Legislature(2001 - 2002)

04/22/2002 03:25 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 520 - BUSINESS LICENSE FEES/BUS DEVELOPMNT FUND                                                                            
CHAIR MURKOWSKI announced that the  final order of business would                                                               
be HOUSE  BILL, "An Act  relating to business  licenses, business                                                               
license   endorsements,   and   business  license   and   license                                                               
endorsement fees, to  a trade and business  development fund, and                                                               
to the international trade and  business endowment; and providing                                                               
for an effective date."                                                                                                         
Number 2061                                                                                                                     
AMY  ERICKSON, Staff  to  Representative  Lisa Murkowski,  Alaska                                                               
State  Legislature,  informed  the  committee  that  HB  520  was                                                               
actually brought to [the  committee] by Representative Lancaster,                                                               
the Finance subcommittee chair for  the Department of Community &                                                               
Economic  Development.   This legislation  seeks  to implement  a                                                               
secure funding mechanism  to pay for the  administrative costs of                                                               
the business licensing program and  the international, trade, and                                                               
economic development  activities, including  tourism development.                                                               
This legislation doubles the business  licensing fees from $25 to                                                               
$50  per year,  which  will generate  approximately $3.6  million                                                               
each year.   She noted that  the fees haven't been  changed since                                                               
1949.   This legislation  also creates a  new Trade  and Business                                                               
Development Fund into which all  the business licensing fees will                                                               
be deposited  and from which  the legislature can  appropriate to                                                               
fund  the  administrative  expenses  of  the  business  licensing                                                               
programs and operating the  department's business development and                                                               
international trade  activities.   Ms. Erickson pointed  out that                                                               
the fund  would also  allow the division  to continue  the Alaska                                                               
Economic  Information  System, which  is  a  digital system  that                                                               
brings  together  state,  federal,  and private  data  about  the                                                               
state's economy,  resources, and  committees in order  to promote                                                               
economic development by both public and private entities.                                                                       
MR. ERICKSON  highlighted that HB  520 repeals  the International                                                               
Trade  and  Business Endowment  Fund  because  funding for  these                                                               
programs  would  now  come  from   the  new  Trade  and  Business                                                               
Development Fund  created by HB 520.   The $5 million  balance in                                                               
the  [International Trade  and Business  Endowment Fund]  will be                                                               
deposited  in  the  general  fund   and  will  be  available  for                                                               
appropriation by  the legislature July  1, 2002.   Therefore, [HB
520]   will  ensure   a  steady   funding  source   for  economic                                                               
development in  the state.   Those  benefiting from  this service                                                               
will fund the program.                                                                                                          
CHAIR MURKOWSKI  related that  Representative Lancaster  has been                                                               
concerned that  the licensing fees have  remained unchanged since                                                               
pre-statehood days, which she indicated  was probably the initial                                                               
[impetus] for HB 520.                                                                                                           
Number 1933                                                                                                                     
JEFF  BUSH,  Deputy  Commissioner, Office  of  the  Commissioner,                                                               
Department  of Community  &  Economic  Development, informed  the                                                               
committee that the department is  supportive of HB 520 because it                                                               
would stabilize the funding source  for the department's economic                                                               
development  and  trade  activities.    Several  year's  ago  the                                                               
International Trade and  Business Endowment was set up  with a $5                                                               
million  endowment from  the  "University  Endowment," which  was                                                               
supposed to  fund some of  the department's  economic development                                                               
and trade activities.   However, the difficulties  with the stock                                                               
market  and investments  has left  the Division  of International                                                               
Trade with  a huge hole  in its funding.   Although there  was an                                                               
authorization for  almost $500,000 from the  [International Trade                                                               
and  Business   Endowment],  the  reality  is   that  the  amount                                                               
available for expenditures  is much less.   Therefore, the fiscal                                                               
note for HB 520 realizes that  the $500,000 was never a realistic                                                               
