Legislature(2019 - 2020)BUTROVICH 205

03/26/2019 01:30 PM Senate STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
+= SJR 6 CONST AM:APPROP. LIMIT; RESERVE FUND TELECONFERENCED
Moved SJR 6 Out of Committee
*+ SJR 4 CONST. AM: STATE TAX; INTIATIVE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
             SJR  4-CONST. AM: STATE TAX; INTIATIVE                                                                         
                                                                                                                                
3:35:46 PM                                                                                                                    
CHAIR   SHOWER  reconvened   the   meeting   and  announced   the                                                               
consideration  of  SENATE  JOINT   RESOLUTION  NO.  4,  Proposing                                                               
amendments   to  the   Constitution  of   the  State   of  Alaska                                                               
prohibiting the  establishment of,  or increase  to, a  state tax                                                               
without the approval of the voters  of the state; and relating to                                                               
the initiative process.                                                                                                         
                                                                                                                                
3:36:09 PM                                                                                                                    
MIKE BARNHILL, Policy Director,  Office of Management and Budget,                                                               
Office of the Governor, Juneau, introduced himself.                                                                             
                                                                                                                                
3:36:15 PM                                                                                                                    
BILL  MILKS, Assistant  Attorney General,  Civil Division,  Labor                                                               
and State Affairs Section, Department  of Law, Juneau, introduced                                                               
himself.                                                                                                                        
                                                                                                                                
MR.  BARNHILL  explained that  SJR  4  amends  art. IX,  sec.  1,                                                               
Constitution of  the State  of Alaska  to require  a vote  of the                                                               
people on any new state tax  or increase to an existing state tax                                                               
that the  legislature enacts. Conversely,  any new  state revenue                                                               
or increase  to an  existing state revenue  that the  people pass                                                               
through the  initiative process would  require approval  from the                                                               
legislature.  This legislation  is patterned  after the  Colorado                                                               
taxpayer bill  of rights  which has a  provision that  requires a                                                               
vote  of the  people  for any  new or  increased  state or  local                                                               
revenue.  He highlighted  that two  other  states have  similarly                                                               
amended their  state constitutions.  Missouri requires a  vote of                                                               
the people if a new state  tax increases revenue by more than $50                                                               
million;  and Washington  State requires  a three-fifths  vote of                                                               
the people  for local property  taxing jurisdictions  to increase                                                               
property taxes in excess of one percent of the property value.                                                                  
                                                                                                                                
MR.  BARNHILL related  that Governor  Dunleavy strongly  believes                                                               
that the  people should  have a  say in  matters relating  to new                                                               
revenues, increasing  revenues, and the permanent  fund dividend.                                                               
He said  that Alaska's constitution already  has direct democracy                                                               
measures  through  referendum and  initiative  and  SJR 4  brings                                                               
those together more closely.                                                                                                    
                                                                                                                                
3:39:42 PM                                                                                                                    
MR. MILKS presented  a sectional analysis for SJR  4, speaking to                                                               
the following prepared document:                                                                                                
                                                                                                                                
     Section 1:  This section would add  two new subsections                                                                    
     to  the tax  clause of  the Alaska  Constitution. Taken                                                                    
     together, the  two subsections  would require  that any                                                                    
     new state  tax or increase  to the rate of  an existing                                                                    
     state tax be  approved by both the  legislature and the                                                                    
     voters.                                                                                                                    
                                                                                                                                
     Subsection  (b)  would  require that  any  law  enacted                                                                    
     through the legislative process  that would establish a                                                                    
     new  state tax  or  increase the  rate  of an  existing                                                                    
     state  tax  shall not  take  effect  unless the  voters                                                                    
     approve  the   proposed  law  in  the   next  statewide                                                                    
     election. If  the voters approve  the proposed  law, it                                                                    
     would  take  effect  90 days  after  the  election  was                                                                    
     certified.                                                                                                                 
                                                                                                                                
     Subsection (c) would require that  any law proposed for                                                                    
     enactment through  the initiative process  and approved                                                                    
     by the voters  that would establish a new  state tax or                                                                    
     increase the  rate of an  existing state tax  shall not                                                                    
     take  effect  unless  the legislature,  by  resolution,                                                                    
     approved the initiated  measure by the end  of the next                                                                    
     regular session. The legislature  would have to approve                                                                    
     it  by  majority  vote  in  a  joint  session.  If  the                                                                    
     legislature  approved  of  the  initiated  measure,  it                                                                    
     would  take  effect  90 days  after  the  legislature's                                                                    
     approval.                                                                                                                  
                                                                                                                                
