an "x"
amount of revenue flows in, but the state is not always going to
have $17 billion in the earnings reserve account (ERA). There
may not be anything in the CBR [Constitutional Budget Reserve]
or the ERA. In order to keep the state operating, the state may
need to implement a tax one day. He emphasized that he does not
currently support implementing a tax. However, this language
makes it so the legislature is always in session because the
approval process would take a year. Even if the legislature held
a special session, the tax would not become effective until
January 1 of the following year, he said.
SENATOR MICCICHE said Amendment 1 would create a completely
unmanageable financial situation and there is a reason why the
legislature retains taxing power. Although the state has not had
to do so for generations, one day the legislature may need to
[implement taxes] in order to provide basic services people
cannot afford to do on their own, such as troopers and schools.
Extending the date would mean waiting to see if something passes
on November 2 and managing it if it doesn't. That would mean
holding a special session, immediately holding a special
election, and waiting until the following year for a correction
on the next January 1. Although it sounds good, he did not think
this has been adequately thought through.
1:59:39 PM
CHAIR HUGHES pointed out that he is speaking more generally
about the resolution, but Amendment 1 and the trigger date is
before the committee. She pointed out that Colorado has done
this. If the legislature were to pass a tax, it would require
public education and a mutual agreement that taxes were
necessary to continue to provide services.
MR. BARNHILL said, "Just briefly, Madam Chair, and with respect
to Senator Micciche, I think there's a difference between making
the enactment of new tax or an increase in the tax rate more
difficult, which this certainly does, and impossible, which this
does not."
CHAIR HUGHES asked whether he maintained his objection.
2:01:14 PM
At-ease.
2:06:42 PM
CHAIR HUGHES reconvened the meeting.
2:06:47 PM
SENATOR MICCICHE made a motion to adopt Conceptual Amendment [1]
to Amendment 1, on page 2 to delete lines 4-6.
CHAIR HUGHES, referring the language on page 2, asked for
clarification from Mr. Whitt. She asked if the committee would
like the possibility of concurrence of two-thirds as another
option, if it should "delete" the word "delete" or whether all
of lines 4-6 in the amendment should be deleted.
MR. WHITT responded that either language would have the same
effect.
CHAIR HUGHES acknowledged that the language is in the
resolution.
2:07:35 PM
There being no objection, the Conceptual Amendment [1] to
Amendment 1 was adopted.
CHAIR HUGHES said that Amendment 1, as amended, was before the
committee.
SENATOR MICCICHE removed his objection.
There being no further objections Amendment 1, as amended, was
adopted.
2:07:56 PM
CHAIR HUGHES moved to adopt Amendment 2, work order 31-
GS1070\U.3, Nauman, 4/10/19.
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR HUGHES
TO: CSSJR 4(STA)
Page 2, lines 7 - 14:
Delete all material and insert:
"(c) Unless rejected by the legislature under
this subsection, a law enacted by voters through the
initiative process under Article XI that establishes a
tax or increases the rate of an existing tax takes
effect January 1 of the fiscal year following the
fiscal year in which the law is enacted by voters. The
legislature shall have sixty days of the next regular
session beginning after the initiative election, or a
full session if of shorter duration, to reject the
initiated law. The law must be rejected by resolution
concurred in by a majority of the members in joint
session. If the legislature rejects the initiated law,
the initiated law does not take effect."
SENATOR MICCICHE objected for discussion purposes.
2:08:02 PM
MR. WHITT explained Amendment 2, would replace language on page
2, lines 7-14. Senator Micciche raised the concern that the
resolution would be removing power from the people. After
discussions with the Department of Law, the language in
Amendment 2 mirrors Article III of the Constitution of the State
of Alaska under executive powers. The current language in SJR 4
states that the legislature must, by resolution, approve an
initiative with a majority vote. If it does not approve the
initiative, the initiative would die, he added. Under Amendment
2, by resolution, the legislature would reject an initiative [by
a majority vote]; otherwise the initiative would automatically
become law. This process is similar to an executive order, he
said.