number for  the [International Trade and  Business Endowment] and                                                               
thus  the  endowment  earnings  are  replaced  with  $300,000  of                                                               
constant and  predictable income  through the  business licensing                                                               
program.   Mr. Bush  said that HB  520 is  particularly appealing                                                               
because it  recognizes that businesses  in the state can  pay for                                                               
business support services.  Furthermore,  the amount paid for the                                                               
business license  would support business support  activities such                                                               
as for economic development and trade.                                                                                          
MR. BUSH  turned to the fiscal  notes.  The fiscal  note with the                                                               
BRU  (Budget  Reserve  Unit)  of  the  Division  of  Occupational                                                               
Licensing shows a change in  revenue of $1.7 million, which would                                                               
be the  additional funds that  would be received by  the increase                                                               
in the business license fee.   Furthermore, the fiscal note shows                                                               
a reduction  of general  fund (GF) program  receipts (PR)  in the                                                               
amount  of $554.7,  which is  replaced  with the  [International]                                                               
Trade and Business Endowment Fund;  these are the funds necessary                                                               
to administer the business license program.                                                                                     
MR.  BUSH moved  on  to  the fiscal  note  with  the Community  &                                                               
Business  Development   component.     This  fiscal   note  shows                                                               
operating expenditures  of $270,000  in contractual  funds, which                                                               
is the  amount necessary to  run the Economic  Information System                                                               
program  discussed by  Ms. Erickson.    Furthermore, this  fiscal                                                               
note  shows  that  [the   Economic  Information  System  program]                                                               
reduces the GF by $1.275 and  substitutes the funding for both of                                                               
the   $270  of   contractual   and  the   $1.275   GF  with   the                                                               
[International] Trade and Business Endowment Fund.                                                                              
MR. BUSH  then addressed the  fiscal note with  the International                                                               
Trade & Market  Development component.  This fiscal  note shows a                                                               
reduction in the contractual line  in the amount of $196.4, which                                                               
is the difference between what is  in the Trade Endowment down to                                                               
a  $300,000  amount if  HB  520  is  passed.   Furthermore,  $1.2                                                               
million  in GF  is  substituted  plus a  loss  of  $496.4 in  the                                                               
[International] Trade and Business  Endowment, and therefore that                                                               
endowment would go away.  "And  substitutes all of that with $1.5                                                               
million in the  Trade and Business Development  Fund," he pointed                                                               
out.   Mr.  Bush  echoed  Ms. Erickson's  testimony  that the  $5                                                               
million   [International]   Trade    [and   Business]   Endowment                                                               
disappears and  is immediately deposited  in the GF,  which isn't                                                               
illustrated in any fiscal note.                                                                                                 
Number 1648                                                                                                                     
CHAIR MURKOWSKI asked whether the  business community is going to                                                               
cry out due to an increase in the business fees.                                                                                
MR. BUSH  answered that he  didn't believe  so.  He  informed the                                                               
committee that  the department anticipates some  loss of business                                                               
licenses because those people who  have carried business licenses                                                               
for many years but have not  used them may view [this increase in                                                               
fee] as a  reason not to apply  for a new business  license.  Mr.                                                               
Bush   related  his   belief  that   there   are  witnesses   via                                                               
teleconference  that  believe  the   increase  in  fee  is  quite                                                               
reasonable given the services one receives.                                                                                     
REPRESENTATIVE  ROKEBERG asked  if, when  [proposing] eliminating                                                               
the  [International  Trade  and  Business]  Endowment  Fund,  any                                                               
thought was given to returning the money to the businesses.                                                                     
MR. BUSH replied no.   Mr. Bush said, "We would  be happy to find                                                               
a place  to spend that money,  but we didn't think  that that was                                                               
really our place to do."                                                                                                        
Number 1569                                                                                                                     
REPRESENTATIVE  ROKEBERG inquired  as to  the original  idea that                                                               
gave way to the Alaska business license fee.                                                                                    
MR. BUSH informed the committee  that the Alaska business license                                                               
