Legislature(2001 - 2002)

04/12/2001 01:37 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                SB 165-EDUCATION TAX ON EMPLOYMENT                                                                          
                                                                                                                                
CHAIRMAN PHILLIPS announced SB 165 to be up for consideration.                                                                  
                                                                                                                                
MR. SEAN RILED, Staff to Senator Austerman, said:                                                                               
                                                                                                                                
     The  purpose of  this bill  would be to  generate revenue                                                                  
     that  would be geared  towards education.  There would  be                                                                 
     $100 per  person taken out in  two consecutive pay checks                                                                  
     per  year for  anyone  that is  working  in the  state  of                                                                 
     Alaska.  This would also incorporate  all the people  that                                                                 
     are  from   out-of-state,  generating   quite  a  bit   of                                                                 
      additional income that would go into the general fund.                                                                    
                                                                                                                                
     The reason  this bill is here  is to generate more income                                                                  
     for  education. The  legislature has  given our schools  a                                                                 
     clear message - that they  want our schools to continue to                                                                 
     get and set high standards  for our students. This will be                                                                 
     facilitated  through  a competency  exam.  To  be able  to                                                                 
     implement this program,  we need to give our educators the                                                                 
     tools with which they can implement that program.                                                                          
                                                                                                                                
     I do fully  agree that you don't  take money and throw  it                                                                 
     at  a problem  and hope  that it will  go away,  but I  do                                                                 
     believe  that  the money  that the  school tax  bill  will                                                                 
     generate  would offer  the tools with  which to implement                                                                  
     that  program  and also  to  help some  of  the education                                                                  
     programs we presently have.                                                                                                
                                                                                                                                
MR. RILEY continued:                                                                                                            
                                                                                                                                
     Children  are  our  future.  I  think  it's  important  to                                                                 
     remember  that we need to fund  these areas. As President                                                                  
     Hamilton  [UAA] said  many times before  the legislature,                                                                  
     "We  don't want to see  a brain drain  going to the  Lower                                                                 
     48. We want to keep our  people here and by providing good                                                                 
     educational  programs and good  infrastructure, we can  do                                                                 
     that.  Some  day, those  same  children  that we  will  be                                                                 
     educating  here and giving the  best education to will  be                                                                 
     passing bills  for taking care of us when we become  older                                                                 
     people  and  passing good  legislation.  By  showing  good                                                                 
     support  in  that regard  at  this early  stage  would  be                                                                 
     helping the state and helping  ourselves at the same time.                                                                 
                                                                                                                                
     Whenever  anyone  comes  before the  legislature  to  pass                                                                 
     legislation,  the second question  everyone asks is,  "How                                                                 
     are we going to fund this?"                                                                                                
                                                                                                                                
     Historically,  we've already  had this tax in place.  It's                                                                 
     nothing  new  to us.  It's  something  we've  worked  with                                                                 
     before  and can  continue to  work with. One  of the  good                                                                 
     aspects about  this tax is that it goes after  some of the                                                                 
     people  who  come up  here and  reap  the harvest  of  the                                                                 
     resources and the infrastructure  of Alaska and take their                                                                 
     money  down south where  they end up  paying state income                                                                  
     tax.  Since we have  no state  income tax  and we have  no                                                                 
     state tax,  the only way we're generating money  to offset                                                                 
     our deficit  budget is from the CBR and unless  we want to                                                                 
     drain  that completely,  we  need to  take steps  in  that                                                                 
     regard  to start  instituting a  way to  start paying  for                                                                 
     some  of these  programs. This  would be a  small step  in                                                                 
     that regard to make plans for Alaska's future.                                                                             
                                                                                                                                
Number 1900                                                                                                                     
                                                                                                                                
SENATOR LEMAN corrected  Mr. Riley's assertion that we have no state                                                            
income tax.  He said  we have a  state income tax,  but not  a state                                                            
personal income  tax or a state sales  tax. "For instance,  on fuel,                                                            
that is a tax  that's applied generally throughout  the state with a                                                            
few exceptions.                                                                                                                 
                                                                                                                                
MR. RILEY thanked  him for the correction  and added that  the point                                                            
he was trying  to make is  that Alaska is  very unique in  that they                                                            
are generating  money for  their budget from  places other  than the                                                            
people themselves.                                                                                                              
                                                                                                                                
SENATOR LEMAN  said that since  the tax of  $100 per head is  due on                                                            
those employed  and those  self employed by  February 1, he  assumed                                                            
that a self employed person  on a form supplied by the Department of                                                            
Revenue  would  submit  $100  before February  1  and  fulfill  that                                                            
requirement,  but what  if the self  employed person  does not  earn                                                            
income before February 1?                                                                                                       
                                                                                                                                
