Legislature(1997 - 1998)
02/13/1997 03:03 PM House HES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HB - 54 EDUCATION TECHNOLOGY PROGRAM
Number 0523
BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division,
Department of Revenue, said DOR would provide a fiscal note for
CSHB 54(HES) after today's meeting. He said there is not currently
an official fiscal note, but one could be generated to go with CSHB
54(HES).
Number 0591
CHAIRMAN BUNDE said there is some concern about the size of the
fiscal note and asked if this project could be launched without a
fiscal note. He said CSHB 54(HES) is asking folks in the
community, businesses, to basically set up this technology grant
and asked if the effort could go forward without state seed money.
Number 0613
MR. BARTHOLOMEW said the fiscal note he is referring to would be
the loss of revenue from the tax deduction which is around
$114,000. As far as the cost of the staff positions, the
Department of Education could provide an answer to that suggestion.
Number 0636
REPRESENTATIVE GREEN said there was a question regarding the
subcommittee report and the chart that the DOR provided.
Number 0658
MR. BARTHOLOMEW said DOR tried to look at what happened in other
tax credits which provide more of an incentive to give than just
allowing a business deduction. Two scenarios were provided that
were pretty close to a linear relationship. He said the lower
option scenario is more realistic. He said you could try to guess
the risk of a higher one based on your perceived conception of
private business support. He said there is a growing competition
for private companies to contribute to various charitable
organizations and funds.
Number 0699
REPRESENTATIVE VEZEY said he had trouble understanding the table.
He said he accepted the assumptions from DOR. He said if you look
at the first table, the deductions for corporations with $100,000
or more in the state of Alaska corporate income tax liability,
there are 15 taxpayers in that category. If those taxpayers
participated in this fund, he believed that the statute limited the
contribution to a $100,000 deduction for this corporation. He
asked for verification that at 9.5 percent of 15 taxpayers owing
$100,000 equals $141,000 in lost tax revenue.
Number 0742
MR. BARTHOLOMEW said this was correct.
Number 0743
REPRESENTATIVE VEZEY said we are saying for $220,000 of potential
tax savings, we can get the corporate tax payers in the state to
contribute $3.7 million.
Number 0759
MR. BARTHOLOMEW said these are the assumptions based in Scenario A.
Number 0775
REPRESENTATIVE VEZEY asked why we need CSHB 54(HES). He said this
fund can be done under existing law.
Number 0780
MR. BARTHOLOMEW said, under existing law, you are allowed to take
a limited deduction for charitable contributions but he did not
think that schools qualified as a 501-C(3), which is what allows
you to deduct contributions from your taxes. He said CSHB 54(HES)
amends the Alaska tax statutes to allow a general business
deduction.
Number 0801
REPRESENTATIVE VEZEY said his opinion differed. He said an
educational organization is capable of getting a 501-C(3) tax, it
is one of the functions, educational purposes, that is recognized
by the Internal Revenue Service (IRS). He said there are limits on
the amount of charitable contributions that a corporation can make,
they are fairly generous based on gross earnings not on tax
liability. He said the main factor here is that the biggest credit
is the federal income tax. He said any entity, including the state
of Alaska if we pass CSHB 54(HES), would still have to address it
on their income tax and get recognized by the IRS. He said any
entity that we set up would still have to apply for the 501-C(3)
status, you do not need to pass a statute to create a 501-C(3)
corporation. He asked what the committee was doing, other than
creating a new bureaucracy.
Number 0872
MR. BARTHOLOMEW said he could not say today whether schools can
apply and become a 501-C(3), but it makes sense within the
guidelines. He said there are limitations that apply to how much
of a charitable contribution you can deduct. He said it was
correct that if CSHB 54(HES) passed and a business gave a
contribution to the technology fund, they would get a general
business deduction for state tax purposes which would not be
deductible on their federal income tax unless you went through the
route and became a recognized 501-C(3) corporation which would
subject you to limitations. He said it is strictly a state tax
code amendment.
Number 0925
REPRESENTATIVE VEZEY said if we create this new bureaucracy is it
their intent to go out and get qualified as a 501-C(3) corporation
or association.
Number 0944
GEORGE SMITH, Deputy Director, Libraries, Archives and Museums,
Department of Education (DOE), referred to the fiscal note
submitted by the DOE which was originally zero. He said it was
assumed that, at least initially, there would not be a large amount
of money in the program and that his division could handle training
in the public library and the school libraries with the existing
library development staff. He said he had a note that said, if the
fund received a large grant or an endowment, a staff would need to
be hired for additional training. He said you cannot put computers
and technology into small communities and expect them to bring it
up and know how to use it without some good training.
MR. SMITH said the initial fiscal note, in one of the other
divisions, Teaching and Learning Support, was that there would be
a need for staffing to handle this fund. He said if the provision
were made that some of the endowment money could be used for
training purposes to hire a staff, then a zero fiscal note could be
submitted. He clarified that this issue was discussed in the
subcommittee meeting. He said his division, Libraries, Archives
and Museums could handle their fiscal note in the same way. If
that provision were included in CSHB 54(HES), the libraries
division would not need a fiscal note.
Number 1032
CHAIRMAN BUNDE clarified that Mr. Smith was referring to the DOE
fiscal note, the $121,000.
MR. SMITH said, "yes, actually for both of us. With that provision
both of us could handle it and I discussed that issue with the
other division."
CHAIRMAN BUNDE said if it doesn't work, you won't take any money
but if it does work you may need it.
MR. SMITH said, even if there were small amounts of money, his
division could handle it with existing staff.