fee was created as part of  the gross receipts tax program, which                                                               
was repealed in 1979 or 1980.   He related his understanding that                                                               
the fee  was essentially  a registration  for the  gross receipts                                                               
tax  that  was  used  as   an  assessment/auditing  tool  by  the                                                               
Department of  Revenue in  order that  the department  would know                                                               
which  businesses should  file [gross  receipts] returns.   Other                                                               
services were  associated with the  fee, which is still  the case                                                               
REPRESENTATIVE   ROKEBERG   pointed   out   that   the   business                                                               
registration  is  used  in  various  ways.    For  example,  this                                                               
registration is  a way that  the Department of Labor  & Workforce                                                               
Development  can  track  tax   receipts  for  unemployment  taxes                                                               
through  business registration.   Furthermore,  entities such  as                                                               
the Municipality  of Anchorage use  the business  registration in                                                               
order to  track down  businesses that need  to file  for personal                                                               
and real property taxes.   Representative Rokeberg inquired as to                                                               
the cost to administer and collect the license fee.                                                                             
MR. BUSH  answered about  $550,000 annually.   He  confirmed that                                                               
the state would take about $3.6 million.                                                                                        
REPRESENTATIVE ROKEBERG  recalled that  the testimony  before the                                                               
House Labor and Commerce Standing  Committee in the past has been                                                               
that there  is no known  use of the  funds, which go  directly to                                                               
the GF.  Therefore, this is really a GF tax.                                                                                    
MR. BUSH said that this is clearly a fee.                                                                                       
REPRESENTATIVE   ROKEBERG  asked   whether,   from  an   economic                                                               
definition, increasing  the fee  wouldn't be [considered]  a tax.                                                               
He   surmised  that   the  department   is  trying   to  use   an                                                               
unconstitutional semi-dedicated fund to finance  a portion of the                                                               
department,  although this  activity is  generally funded  by the                                                               
MR. BUSH agreed  that most of the  [business licensing] functions                                                               
are  paid for  by  the  GF.   Furthermore,  the business  license                                                               
receipts are  all placed directly  in the  GF.  Although  some of                                                               
the  receipts  are accounted  for  as  GF program  receipts,  the                                                               
remainder is deposited as GF revenue.                                                                                           
REPRESENTATIVE ROKEBERG surmised that would change under HB 520.                                                                
MR.  BUSH clarified,  "It would  be deposited  into this  account                                                               
within the general fund, and  accounted for separately within the                                                               
general fund."                                                                                                                  
REPRESENTATIVE  MEYER  explained  that  in his  job  outside  the                                                               
legislature, he was assigned the task  of obtaining a list of all                                                               
the businesses  owned by minorities and  women in the state.   He                                                               
thought that  would be an  easy task because he  thought business                                                               
owners probably  marked whether  they were  owned by  a minority.                                                               
However, it doesn't seem as if such information is solicited.                                                                   
MR. BUSH  responded that  he didn't  believe such  information is                                                               
Number 1326                                                                                                                     
CATHERINE REARDON, Director,  Division of Occupational Licensing,                                                               
Department of Community &  Economic Development (DCED), explained                                                               
that businesses  are tracked by  a description of  their activity                                                               
that's pulled  from the North American  Industrial Classification                                                               
System (NAICS).   She related her belief that  DOT [Department of                                                               
Transportation  &  Public   Facilities]  maintains  the  minority                                                               
business activity [list].                                                                                                       
REPRESENTATIVE  MEYER noted  that  the information  from DOT  was                                                               
very  limited.    He  also noted  that  the  federal  government,                                                               
through the  small business association,  kept track when  it was                                                               
provided  with the  information.    He inquired  as  to why  such                                                               
information  couldn't be  asked  when a  business  applies for  a                                                               
business license.                                                                                                               
MS. REARDON  answered that additional  questions can be  asked at                                                               
the  time  of  licensure  or   renewal,  if  the  legislature  so                                                               