     Section 2: This section  would make a conforming change                                                                    
     to the initiative  process in Section 6  of Article XI,                                                                    
     providing   an   exception   to  the   effective   date                                                                    
     requirements for initiatives.                                                                                              
                                                                                                                                
     Section  3:  This  section   would  require  that  this                                                                    
     amendment be placed  on the ballot in  the 2020 general                                                                    
     election.                                                                                                                  
                                                                                                                                
3:42:34 PM                                                                                                                    
CHAIR SHOWER asked if there were questions.                                                                                     
                                                                                                                                
3:42:55 PM                                                                                                                    
SENATOR  REINBOLD observed  that SJR  4 is  far broader  than she                                                               
realized. She  asked if it would  apply to new or  existing taxes                                                               
on income,  fish, alcohol, oil, education,  or designated general                                                               
funds since  some view the  latter as  fees. She noted  that some                                                               
people  think that  it's a  tax  on children  who don't  directly                                                               
receive their PFDs.                                                                                                             
                                                                                                                                
MR. MILKS  said there  is a distinction  between taxes  and fees.                                                               
The resolution  would amend art.  IX, sec. 1, relating  to taxing                                                               
power. It does  not amend art. IX, sec. 7,  relating to dedicated                                                               
funds and including licensing fees.                                                                                             
                                                                                                                                
SENATOR REINBOLD  responded, "Just  to verify. We  can't increase                                                               
taxes  on fish,  alcohol,  education -  nothing basically.  ...It                                                               
sounds  like we  can't do  taxes  on virtually  anything or  some                                                               
people would say increase fees."                                                                                                
                                                                                                                                
MR. MILKS clarified that the  resolution is not intended to apply                                                               
to licensing fees.                                                                                                              
                                                                                                                                
3:46:30 PM                                                                                                                    
MR. BARNHILL  agreed with Mr.  Milks that there is  a distinction                                                               
between taxes and  fees. He said the  intent in SJR 4  is that it                                                               
would  require  a vote  of  the  people  for the  legislature  to                                                               
initiate any new state tax or  increase an existing state tax. He                                                               
added,  "For user  fees, license  fees, fees  that we  frequently                                                               
consider as  designated general fund  - those would  fall outside                                                               
of the  definition of  tax for purposes  of the  constitution and                                                               
would not be subject to going to a vote of the people."                                                                         
                                                                                                                                
SENATOR REINBOLD  observed that  this creates a  loophole because                                                               
things now identified as a tax could be re-designated as a fee.                                                                 
                                                                                                                                
MR. BARNHILL said the administration  would be happy to draft the                                                               
legislation  to  close  any loopholes  that  are  identified.  He                                                               
opined  that constitutional  amendments  always try  to strike  a                                                               
balance  between language  that is  too restrictive  and language                                                               
that is too general. He  reiterated agreement with Mr. Milks that                                                               
taxes would  be subject to  a vote of  the people but  fees would                                                               
not.                                                                                                                            
                                                                                                                                
MR. MILKS said  the Alaska Supreme Court sometimes  looks at what                                                               
the dictionary  said about  key terms  when the  constitution was                                                               
framed. He read  the following from a 1955 dictionary:  "A tax is                                                               
a charge laid  by government upon persons or  property for public                                                               
purposes." He  said that  is key;  a tax on  the sale  of alcohol                                                               
would be a tax  but what the bar pays to hold  a license would be                                                               
a licensing  fee. He said  that is  the intent of  the resolution                                                               
but he agrees  with Mr. Barnhill that suggestions  to improve the                                                               
language were welcome.                                                                                                          
                                                                                                                                
3:49:23 PM                                                                                                                    
SENATOR  COGHILL  listed  various   taxes  in  the  statutes  and                                                               
highlighted that  there are  two pages  of exemptions.  He asked,                                                               
should the resolution  pass, if any modification  to an exemption                                                               
would require a vote of the people.                                                                                             
                                                                                                                                
MR. MILKS restated that SJR  4 addresses establishing a new state                                                               
tax and  increasing an  existing state tax,  both of  which would                                                               
require  a vote  of the  people. He  also summarized  the similar                                                               
provisions   that    amended   the   Colorado    and   California                                                               
constitutions.                                                                                                                  
                                                                                                                                