Number 1055
REPRESENTATIVE PETE KOTT, sponsor of HB 54, said he did not feel
that CSHB 54(HES) would create a growing bureaucracy. He said, as
indicated, there might be one or two individuals put on staff to
allocate the grants, monies to the individual school districts and
libraries. The staff will be responsible for insuring that the
requirements for the application are met. He said he did not think
that a great bureaucracy would be growing here.
REPRESENTATIVE KOTT said, currently, the DOE has a $1 million
grant. He said there is a provision in that federal grant that
gives them up to 5 percent for administrative costs. He said
passage of CSHB 54(HES) will assist in the state's ability to
obtain future grants by getting a program that shows that the state
is interested and committed to providing education technology. He
said it is his understanding after talking to potential recipients
of grants that one of the first questions asked is what the state's
interest is and what is their level of commitment. He said having
this structure in place sends a message out there. He said the
U.S. Office of Education has an annual challenge grant that is
available and said the state of Alaska has not received it for
three years because we don't have the interest or intent out there.
He said this fund would resolve that particular issue.
Number 1154
REPRESENTATIVE PORTER asked if CSHB 54(HES) gave DOE the ability to
utilize the fund for necessary training or would that have to be
something that would be added.
REPRESENTATIVE KOTT said he believed that the subcommittee
addressed this issue.
Number 1173
REPRESENTATIVE GREEN said the subcommittee actually found two
references; an early reference was of the opinion that no you
couldn't and then later there was a legal reference that said yes
you can. Ms. Cook said as long as you don't preclude it within the
bill itself stating that it cannot be used, then it can be used.
Number 1195
REPRESENTATIVE PORTER said the chairman of the committee that has
the bill, by the executive branch's policy, is the one who has to
order the fiscal notes. He would suggest that if it is the intent
to move CSHB 54(HES) today, we move it with a qualification on the
fiscal notes, that the chairman be allowed to get fiscal notes from
the department reflecting (indisc.--coughing) testimony we've heard
which he thought would then be a zero fiscal note for the DOE.
Number 1220
REPRESENTATIVE J. ALLEN KEMPLEN said the possibility of allowing
community centers, recreational centers to receive or apply for
these grants from the education technology fund was discussed at
the subcommittee meeting. He asked if there was a discussion with
the federal government about this possibility.
Number 1248
REPRESENTATIVE KOTT said no, not to that particular issue. Some of
these grants do come with strings attached and would prohibit the
money from being allocated down to community centers. He said,
after giving it some additional thought, it was his opinion that
this particular area of appropriating, allocating grant money goes
beyond the scope of his intent in CSHB 54(HES).
Number 1278
CHAIRMAN BUNDE called an at ease at 4:13 p.m. and the committee
meeting resumed at 4:14 p.m. He said he is hesitant to pass CSHB
54(HES) with a fiscal note that is inaccurate. He asked Mr. Smith
if he could provide a fiscal note that would be a zero fiscal note.
Number 1294
MR. SMITH said his division's fiscal note was zero. He said the
other division's fiscal note, the Division of Teaching and Learning
Support was originally $120,000. He has discussed this issue with
the director of the division. He said as long as DOE knows that
administrative costs can come out of the grant or endowment, they
could provide a zero fiscal note.
Number 1327
CHAIRMAN BUNDE said it is the chair's intent to write a zero fiscal
note for the Department of Education including the Division of
Teaching and Learning Support and the Division of Libraries,
Archives and Museums.
Number 1332
REPRESENTATIVE TOM BRICE made a motion to move CSHB 54(HES) with
attached zero fiscal note or fiscal note as corrected by this
committee.
Number 1340
REPRESENTATIVE VEZEY objected to the motion. He said his objection
is no comment on the role of technology in our society and in our
educational process. He said he has some interest in
organizational structure, particularly in business organization,
and said he believes that we are going, completely, in the wrong
direction. He said the state of Alaska and the United States
government have spent considerable time and effort, over the last
200 years in the case of the federal government, creating
institutions that can provide public service. He said by trying to
create an organization within the state of Alaska, we are creating
a government entity that can do, with all the efficiency of
government, that which can be currently be done under our non-
profit corporation statutes. He said we recognize that our civic
organizations provide the community greater efficiency. He said he
did not feel that the organization of this fund has been thought
out. He said he could not help but think that the idea is to
create a bureaucracy that can request more funding.
Number 1418
REPRESENTATIVE PORTER said he did not disagree with a lot of what
Representative Vezey said. He said he was particularly encouraged
by hearing the DOE's comments that if it was necessary to increase
the volume of personnel needed to implement, not maintain, they
would contract for those kinds of services. He said he would not
support CSHB 54(HES) thinking that we would be adding permanent,
long-term state employees. He said if it turns out that a year or
two down the road that is the case, then he would hope it would be
revisited.
Number 1446
REPRESENTATIVE DYSON said he felt that making technology available
in the education process was inordinately important, but the other
problem with the issue is the idea that government can come from
the people in the sense of being supported by it, such as trust
funds. He said he has a problem with trust funds on the government
side of it. He said he would pass CSHB 54(HES) out and would spend
time weighing the issues before it was voted on the House floor.
A roll call vote was taken on CSHB 54(HES). Representatives Bunde,
Green, Porter, Brice, Kemplen and Dyson voted yea. Representative
Vezey voted nay. CHAIRMAN BUNDE announced that CSHB 54(HES) was
moved with zero fiscal notes from the House Health, Education and
Social Services Standing Committee.
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