Legislature(1995 - 1996)
04/12/1995 01:45 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 269
"An Act relating to credits against certain taxes for
contributions to certain public educational radio and
television networks and stations and to endowments for
public educational radio and television networks; and
providing for an effective date."
TOM WRIGHT, STAFF, REPRESENTATIVE IVAN testified in support
of HB 269. He observed that the legislation provides a tax
credit for contributions made to instate public radio and
television stations and networks. The tax credit ceiling
was raised from $100 thousand dollars to $450.0 thousand
dollars. The credit is allowed on 50 percent of the first
$100.0 thousand dollars in contributions and 100 percent of
the next $400.0 thousand dollars. The new limits would also
apply to the university system and library and museum
acquisitions. The tax credit would be applied against a
taxpayer's liability under insurance premiums, corporation
income, oil and gas production, oil and gas property, mining
licenses and fisheries business taxes. He explained that a
credit claimed under one of the tax types may not be claimed
under another tax type.
Members were provided with a proposed committee substitute
for HB 269, Work Draft #9-LS0937\K, dated 4/3/95 (copy on
file). Mr. Wright explained that the work draft
incorporates technical changes requested by the Department
of Revenue.
Representative Mulder MOVED to adopt Work Draft #9-LS0937\K,
dated 4/3/95. There being NO OBJECTION, it was so ordered.
Mr. Wright reviewed changes incorporated by CSHB 269 (FIN)
as outlined in the sectional analysis prepared by
Representative Ivan (copy on file).
Representative Mulder observed that the fiscal note shows a
loss of revenue to the state of $35 million dollars. Mr.
Wright emphasized that revenue is currently being lost
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through contributions to the University of Alaska and
libraries.
Representative Brown asked if the total potential loss of
state revenues have been calculated.
BOB BARTHOLOMEW, DEPURTY DIRECTOR, DIVISION OF INCOME AND
EXCISE AUDIT. DEPARTMENT OF REVENUE replied that the fiscal
note was calculated by assuming that tax payers who
participated in the program in FY 95 would take the maximum
credit allowed in FY 96. He stated that there is no way to
estimate the maximum loss revenue through deductions by
corporations that are not participating.
Representative Navarre expressed concern with the level of
deduction allowed under the legislation. He emphasized that
tax credits allow appropriations without the legislative
process.
Mr. Bartholomew observed that not all corporations have made
contributions. He did not know if all the corporations that
gave did so at the maximum level.
Representative Navarre expressed support for the philosophy
of HB 268. He expressed reservations in regards to the
level of contribution that would be diverted from the
general fund by the tax credit.
In response to a question by Representative Brown, Mr.
Wright acknowledged that the sponsor considered setting up
two different contribution deductions. He stressed that the
sponsor did not want the public broadcasting credit to be in
competition with the credit for the University of Alaska and
libraries and museums.
Representative Brown expressed reservations in regards to
the constitutionality of the tax credit. She noted that
there is a prohibition against appropriating public money to
private institutions. She indicated support for public
broadcasting.
In response to a question by Representative Mulder, Mr.
Bartholomew stated that the state lost $944.0 thousand
dollars through the tax credit in FY 95. Representative
Mulder suggested that the credit would be a "back door"
appropriation. He emphasized the difficult decisions the
Committee has had to make in regards to cutting the
operating budget.
Representative Navarre pointed out that there is no match
requirement for the tax credit.
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EDWARD RASMUSON, EXECUTIVE DIRECTOR, NATIONAL BANK OF ALASKA
spoke in support of HB 268. He noted that the educational
tax credit was passed approximately 5 years ago. He
observed that the university system, public and private,
have used them extensively. He maintained that the Alaska
Pacific University and Sheldon Jackson College would not be
operating without the tax credit. He stated that about a
third of the contributions go to the University of Alaska, a
third to the Alaska Pacific University and a third to
Shelton Jackson College. He stressed that it is difficult
to quantify how much the State will loose as a result of the
tax credit. Mr. Rasmuson urged members to consider the
benefit to the state of Alaska. He stressed that
contributions will remain in the state. He did not think
that the state would loose $3.5 million dollars as estimated
by the fiscal note.
ROBERT GOTTSTEIN, CHAIR, ALASKA PUBLIC BROADCASTING
ENDOWMENT TRUST maintained that more people will be educated
in the state as a result of the credit. He observed that
the goal of the Trust is to wean public broadcasting from
state support. He stressed that the Trust will be more
creditable if funding is provided through the tax credit.
He emphasized that the money will help the Trust to leverage
funding in order to build an endowment for the future.
Mr. Gottstein stressed that Alaska will remain a public
schooling state. He maintained that the public will benefit
from a better educated society. He asserted that something
needs to be done to ensure that essential radio and
television service exists in all parts of Alaska in the
future.