CHAIR HUGHES pointed out that if the legislature does nothing,
the initiative would also become law. Amendment 2 would require
the legislature to go on record, after the people have weighed
in [by passing an initiative]. She envisioned that it would be
more demanding for the legislature to go on record to oppose [a
vote] by the people.
2:09:55 PM
SENATOR MICCICHE clarified that [Amendment 2] does not replace
that right, that the public has lost the right to initiative.
The current constitutional language provides the legislature the
right to tax, but the people can remove the tax through an
initiative process or a referendum process. The people also have
the right to create a law by initiative and the legislature must
honor that law for two years. After two years, it is more
difficult to change the law because people remember they voted
to create it. All Amendment 2 does is to document how
[legislators] voted when [the legislature] takes away the right
to initiative for two years.
CHAIR HUGHES agreed that it documents the vote, but it also
makes it a higher bar and more difficult [for the legislature]
to overturn the law since the people passed it by initiative.
She said that legislators might be hesitant to go against a law
the people have asked for [via the initiative vote]. The way the
resolution currently reads, one would never really know who was
in agreement or who was not in agreement. She characterized it
as "somewhere in between."
2:11:26 PM
SENATOR KIEHL offered his belief that Amendment 2 would make a
smaller reduction in the people's authority to pass an
initiative, but it would still be a reduction.
CHAIR HUGHES asked whether he would agree it was a slight
improvement.
SENATOR KIEHL indicated it was a small one.
SENATOR MICCICHE removed his objection.
There being no further objection, Amendment 2 was adopted.
2:12:25 PM
CHAIR HUGHES moved to adopt Amendment 3, work order 31-
GS1070\U.4, Nauman, 4/16/19.
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR HUGHES
TO: CSSJR 4(STA)
Page 1, line 12, following "the":
Insert "nominal"
Page 2, line 8, following "the":
Insert "nominal"
SENATOR MICCICHE objected for discussion purposes.
2:12:35 PM
MR. WHITT reviewed Amendment 3, which would specify "nominal."
He said the language on page 1, line 12 would read, "? the
nominal rate of an existing state tax ?." He said that the
Department of Law described it as cleanup language per its memo.
SENATOR MICCICHE said he was not positive that it resolves the
issue. For example, a 35 percent base tax rate on oil taxes also
has a $5 per barrel tax. One might say that the 35 percent is a
nominal rate. However, it is not the nominal rate because it is
inherently a part of the tax that results in a nominal outcome.
While he understands the argument, it would be very easy to
challenge in court since taxes are not a base rate. They are a
function of exclusions, deductions, and other levers that are
designed for a specific outcome, he said. In this instance,
nominal is not what one would think it is. He said that it just
means if the state decides it is "nominal" and the people decide
it is not, it would go to a vote of the people. He said it is
not a huge deal to him, but it is something to think about.
CHAIR HUGHES suggested that the record would reflect the
committee's intent and that the committee's discussion is
related to the 35 percent and not the deductions or other
things. She asked Mr. Barnhill if "nominal tax rate" is a
standard term used to refer to the base rate and that it does
not include other calculations that occur above the line.
2:15:28 PM
MR. BARNHILL said that he did not know if it was a standard tax
term. He said that the record could reflect that the 35 percent
rate in the state's production tax statutes is the nominal rate.
In order to trigger [SJR 4,] the legislature would need to
change the nominal rate from 35 percent to some another number.
CHAIR HUGHES suggested the committee adopt [Amendment 3] and ask
the Senate Finance Standing Committee to determine if this is a
standard tax term that could be relied upon.
MR. BARNHILL offered to research it.
2:16:17 PM
SENATOR KIEHL said that it is a fairly standard term. He
acknowledged that Senator Micciche is correct. He said he does
not think this provision would be triggered if the legislature
passed a law to apply a credit of minus $5 on every barrel of
oil. Although it is not the nominal rate, it raises the taxable
value for tax purposes by $5 and collects 35 percent, he said.
The legislature could change the nominal rate and what Senator
Micciche said was "spot on," he said. He characterized it as a
can of worms that is wriggling and hard to grab.
MR. BARNHILL responded that Amendment 3 tries to provide clarity
for future cases that are litigated. He said that broad terms
are used in constitutional language and it leaves it up to the
courts to ultimately decide.