specifies.  She  said that she would want to  know what meets the                                                               
definition.  Furthermore, there is  a limit to how many questions                                                               
she would  advocate adding  to this  form because  the [division]                                                               
likes the form to be simple for people to do.                                                                                   
REPRESENTATIVE MEYER  asked if the  passage of the  minimum wage,                                                               
the unemployment  compensation tax,  and now  an increase  in the                                                               
business license, is too hard on commerce.                                                                                      
MR. BUSH  responded that he  didn't believe so.   Furthermore, he                                                               
didn't believe  that the current  administration would  feel that                                                               
any of  the aforementioned  is too harsh  on commerce  in Alaska.                                                               
However,  he acknowledged  that there  is quite  a bit  of debate                                                               
regarding the minimum  wage, which is probably the  item with the                                                               
strongest impact.   He said he didn't believe that  $25 a year is                                                               
a significant amount of money for most businesses.                                                                              
REPRESENTATIVE HAYES asked if, last  year, legislation was passed                                                               
that  increased  the  license  [fee] for  those  folks  who  sell                                                               
cigarettes.   He  inquired  as to  how HB  520  will impact  that                                                               
[increase in the license fee for those who sell cigarettes].                                                                    
MR.  BUSH explained  that the  tobacco endorsement  is a  program                                                               
that's  operated  by  DCED  and   associated  with  the  Business                                                               
Licensing Program.   He said  that businesses engaged  in tobacco                                                               
activities will  be required  to pay more.   However,  that's not                                                               
impacted by HB 520.  In  fact, those fees charged for tobacco are                                                               
accounted  for   separately  and  dealt  with   as  a  completely                                                               
independent program.                                                                                                            
REPRESENTATIVE HAYES recalled  that with the increase  in the fee                                                               
for a tobacco  endorsement there was discussion  that some people                                                               
would  drop [the  tobacco endorsement  because of  the increase].                                                               
Therefore,  he  questioned  whether  these people  would  now  be                                                               
impacted by HB 520 as well.                                                                                                     
CHAIR  MURKOWSKI  recalled  that  the  endorsement  procedure  is                                                               
different  than  the  business  license  procedure.    Therefore,                                                               
although  a  business  may  have  various  endorsements  for  its                                                               
outlets,  only  one  business  license   would  be  required  per                                                               
Number 1012                                                                                                                     
MS. REARDON,  in response  to Representative  Rokeberg, confirmed                                                               
that the business  licenses are biennial licenses,  per AS 08.01.                                                               
Therefore, the  $25 annual increase  under HB 520 will  mean that                                                               
for a two-year license one will  pay $50 and when the increase to                                                               
$50 a year occurs, one will pay $100 for the two-year license.                                                                  
REPRESENTATIVE  ROKEBERG inquired  as to  why this  statute isn't                                                               
fixed [to parallel the biennial licenses under AS 08.01].                                                                       
Number 0930                                                                                                                     
BARBARA  PROPES, Scan  Home, testified  via teleconference.   Ms.                                                               
Propes related  her belief  that this  is a  reasonable increase.                                                               
She noted  her intrigue with the  notion of the fee  going into a                                                               
Trade and Business Development Fund.   She said she believes that                                                               
it's  the state's  responsibility  to try  to  attract trade  and                                                               
development  in the  state.   Much  of [the  state's] revenue  is                                                               
derived from  international trade.   She  said she  believes that                                                               
most  businesses would  be willing  to pay  this fee  knowing the                                                               
need  to continue  to increase  their client  base.   The state's                                                               
current  office   does  fulfill   an  essential  need   and  it's                                                               
frustrating to  wait and see how  much the office will  be funded                                                               
each year.   Ms.  Propes viewed  this as  having a  ripple affect                                                               
with regard to the job opportunities in the state.                                                                              
REPRESENTATIVE  ROKEBERG noted  his  concern with  regard to  the                                                               
constitutional  prohibition  against  dedicated funds,  which  is                                                               
what this legislation is basically.                                                                                             
Number 0756                                                                                                                     