MR. RILEY  replied that  the mechanism  for that  would be that  the                                                            
tax,  itself, is  not due  until the  following year  after you  had                                                            
already worked through that one year.                                                                                           
                                                                                                                                
MR.  MIKE  MILLIGAN,  Kodiak,  supported  SB  165.  He  thought  the                                                            
greatest problem facing  Alaska now is that we have developed into a                                                            
culture of give-me. "We  expect a check from the government. We have                                                            
to begin now reducing the rate of deficit spending."                                                                            
                                                                                                                                
Mr. Milligan said that  we need to put more money into education and                                                            
the question is how to  pay for it and this bill begins to deal with                                                            
the problem.                                                                                                                    
                                                                                                                                
MR. RICHARD WALBERTS,  Kodiak, said he is for public  education, but                                                            
opposed SB  165. He can't  support it, because  it's an unfair  tax,                                                            
especially  to low-income  people. He thought  that schools  receive                                                            
more than enough money to teach basic academics.                                                                                
                                                                                                                                
MR.  BEN  ARDINGER,  Kodiak  businessman,  said  he  serves  on  the                                                            
Committee  for  Better  Education  and  supports  SB 165.  They  are                                                            
striving  to get  the music  program  reinstated  at the  elementary                                                            
level and they  need the money. He  said the people he talks  to are                                                            
all for it, but they want to make sure it goes for education.                                                                   
                                                                                                                                
MAYOR  GABRIELLE  LEDOUX, Kodiak  Island  Borough,  said the  Kodiak                                                            
Assembly supports this  bill and has passed a resolution stating so.                                                            
She  supports  this   bill  personally.  "Our  schools   are  having                                                            
difficulty.  They are having difficulty  with maintenance.  They are                                                            
having difficulty  with large  classrooms.  We're close to  the cap;                                                            
other school districts are already there."                                                                                      
                                                                                                                                
She realizes this is a  regressive tax, but said, "At some point, we                                                            
have to figure  there is no such thing as a free lunch.  This is our                                                            
first step  to a  long-range fiscal  plan and  that's why I  support                                                            
it."                                                                                                                            
                                                                                                                                
MR. GREG RAZO,  Kodiak Island Borough  Assembly, said he  ran with a                                                            
commitment to  education as part of his platform.  He said the local                                                            
community is  interested in quality  schools, but they are  having a                                                            
hard time  achieving that  when they have over  10 years of  lack of                                                            
inflation proofing  for education  funding from the state.  He said:                                                            
                                                                                                                                
     We have  heard recently  with the tax  cap initiative  how                                                                 
     concerned  people around the  state are at the increasing                                                                  
     burden of  local property tax. That burden is  going to do                                                                 
     nothing  but continue  unless we receive  assistance  from                                                                 
     both the state and federal government.                                                                                     
                                                                                                                                
MR.  RAZO said  the  citizens  of  Alaska are  ready  to  see a  new                                                            
approach to state funding.                                                                                                      
                                                                                                                                
MS. MARILY  DAVIDSON,  Kodiak, supported  SB 165.  The local  school                                                            
district support high quality  education and those efforts are being                                                            
impaired  by  the  fiscal  restraints  that  are  the  result  of  a                                                            
shrinking budget.  "We need to fund,  not the minimum necessary  for                                                            
education, but a high quality  education for all Alaskan students so                                                            
they  can be  competitive  in whatever  avenue  the  choose as  they                                                            
finish their standard school career…"                                                                                           
                                                                                                                                
MR. DAVID JONES,  Director of Finance, Kodiak School  District, said                                                            
he is also a parent and  a non-tax payer in Kodiak. He has addressed                                                            
the legislature  a number of times expressing the  need for money to                                                            
provide  an adequate education.  As  a parent in  Kodiak, he  pays a                                                            
property tax and a 6 percent  sales tax. In October, the state sends                                                            
his family a permanent  fund dividend. He is willing  to pay for the                                                            
services he receives from the government.                                                                                       
                                                                                                                                
MS.  PAT BRANSON,  Kodiak  Island  Assembly, said  that  she has  no                                                            
children, but believes  the schools are temples of learning and, "It                                                            
is most important that  we provide the proper amount of funding in a                                                            
diverse manner for quality education throughout the state."                                                                     
                                                                                                                                
