Legislature(1997 - 1998)
01/23/1997 08:03 AM House STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 21 - TAX CREDIT: GIFTS TO PUBLIC BROADCASTING Number 0607 The next order of business to come before the House State Affairs Standing Committee was HB 21, "An Act establishing the Alaska public broadcasting trust fund as a trust fund of the state, and providing for its administration; relating to credits against certain taxes for contributions to the Alaska public broadcasting trust fund; increasing the amounts that may be claimed as credits against certain state taxes, and precluding claims of the contributions as both credits and deductions against the taxes; and terminating the credits authorized by this Act at the end of five years; and providing for an effective date." CHAIR JAMES called on Thomas W. Wright, Legislative Assistant to Representative Ivan Ivan, to present the sponsor statement. THOMAS W. WRIGHT, Legislative Assistant to Representative Ivan Ivan, Alaska State Legislature, explained HB 21 provided an alternative funding source and lessened the general fund demand for public broadcasting. Mr. Wright read the following sponsor statement into the record: "This bill provides a tax credit for cash contributions made to a trust fund for public broadcasting which is established in this legislation. The credit to the public broadcasting trust fund is limited to 50% of $300,000. The tax credit would be applied against a taxpayer's liability under the following tax types: the insurance premium tax (AS 21.09.210), tax on title insurance premiums (AS 21.66.110), corporation income (AS 43.20), oil and gas production (AS 43.55), oil and gas property (AS 43.56) and mining license (AS 43.65). The credit claimed under one of the tax types may not be claimed under another tax type and may not be deducted against a tax imposed under the titles of the tax types previously listed." MR. WRIGHT lastly commented the bill had a sunset date of December 31, 2002. He announced he would be happy to answer any questions from the committee members, and explained members of the administration were here to answer any questions concerning the bill as well. Number 0739 REPRESENTATIVE ETHAN BERKOWITZ asked Mr. Wright if there was a reason why HB 21 was limited to the mentioned tax types? Number 0749 MR. WRIGHT replied it was limited to those tax types because they were the only ones in statute right now. He explained there were fishery taxes and fishery landing taxes, however, they were shared with municipalities using a 50/50 split. This split created confusion, therefore, they were left from the bill. Number 0794 REPRESENTATIVE BERKOWITZ stated he was personally concerned about the fishery taxes. He further asked Mr. Wright what level of revenues generated were expected for public broadcasting as a result of this bill? Number 0807 MR. WRIGHT replied, according to the Department of Revenue, $650,000 to $1,300,000 would be generated. That was a rough estimate, however. Number 0820 REPRESENTATIVE BERKOWITZ asked Mr. Wright, if the estimated generated funds mentioned were a total figure, or an annual figure? Number 0827 MR. WRIGHT replied, "Annual." Number 0835 REPRESENTATIVE KIM ELTON wondered if the tax credits could be stacked. He asked Mr. Wright if one tax credit could exclude another? Number 0866 MR. WRIGHT replied, "Yes." It was possible to stack a tax credit, according to the Department of Revenue. Number 0898 ALISON ELGEE, Deputy Commissioner, Office of the Commissioner, Department of Administration, was the next person to testify before the House State Affairs Standing Committee. She stated the Administration supported HB 21. She explained the money generated from the bill would go to the trust. Therefore, the principle of the trust would be maintained. The Administration would only spend the earnings on the trust. The bill specified what the trust income could be used for by the Administration. She cited inflation proofing as an example. She further explained for clarification that $1,000,000 that went into the trust would generate only $50,000 as an expenditure, for example. Therefore, the bill would not be an immediate solution to the financing problems for the public broadcasting system. Number 0975 REPRESENTATIVE MARK HODGINS asked Ms. Elgee what the time schedule would be for more money to be available? Number 0982 MS. ELGEE replied the department would hope to see the fund build over the next five years as the tax credits were in place. She explained the funds potential was based on current corporate contributions to the public broadcasting system statewide. The larger the fund the larger the income account. The present general fund support for grants to public broadcasting was close to $4 million. Number 1029 REPRESENTATIVE HODGINS asked Ms. Elgee what would be the department's target for a level of funds? Number 1036 MS. ELGEE repled she could not answer Representative Hodgins' question. She stated a concerted fund raising effort would be needed to realize the benefits of the trust, however. Number 1053 REPRESENTATIVE ELTON asked Ms. Elgee if the trust fund would harm other fund raising efforts? Number 1079 MS. ELGEE replied that was a concern of the department. However, many of the corporate sponsorships that the current stations received were for underwriting. The administration would hope that that funding would continue. The contributions that the bill required were specifically for the trust that would be managed by the commission. Number 1096 REPRESENTATIVE ELTON asked Ms. Elgee, how much would it cost to underwrite a program such as the fish report? Number 1111 MS. ELGEE replied she did not know. However, there were individuals in the audience that could answer that question. Number 1127 REPRESENTATIVE AL VEZEY stated he found Section 2 of the bill confusing. He asked for clarification. CHAIR JAMES called on Bob Bartholomew, Department of Revenue, to answer Representative Vezey's question. BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division; and Legislative Liaison, Department of Revenue, explained Section 2 amended the insurance premium tax. Currently, there was an education credit for 50 percent of the first $100,000, and 100 percent of the second $100,000. The new language on line 25, page 2, for the public broadcasting trust fund was 50 percent of the first $300,000. Therefore, if a corporation gave $10,000, it would receive a 50 percent credit, for example. Number 1229 REPRESENTATIVE VEZEY asked Mr. Bartholomew if subsection (i) (a) on page 2, referred to public broadcasting? MR. BARTHOLOMEW replied only subparagraph (2) on page 2, referred to public broadcasting. Subparagraph (1) on page 2, referred to higher education. Number 1261 REPRESENTATIVE VEZEY asked if there was a minimum? MR. BARTHOLOMEW responded there was not a minimum. He gave the