SCOTT    McMURREN,   McMurren    &    Goodman,   testified    via                                                               
teleconference.   Mr. McMurren announced  his support of  HB 520.                                                               
He informed the  committee that he has witnessed  first hand what                                                               
DCED has  done for seafood  marketing, film  development, tourism                                                               
development, and  international trade.  The  consistent battle to                                                               
fund [the  business license  program] impedes  his ability  to do                                                               
business with  [DCED] for about four  months out of the  year, he                                                               
noted.    Mr.  McMurren  explained that  [this  program  and  the                                                               
department]  is  building  incremental  business  and  money  for                                                               
REPRESENTATIVE  ROKEBERG  requested  explanation as  to  why  the                                                               
endowment fund was established.                                                                                                 
Number 0519                                                                                                                     
MR. BUSH explained  that Senator Drue Pearce  was frustrated with                                                               
the endowment and the activities  of the Center for International                                                               
Business  at  the university  and  wanted  to see  more  business                                                               
advocacy with the  aforementioned fund.  Therefore,  a portion of                                                               
the  fund was  taken to  create an  endowment, the  proceeds from                                                               
which were used to partially  fund international trade activities                                                               
by the department.                                                                                                              
REPRESENTATIVE  ROKEBERG  inquired as  to  why  the endowment  is                                                               
going to be destroyed, although the returns are down.                                                                           
MR. BUSH said,  "We don't really view it as  a destruction of the                                                               
endowment as  much as we  see it as a  method of creating  a more                                                               
consistent funding source."                                                                                                     
REPRESENTATIVE ROKEBERG  pointed out that there  is no connection                                                               
because the money is placed in  the GF, where he was sure someone                                                               
would find a  use for it.  Representative Rokeberg  turned to the                                                               
Alaska Economic Association, which  he didn't recall being funded                                                               
in the  budget.  He asked  if the Alaska Economic  Association is                                                               
related to HB 520.                                                                                                              
MR.  BUSH   answered  that  one  of   Representative  Lancaster's                                                               
motivations with this bill was to  find a way to fund the program                                                               
and  Legislative Finance  advised him  that the  business license                                                               
may be a method of funding for  this program.  Mr. Bush said that                                                               
this  program was  created  through a  lot of  work  of the  past                                                               
several  years and  it  still isn't  operational  on a  statewide                                                               
basis.  Although everyone who has  viewed demos of the program or                                                               
has worked  with program have  received it well,  it's impossible                                                               
to maintain without an ongoing funding source.                                                                                  
REPRESENTATIVE ROKEBERG  surmised then  that the  endowment would                                                               
[generate] about $250,000 a year.                                                                                               
MR.  BUSH confirmed  that would  be the  case at  5 percent.   In                                                               
further response  to Representative Rokeberg, Mr.  Bush said that                                                               
the program's budget was to be $496[,000].                                                                                      
Number 0255                                                                                                                     
REPRESENTATIVE HAYES recalled that  the Senate proposed using the                                                               
$5 million  currently in the  endowment for tourism.   Therefore,                                                               
this endowment isn't really protected.                                                                                          
MR.  BUSH  acknowledged that  there  is  a  proposal to  use  the                                                               
endowment's  funds to  pay  for the  emergency  funding that  the                                                               
tourism  industry requested  after  the events  of September  11,                                                               
CHAIR  MURKOWSKI,  upon determining  there  was  no one  else  to                                                               
testify, closed public testimony.                                                                                               
REPRESENTATIVE HAYES  remarked that  it's sad when  entities with                                                               
no vision take money and fill  a void elsewhere rather than where                                                               
the money is necessary.   He expressed the need [for legislators]                                                               
to  be truthful  with constituents  with regard  to the  state of                                                               
Alaska's budget.   He indicated  his dislike of the  "shell game"                                                               
with the budget.  Therefore, he  recommended that if the money in                                                               
the endowment  is going to  be used  for something else,  then it                                                               