Property owners  are the ones who bear the burden  of school funding                                                            
and if the legislature  doesn't look for other sources of long-range                                                            
funding,  their  local  government  will have  to  continue  raising                                                            
property taxes, Ms. Branson said.                                                                                               
                                                                                                                                
Number 2300                                                                                                                     
                                                                                                                                
MR.  MIKE WILLIAMS,  Department  of Revenue,  said  he would  answer                                                            
questions.                                                                                                                      
                                                                                                                                
SENATOR LEMAN  asked if wouldn't  make sense  for people to  pay the                                                            
amount  out of the  Permanent Fund  portion so  that it wouldn't  be                                                            
taxable,  because the language  now has them  paying taxes  on their                                                            
full dividend, plus paying another $100.                                                                                        
                                                                                                                                
MR. WILLIAMS  replied that  there is some  concern on the method  of                                                            
reducing  a  PFD  because  there would  be  tax  implications  on  a                                                            
personal  level.  "You would  have  a proposed  statute  that  would                                                            
propose a tax  and, if you have used the PFD to offset  that act, it                                                            
could be considered  to be debt relief.  That debt relief  in itself                                                            
would be taxable to the individual."                                                                                            
                                                                                                                                
SENATOR LEMAN  asked if it could be designed in a  way that it would                                                            
avoid that?  He thought  it might  be possible  to "grab that  money                                                            
before it enters the dividend  distribution stream and that would be                                                            
the offset."                                                                                                                    
                                                                                                                                
TAPE 01-17, SIDE B                                                                                                            
                                                                                                                              
CHAIRMAN  PHILLIPS said  the fiscal  note looked  like it was  about                                                            
$700,000, "which raises some flags."                                                                                            
                                                                                                                                
MR.  WILLIAMS  responded that  he  would  have to  research  Senator                                                            
Leman's question.                                                                                                               
                                                                                                                                
MR. KEVIN RITCHIE, Alaska  Municipal League, said they do not have a                                                            
position  on this  bill,  but their  top  priority is  a  long-range                                                            
financial plan for the  state of Alaska and their second priority is                                                            
funding  education.  "This is  obviously one  option  that could  be                                                            
considered in  terms of developing a long-range financial  plan. And                                                            
of  course,  the  plan  may  come  together  incrementally.   So  we                                                            
encourage you  to keep moving such  bills forward and at  some point                                                            
consider  them. Just to let  you know that  Alaskans United  Against                                                            
the Cap, a group  of 90 partner organizations that  worked to defeat                                                            
the tax cap,  will be working in various  communities to  talk about                                                            
the various  options for  creating a long-range  financial  plan for                                                            
the state."                                                                                                                     
                                                                                                                                
SENATOR LEMAN  encouraged him and  his organization to come  up with                                                            
some suggestions on how  to do it and work within the organizations,                                                            
because he  was convinced  this would be  "grass routes led"  rather                                                            
than more top down.                                                                                                             
                                                                                                                                
SENATOR  DAVIS said  she  appreciated  his testimony  and  a lot  of                                                            
things would  have to happen when  they begin to talk about  a long-                                                            
range plan  and if they  don't happen at  the legislature,  they are                                                            
going to have  to come through grass  routes efforts. She  plans to,                                                            
"Take it to the public."                                                                                                        
                                                                                                                                
She asked him  to keep the legislature informed about  what they are                                                            
doing.                                                                                                                          
                                                                                                                                
MR. CARL  ROSE, Executive  Director,  Association  of Alaska  School                                                            
Boards,  supported SB  165. He  said they  know  revenues have  been                                                            
reduced and that essential  services have costs attached. "We have a                                                            
window of four to five  years to fashion some kind of plan that will                                                            
project  us into the  future successfully.  Our  other option  is to                                                            
slam head-long into the wall in four years."                                                                                    
                                                                                                                                
He said  that it will entail  talk about  revenue streams like  this                                                            
bill and perhaps and sales  tax, personal income tax or some kind of                                                            
investment for the purpose of generating revenue.                                                                               
                                                                                                                                
MR. RILEY said  he had been in committee meetings  before where this                                                            
committee's  chairman  recognized  the  need  for  long-term  fiscal                                                            
planning and this was an  opportunity to take the first step in that                                                            
direction.                                                                                                                      
                                                                                                                                
SENATOR LEMAN said he was concerned about the fiscal note, but                                                                  
would look at it in the Finance Committee.                                                                                      
                                                                                                                                
SENATOR DAVIS moved to pass SB 165 from committee with individual                                                               
recommendations. There were no objections and it was so ordered.                                                                

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