example of a $10,000 contribution to illustrate it would be subject to the same 50 percent credit as a larger contribution would be. Number 1292 JOHN NEWSTROM, Affiliate, Coast Alaska, was the next person to testify before the House State Affairs Standing Committee. He explained his organization supported HB 21 because it provided another form of fund raising for the public broadcasting system using a non-governmental source. The fish report he explained would cost about $2,000 to $5,000 per year to answer Representative Elton's question. It depended on the production cost, however. He further explained that a contribution to the trust did not trigger an announcement on public broadcasting compared to a direct contribution to the programming mandated by federal law. There was the possibility of announcing that the funding came from the trust fund and list the contributors, however. He was concerned because they were different types of announcements and it would be up to the discretion of whoever distributed the money from the trust. He reiterated HB 21 created another tool for public broadcasting to raise money that would push the industry forward. He alleged between $30 million to $50 million would keep public broadcasting off state money and maintain its programming statewide. Number 1488 CHAIR JAMES stated $50 million in an endowment would be $25 million less taxes collected by the state. She explained she supported HB 21, but she was concerned about the net benefit to public broadcasting versus the net reduction in the general fund income. This caused her some distress. Number 1542 MR. NEWSTROM replied he understood the concerns of Representative James. It was important, however, to understand that public broadcasting was not looking for a replacement for state funds now, but rather for a supplement. It was understood that if the earnings of the trust fund were at a certain level, the general fund allocation would be reduced by the corresponding amount. Furthermore, the issue of the tax credit and how it affected the general fund was an interesting policy question. He stated he would be happy to work with anyone that was interested in further examining that issue. Number 1608 REPRESENTATIVE FRED DYSON asked Mr. Newstrom why the language in the bill required the money to go into an endowment rather than a direct annual contribution? Number 1619 MR. NEWSTROM stated there was interest expressed to allow a tax credit for direct annual contributions. A direct annual contribution, however, was very short sighted. A fund on the other hand created a future of stability and security. Number 1671 REPRESENTATIVE DYSON stated it was a painless contribution. The money otherwise that would have gone to the state coffers for taxes would go to the trust. Number 1691 MR. NEWSTROM replied it was 50 percent painless. Number 1725 CHAIR JAMES stated the figures right now were only estimates. There was no way to determine exactly how much money would be contributed. She expressed her support for the public broadcasting system and was not opposed to having "people pay for what they play." She was concerned, however, about the money that would be taken from the general fund as a result of the tax credits. She supported moving the bill forward in the committee process, nevertheless. Number 1874 REPRESENTATIVE DYSON expressed his support of the public broadcasting system. He stated the founding father of the United States really only wanted a government that the people were able to pay for. He was concerned about establishing an independent funding source that was not sensitive to the willingness of the people to pay for what they wanted. That was the best control the citizens had, he commented. Number 1953 REPRESENTATIVE BERKOWITZ stated he respected the "slippery slope" argument of Representative Dyson. It was important, however, to respect the discretion of the companies and the people of the state to make their own donations. Therefore, any measure that allowed a choice was good for business and for the state. Number 1983 REPRESENTATIVE ELTON explained the other side of Representative Dyson's argument was that the bill empowered a tax payer. The only tax payers right now were the corporate citizens, and the bill allowed the corporate citizens to direct their spending. The bill was, therefore, an empowering method. He further commented that it was difficult to predict the future level of contributions. The bill did have a sunset date which allowed for further review in the future. Number 2052 REPRESENTATIVE DYSON replied that once the contributions were made to the foundation, the corporate control was gone. The control resided with the commissioners and not the contributors. Number 2100 REPRESENTATIVE HODGINS stated his only concern was that the legislature would have to contribute to the general fund the amount that the general government increased. He supported the bill, but reiterated his concern of fewer dollars going into the general fund. Number 2141 CHAIR JAMES explained the legislature established the tax credit and rates that the corporations contributed to the state. She called it an "end-run" around the public process. She believed that this was the first endowment established of many worthy causes yet to come forward. The Alaska State Constitution did not allow for a dedicated fund without an amendment, but it did allow for an endowment which circumvented the legislature. She wondered in the future what would be left for the legislature. Number 2244 REPRESENTATIVE BERKOWITZ stated there had been a call for a smaller and smarter government. This was one way to reach that goal. Number 2254 REPRESENTATIVE ELTON said he disagreed with Chair James that the legislature would loose a certain amount of control. He cited the children's trust whereby the legislature did not relinquish its control but rather exercised its control. The bill did not bind a future legislature from taking action. He agreed that over time there would be a lot of causes that would want an endowment type of funding source. He reiterated, however, that the legislature would be exercising its control. Number 2338 CHAIR JAMES stated it was a trend that she was cautious about. There were unintended consequences that could not been seen right now. CHAIR JAMES asked the committee members for a motion to move the bill forward. Number 2399 REPRESENTATIVE HODGINS moved that HB 21 move from the House State Affairs Standing Committee with individual recommendations and attached fiscal note(s). REPRESENTATIVE VEZEY objected. A roll call vote was taken. Representatives James, Berkowitz, Elton and Hodgins voted in favor of moving the bill. Representatives Dyson and Vezey voted against moving the bill. House Bill 21 was so moved from the House State Affairs Standing Committee.
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