3:51:04 PM                                                                                                                    
SENATOR  COGHILL  suggested  that   before  passing  SJR  4,  the                                                               
committee might  want to review  all the tax exemptions  or place                                                               
clarifying sideboards.  He mentioned  excise taxes,  fish landing                                                               
taxes,  and  unemployment  insurance  and  said  he  agrees  with                                                               
Senator Reinbold  that the  application could  be very  broad. He                                                               
suggested  that  it  may  be  difficult to  make  the  case  that                                                               
something is  a fee but the  tipping point may be  the public fee                                                               
for  individual use  versus the  public fee  that is  broad-based                                                               
use. He reiterated  that dealing with the  exemptions embedded in                                                               
the law would be a real conundrum.                                                                                              
                                                                                                                                
MR. BARNHILL advised that he and  Mr. Milks would get back to the                                                               
committee  after they  review the  Colorado  Supreme Court  cases                                                               
relating to increasing a tax  rate and whether that includes just                                                               
the increase to  the rate in statute or whether  it also includes                                                               
an indirect increase through changing an exemption.                                                                             
                                                                                                                                
SENATOR COGHILL said  he likes the idea of a  low broad-based tax                                                               
because it applies  to everybody and generally  affects the state                                                               
positively. He  noted that if  Colorado isn't part of  the United                                                               
States Court of Appeals for  the Ninth Circuit, it doesn't matter                                                               
what that state did.                                                                                                            
                                                                                                                                
3:54:18 PM                                                                                                                    
MR. MILKS clarified that the  Colorado Supreme Court would be the                                                               
definitive interpreter of the Colorado State Constitution.                                                                      
                                                                                                                                
SENATOR COGHILL said  it could be a conundrum  if the legislature                                                               
decided to tax income from other states.                                                                                        
                                                                                                                                
MR. BARNHILL  said an Alaskan  court would look at  cases decided                                                               
by the Colorado Supreme Court as persuasive but not binding.                                                                    
                                                                                                                                
CHAIR SHOWER  summarized that an  Alaska court could look  at and                                                               
potentially  use the  information  from the  Colorado court  even                                                               
though  that state  is not  under the  jurisdiction of  the Ninth                                                               
Circuit.                                                                                                                        
                                                                                                                                
MR. MILKS opined  that the Alaska court would look  at the intent                                                               
of the legislature  and how the proposal was  communicated to the                                                               
voters before it looked at other states.                                                                                        
                                                                                                                                
SENATOR  MICCICHE  talked  about  the recent  ballot  measure  to                                                               
tighten protections  for fish habitat from  development and noted                                                               
that the  warring bumper stickers  inaccurately reduced  what was                                                               
an intricate issue  to either you like fish or  you hate fish. He                                                               
said despite the fact that  legislators will sit through hours of                                                               
meetings  to learn  the  details  of SJR  4,  it,  too, could  be                                                               
reduced to  warring bumper stickers that  ask if you want  to pay                                                               
more  money or  not.  He said  he struggles  with  SJR 4  because                                                               
conservative  districts like  his will  be ceding  their vote  to                                                               
districts like Anchorage and Southeast  that are much more likely                                                               
to  support  a  broad-based  tax.  He  questioned  how  carefully                                                               
considered policy  can result  from what comes  down to  a bumper                                                               
sticker war.                                                                                                                    
                                                                                                                                
MR. BARNHILL responded,  "The important thing here  is that we're                                                               
combining the  best of  representational democracy,  which really                                                               
does  resist the  sound bite  - the  bumper sticker,  with direct                                                               
democracy."  This   involves  the  legislative  process   and  it                                                               
consults   the  people.   He  opined   that  policy   makers  are                                                               
responsible for  resisting the sound  bite or bumper  sticker and                                                               
having  substantive  discussion  with  the people  of  Alaska  to                                                               
convey the reasons that this is important.                                                                                      
                                                                                                                                
MR.  MILKS added  that the  framers of  the constitution  decided                                                               
they wanted the people to have  a role through the initiative and                                                               
referendum processes.                                                                                                           
                                                                                                                                
SENATOR  MICCICHE said  he supports  the right  of the  people to                                                               
have a role  in government through the  initiative and referendum                                                               
processes  but he  wonders how  far  a representative  government                                                               
should go and still be fruitful in answering to the people.                                                                     
                                                                                                                                
MR. BARNHILL responded  that a tension exists  now between direct                                                               
democracy and representational  democracy. The substantive public                                                               
discussion  in the  referendum over  Senate Bill  21 relating  to                                                               
progressivity  and oil  production tax  is evidence  of that.  He                                                               
said he believes that sort of  high level discussion can occur in                                                               
this context, but  he also believes that if  the legislature were                                                               
to pass a  broad-based income or sales tax,  it's inevitable that                                                               
a group  of stakeholders  would seek a  referendum on  that. This                                                               
tightens the  relationship between  the roles of  the legislature                                                               
and the people, he said.                                                                                                        
                                                                                                                                