should be  laid on the  table.  Furthermore,  in such a  case the                                                               
endowment  should be  eliminated  and a  steady  stream of  money                                                               
should be created for the [programs] desired.                                                                                   
Number 0110                                                                                                                     
REPRESENTATIVE  HAYES moved  to report  HB 520  out of  committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
REPRESENTATIVE ROKEBERG objected.                                                                                               
TAPE 02-63, SIDE A                                                                                                              
REPRESENTATIVE  ROKEBERG commented  that  many [business  owners]                                                               
don't like  the business tax,  although they know  it's necessary                                                               
and serves  a purpose.   Therefore, the  fees should  reflect the                                                               
cost rather than  be a source of revenue, he  said.  He expressed                                                               
the need to classify this for what  it is.  He related his belief                                                               
that  [HB 520]  sets up  a bogus  designated fund  for designated                                                               
receipts, which is  unconstitutional.  He then  noted his support                                                               
of the Alaska Economic Information System.                                                                                      
Number 0189                                                                                                                     
CHAIR   MURKOWSKI  remarked   that   she   wasn't  sure   whether                                                               
Representative Rokeberg supported or opposed the HB 520.                                                                        
REPRESENTATIVE  ROKEBERG said  that these  things should  just be                                                               
funded in the budget.   "If you want to have a  bill to raise the                                                               
license fee,  let's talk  about that but  it shouldn't  be hooked                                                               
something else," he  stressed.  He announced that  he was opposed                                                               
to HB 520.                                                                                                                      
REPRESENTATIVE   MEYER  said   he   didn't   think  business   is                                                               
overwhelmingly  opposed to  increasing the  license fee  or there                                                               
would  have been  testimony  to indicate  so.   Furthermore,  the                                                               
[Alaska Chamber of  Commerce] usually puts out  something for the                                                               
REPRESENTATIVE ROKEBERG interjected  that he had not  heard of HB
520 until the  folks from the department came to  his office.  He                                                               
related  his belief  that  no  one in  the  state  knows this  is                                                               
happening; small businesses are working.                                                                                        
REPRESENTATIVE MEYER  indicated that businesses join  the [Alaska                                                               
Chamber of Commerce] so that  someone watches out for things such                                                               
as this.                                                                                                                        
Number 0336                                                                                                                     
REPRESENTATIVE HALCRO agreed  that folks are tired  of piece meal                                                               
approaches.    "The fact  is  until  such  time  as we  get  some                                                               
leadership in this building to ...  chart a course for the future                                                               
and determine how  we're going to pay for some  of these programs                                                               
like the information  services, we're left with this  as our only                                                               
device," he charged.  He  pointed out that the prior legislation,                                                               
SSHB 315,  that was reported  from this committee had  a $132,000                                                               
fiscal note.  Therefore, he saw  two options.  One of which would                                                               
be to  start asking people  to pay their  fair share now  or stop                                                               
trying to solve the world's problems for nothing.                                                                               
REPRESENTATIVE CRAWFORD  noted his agreement  with Representative                                                               
Rokeberg in that HB  520 is a tax.  He pointed  out that he voted                                                               
against HB  3 and  would vote  against HB  225 and  anything else                                                               
that doesn't come as part of a [long-term fiscal] plan.                                                                         
REPRESENTATIVE  ROKEBERG,  with  regard   to  SSHB  315,  assured                                                               
Representative Halcro  that he is  having discussions  with AMTAR                                                               
(ph)  and  hopefully  [the  fiscal  impact]  will  be  addressed.                                                               
Furthermore,  HB 4  has been  stripped in  order to  have a  zero                                                               
fiscal note.                                                                                                                    
Number 0569                                                                                                                     
REPRESENTATIVE HAYES restated his motion  to report HB 520 out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal note(s).                                                                                                                 
REPRESENTATIVE ROKEBERG withdrew his objection.                                                                                 
There being  no objection, HB  520 was reported from  House Labor                                                               
and Commerce Standing Committee.                                                                                                

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