SENATOR MICCICHE said the legislature has been known to find
"work arounds." He acknowledged that it is popular to require
voter approval but adding "nominal" creates a work around. He
brought up the $5 per barrel tax example to illustrate it. He
said the legislature could find another way to change the tax
rate without voter approval. He understood Amendment 3 is an
attempt to achieve clarity, but it may work the other way.
MR. BARNHILL responded that the administration is trying to
strike a balance, so everything does not need voter approval and
to create a dividing line. Some things will need voter approval
and others will not, and some gray areas will occur, he said.
Adding words like "nominal" may help reduce the ambiguity in
certain cases, and if so, the committee should do so. He said
the record should be clear that the administration is not trying
to amend the Constitution of the State of Alaska by sending
every tax fee, deduction, or question to the people [for voter
approval]. [Under Amendment 3], some things will require voter
approval, such as an increase in the "nominal" rate of tax or to
create a new tax. However, certain things will not require voter
approval, such as fees, deductions, or implied changes to the
rate of tax that do not change the nominal rate of existing
state tax.
2:20:26 PM
SENATOR REINBOLD [via teleconference] said she appreciated
hearing the discussion.
2:20:39 PM
SENATOR MICCICHE said he opposes the legislature telling people
it is doing something that it is not really doing. For example,
the Constitution of the State of Alaska has a spending limit.
The minutes reflect that the legislature put into place
something that sounded like a spending limit, yet it was a "big
joke," and the legislature knew it was not going to have any
effect on spending.
He acknowledged that this may be uncomfortable to discuss.
However, he views Amendment 3 as a work around and people should
understand that there are not any corporate taxes, fish taxes,
fuel taxes, or marijuana taxes in place that the legislature
cannot find a work around. He said that the committee could
create a "purer" approach, or it could make the process more
flexible, which might bring out creativity by the legislature.
2:21:52 PM
SENATOR MICCICHE withdrew his objection.
There being no further objection, Amendment 3 was adopted.
2:22:10 PM
CHAIR HUGHES moved to adopt Amendment 4, work order 31-
GS1070/U.5, Nauman, 4/16/19.
AMENDMENT 4
OFFERED IN THE SENATE BY SENATOR HUGHES
TO: CSSJR 4(STA)
Page 2, line 19:
Delete "Section 1"
Insert "Section 1(c)"
SENATOR MICCICHE objected for discussion purposes.
2:22:21 PM
MR. WHITT explained Amendment 4 is a "carve out" for Article IX,
Section 1(c), which relates to the enactment provisions in
Amendment 2. Thus, except as provided in Section 2 of Article
IX, the enactment would follow the provisions in Section 1(c) of
SJR 3.
2:23:05 PM
SENATOR MICCICHE removed his objection.
There being no further objections, Amendment 4 was adopted.
[SJR 4 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SJR 3 - Sponsor Statement.pdf |
SJUD 4/12/2019 1:30:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM SJUD 4/22/2019 6:00:00 PM |
SJR 3 |
| SJR 3 Version A.PDF |
SJUD 4/12/2019 1:30:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM SJUD 4/22/2019 6:00:00 PM |
SJR 3 |
| SJR3 Fiscal Note.pdf |
SJUD 4/12/2019 1:30:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 3 |
| SJR4 Transmittal Letter.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| SJR4 Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/15/2019 1:30:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| SJR4 Explanation of Changes Version U.pdf |
SJUD 4/1/2019 1:30:00 PM SJUD 4/3/2019 1:30:00 PM SJUD 4/3/2019 6:00:00 PM SJUD 4/17/2019 6:00:00 PM SJUD 4/19/2019 1:30:00 PM |
SJR 4 |
| CSSB 33(JUD) Version U.pdf |
SJUD 4/19/2019 1:30:00 PM SJUD 4/22/2019 6:00:00 PM |
SB 33 |
| CSSB33 Explanation of Changes from Version M to U.pdf |
SJUD 4/19/2019 1:30:00 PM SJUD 4/22/2019 6:00:00 PM |
SB 33 |