4:03:53 PM                                                                                                                    
SENATOR REINBOLD said the idea of  no new taxes without a vote of                                                               
the  people  sounds  like  a  generally  good  idea  because  the                                                               
constitution calls for government established  by the will of the                                                               
people. However, the people vote  for legislators to go to Juneau                                                               
for 90 days to dig deep into  issues. She said part of the reason                                                               
she wants to support SJR 4  is because of how abusive the federal                                                               
income  tax has  become,  but  it's not  clear  what the  overall                                                               
impact will be.  "I don't know if this is  going to impact bonds.                                                               
Are  bonds  technically  a  tax?  Can  we  really  vote  to  bond                                                               
ourselves into taxes? Is that  basically where we're going?"  She                                                               
further questioned  whether this was  intended to limit  the size                                                               
and  scope of  government. She  predicted a  massive boom  in the                                                               
state if SJR 6 and SJR 4 were to pass.                                                                                          
                                                                                                                                
MR.  BARNHILL responded  that the  two resolutions  combined will                                                               
have an impact  similar to what happened in 1992  when the voters                                                               
passed the  Colorado taxpayer bill  of rights. The intent  was to                                                               
restrain  the  growth  of  government  spending  and  to  require                                                               
consultation with  the people  when enacting  new taxes.  He said                                                               
Colorado has thrived economically since that legislation passed.                                                                
                                                                                                                                
SENATOR COGHILL asked  how this interacts with art.  IX, sec. 11,                                                               
Constitution of  the State of  Alaska relating to  the exemptions                                                               
for bonding.                                                                                                                    
                                                                                                                                
MR.  MILKS pointed  out that  the proposed  legislation is  about                                                               
taxes, not bonding. He said  bonding is about borrowing money and                                                               
the constitution places certain restrictions on borrowing.                                                                      
                                                                                                                                
SENATOR  COGHILL   suggested  he  think  about   whether  special                                                               
assessments would be  a tax. He also asked the  reasoning for the                                                               
statewide  election  to   be  held  more  than   120  days  after                                                               
enactment.                                                                                                                      
                                                                                                                                
4:09:35 PM                                                                                                                    
MR.  BARNHILL said  he didn't  know the  intention or  the reason                                                               
that it  was different  than for referendums,  which is  180 days                                                               
after adjournment.                                                                                                              
                                                                                                                                
SENATOR  COGHILL  suggested the  committee  think  of that  as  a                                                               
timeframe issue.                                                                                                                
                                                                                                                                
MR. MILKS offered to follow up with the information.                                                                            
                                                                                                                                
4:10:18 PM                                                                                                                    
CHAIR SHOWER stated that he would hold SJR 4 in committee.                                                                      

Document Name Date/Time Subjects
SSTA OFFICIAL AGENDA MEMO.pdf SSTA 3/26/2019 1:30:00 PM
agenda
SJR 6 Sponsor Statement.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR006A.PDF SJUD 4/1/2019 1:30:00 PM
SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Slide Show Presentation & Analysis.pdf SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 ver A Sectional 3.21.19.pdf SJUD 4/1/2019 1:30:00 PM
SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Fiscal Note.PDF SJUD 4/1/2019 1:30:00 PM
SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Additional Slides.pdf SSTA 3/21/2019 1:30:00 PM
SSTA 3/25/2019 5:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 6
3.25.2019 - SJR6 Responses.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 6 Various Written testimonies.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
03.27.2019 - SJR6 MORE Responses to SSTA.pdf SSTA 3/26/2019 1:30:00 PM
SJR 6
SJR 4 Transmittal Letter.pdf SJUD 4/15/2019 1:30:00 PM
SJUD 4/22/2019 6:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SSTA 3/27/2019 6:00:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 version A.pdf SJUD 4/22/2019 6:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SSTA 3/27/2019 6:00:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 Sectional Analysis.pdf SJUD 4/22/2019 6:00:00 PM
SSTA 3/26/2019 1:30:00 PM
SSTA 3/27/2019 6:00:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 Fiscal Note GOV-DOE.pdf SJUD 4/15/2019 1:30:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 4
SJR 4 Fiscal Note - DLWD.pdf SJUD 4/15/2019 1:30:00 PM
SSTA 3/26/2019 1:30:00 PM
SJR 4
Senate State Affairs - SJR 6 Written Testimony uploaded (04-05-19).pdf SSTA 3/26/2019 1:30:00 PM
SJR 6