Representative Navarre commended the efforts of Mr. Rasmuson
and Mr. Gottstein. He noted the competition for general
fund dollars, including K - 12 education funding. He
observed that the state of Alaska spends more in the
university system per student than in K - 12. He suggested
that the Committee meet in executive session in order to
more accurately ascertain the potential drain to the general
fund that the tax credit represents.
Mr. Gottstein emphasized that the legislation attempts to
create a mechanism to provide incentives for greater
contributions. He stated that the mission is to attract
outside, non-state investment to the recipients of the
credit. He accentuated that they are seriously interested
in raising outside capital contributions that will result in
more education in Alaska and provide a better assurance that
essential radio and television service will take place.
Mr. Rasmuson observed that more money was paid by outside
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sources to Shelton Jackson than the college received from
inside Alaska. He added that there was as much money paid
from outside sources to the Alaska Pacific University as
came from inside the state. He emphasized his desire to see
a better educated work force.
Representative Mulder emphasized the need to balance what
works with what is affordable to the state. He suggested
that the credit amounts to an appropriation from the state.
He reiterated the need to reduce spending. He asked how the
credit ceiling was decided. Mr Rasmuson stated that the
ceiling level was arbitrary.
Mr. Gottstein emphasized that if the cap is not raised that
public broadcasting will be in competition with the funds
that are currently being raised. He stressed that it is not
the intent to take money away from universities which are
already receiving funds from the credit. He stated that
public radio and television is an educational enterprise.
He maintained that it is appropriate to include them in the
statute. He indicated that a lower ceiling on the credit
would be acceptable. He urged the Committee to adopt a
level high enough not to impact current contributions. He
emphasized the need to ensure that public broadcasting
remains in the state of Alaska.
Mr. Rasmuson pointed out that most corporations in Alaska
are subchapter (s) corporations and do not pay state taxes.
He gave a brief history of the institutions that have taken
advantage of the tax credit.
Representative Kelly suggested that public broadcasting be
deleted and the current credit ceiling raised. Mr. Rasmuson
replied that he would not support such an amendment. He
emphasized that public broadcasting and postsecondary
education are both educational items. He stated that public
broadcasting should not be sacrificed for education. He
emphasized that they should be treated together.
Mr. Gottstein speculated that more than 50 percent of the
benefit will go to higher education.
Representative Martin suggested that the state's general
fund contribution to the University was reduced in response
to increased contributions in the form of tax credits. He
thought there would be no net gain in terms of University
funding. He observed that the University is a
responsibility of the state. He expressed concern that
other non-profit organizations would want to be added to the
credit.
Mr. Rasmuson did not think that corporations would give to
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other organizations.
(Tape Change, HFC 95-83, Side 2)
Representative Parnell queried the long term plan for
phasing out state funding.
Mr. Gottstein replied that the plan is to create a mechanism
to provide a substantial trust that will throw off income in
lieu of federal and state funding. He observed that the
state contributes $7.2 million dollars to public radio,
television and RATNet. He noted that they are asking for
less in FY 96 than was appropriated in FY 95. He
acknowledged that the state contribution must be reduced.
He stated that the goal is to raise $100.0 million dollars
for the endowment. He emphasized that it would be easier to
raise money if there was some money in the bank. He
stressed that incentives to attract private capital must be
developed. He reiterated that the contribution amount could
be reduced.
Mr. Rasmuson emphasized that there are not many corporations
that pay taxes in the state of Alaska.
In response to a question by Representative Mulder, Mr.
Gottstein stated that a five year sunset would be
reasonable. He did not support a sunset in regards to the
education contribution.
Representative Navarre noted that the legislation allows
credits to individual stations as well as to the endowment.
He expressed concern that the system will suffer as
contributions are allocated to individual stations. Mr.
Gottstein felt that the majority of contributions would go
to the endowment. He stated that most of the contributions
to the University are given to endowments. He emphasized
that contributions to the endowment will protect the
principal investment.
Mr. Rasmuson observed that most stations do not have the
luxury of setting money aside for an endowment.
Representative Navarre expressed concern that the Anchorage
television station and other urban radio stations could
create competition for the endowment.
Mr. Gottstein emphasized that essential service needs to be
protected. He stated that contributions to rural Alaska
would be to the same end, of ensuring that service is
provided. He did not think that urban broadcast centers
would receive significant contributions, since substantial
commercial competition exists in those areas.
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Representative Kelly asked if underwriting on public
broadcasts will amount to commercials.
RICH MCCLEAR, SOUTHEAST ALASKA MEDIA CONSORTIUM replied that
Congress set in the Communications Act specific parameters
which limit underwriting to things that do not mention
price, adjectives that are comparative or superlative, and
do not amount to a call to action. He did not think that
federal guidelines would be relaxed.
HB 269 was HELD in Committee for further discussion.
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