Legislature(2019 - 2020)BUTROVICH 205

03/28/2019 03:30 PM Senate STATE AFFAIRS

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Audio Topic
03:38:02 PM Start
03:38:42 PM SJR4
04:27:46 PM SJR5
06:05:40 PM Public Testimony on Sjr 5
07:59:58 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SJR 4 CONST. AM: STATE TAX; INTIATIVE TELECONFERENCED
Moved CSSJR 4(STA) Out of Committee
*+ SJR 5 CONST. AM.:PERMANENT FUND & DIVIDEND TELECONFERENCED
Heard & Held
-- Public Testimony - Starts at 6:00 p.m. --
<Time Limit May Be Set>
+ Bills Previously Heard/Scheduled TELECONFERENCED
             SJR  4-CONST. AM: STATE TAX; INTIATIVE                                                                         
                                                                                                                                
3:38:42 PM                                                                                                                    
CHAIR  SHOWER   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.                                                                              
                                                                                                                                
He advised  that the bill was  last heard on 3/27/19  when public                                                               
testimony  was  opened  and  closed.  Written  testimony  may  be                                                               
submitted to [email protected]  until 6:00 p.m. this                                                               
evening. He invited Mr. Milks to  the witness table to respond to                                                               
the questions that were raised during the first hearing.                                                                        
                                                                                                                                
3:39:18 PM                                                                                                                    
BILL  MILKS, Assistant  Attorney General,  Civil Division,  Labor                                                               
and State  Affairs Section, Department  of Law, Juneau,  said the                                                               
first question  asked why  any new  state tax  or increase  in an                                                               
existing state  tax would  take effect  "in a  statewide election                                                               
held  more than  one hundred  twenty days  from enactment  of the                                                               
proposed law." He  explained that one hundred  twenty days aligns                                                               
with  the  initiative  provision  in  art  XI,  sec.  4,  of  the                                                               
Constitution of the State of Alaska.                                                                                            
                                                                                                                                
3:40:48 PM                                                                                                                    
SENATOR COGHILL related  that he asked for  the rationale because                                                               
he wondered  if it  was arbitrary.  He asked  if the  fiscal note                                                               
would be affected.                                                                                                              
                                                                                                                                
MR. MILKS said he didn't believe so.                                                                                            
                                                                                                                                
Mr.  MILKS said  Senator Coghill  also  asked if  any changes  to                                                               
existing tax exemptions  would trigger a vote. The  answer is no,                                                               
changing  an existing  tax would  neither  create a  new tax  nor                                                               
change  a  tax   rate.  He  reminded  the   committee  that  this                                                               
legislation  is  patterned  after  the  Colorado  model  and  the                                                               
Colorado  Supreme Court  considered a  case about  exemptions and                                                               
held that changing a tax exemption would not trigger a vote.                                                                    
                                                                                                                                
3:42:13 PM                                                                                                                    
SENATOR MICCICHE joined the committee.                                                                                          
                                                                                                                                
SENATOR COGHILL suggested  Mr. Milks and the  committee look into                                                               
that a little further because  he believes it would be challenged                                                               
if changing an exemption increases  the tax. For example, "if you                                                               
remove an exemption and their tax  payment goes up, is that going                                                               
to be a rate increase?"                                                                                                         
                                                                                                                                
MR.  MILKS  said he  appreciates  that  but  the intent  is  that                                                               
exemptions are not  subject to this legislation  and therefore do                                                               
not trigger a vote.                                                                                                             
                                                                                                                                
MR. MILKS  turned to Senator  Coghill's that asked  about special                                                               
assessments referred to  in art IV, sec. 11,  Constitution of the                                                               
State of Alaska. He explained  that those special assessments are                                                               
exceptions from  a debt prohibition.  The intent is that  kind of                                                               
special  assessment  is  not  covered  by  this  legislation  and                                                               
therefore would not trigger a vote.                                                                                             
                                                                                                                                
SENATOR COGHILL suggested the next  committee of referral explore                                                               
that further and  get a better definition because  it talks about                                                               
state or  political subdivisions  and the pipeline,  for example,                                                               
has an assessment that's been litigated repeatedly.                                                                             
                                                                                                                                
3:46:32 PM                                                                                                                    
SENATOR KAWASAKI read:  "an initiative can't be  used to dedicate                                                               
revenues, make or repeal appropriations".  He asked what the cure                                                               
is  for  that  because  it's  been used  quite  often  to  strike                                                               
initiatives from the ballot.                                                                                                    
                                                                                                                                
MR. MILKS  pointed out that  voters have the initiative  power on                                                               
taxes  but not  appropriations.  He explained  that  SJR 4  would                                                               
create an  automatic review  process by  the legislature  and the                                                               
voters of any  new [state] tax or change in  tax rate. The voters                                                               
already have the constitutional authority  to review a tax passed                                                               
by  the legislature  such as  the Senate  Bill 21  initiative and                                                               
vice versa through the referendum process, he said.                                                                             
                                                                                                                                
SENATOR KAWASAKI observed that subsection  (c) in Section 1 gives                                                               
the legislature the power to veto whatever an initiative did.                                                                   
                                                                                                                                
MR.  MILKS  agreed  and added  that  an  existing  constitutional                                                               
provision gives the  legislature the same authority,  but not for                                                               
two years.                                                                                                                      
                                                                                                                                
SENATOR  KAWASAKI commented  that  this  would establish  another                                                               
weird power dynamic between the people and legislature.                                                                         
                                                                                                                                
CHAIR SHOWER emphasized that this  would be further vetted in the                                                               
next committee of referral.                                                                                                     
                                                                                                                                
SENATOR KAWASAKI asked  for an explanation of the  genesis of the                                                               
Colorado law, which is the model for SJR 4.                                                                                     
                                                                                                                                
MR.  MILKS responded  that Colorado  adopted a  similar provision                                                               
called  the Tabor  Amendment. It  provides that  new state  taxes                                                               
must be reviewed by the voters.                                                                                                 
                                                                                                                                
3:51:21 PM                                                                                                                    
SENATOR COGHILL  recalled that Tabor  was an initiative  to amend                                                               
the Constitution of the State of Colorado.                                                                                      
                                                                                                                                
MR. MILKS said he believes that's correct.                                                                                      
                                                                                                                                
SENATOR  COGHILL asked  how  many articles  are  in the  Colorado                                                               
constitution.                                                                                                                   
                                                                                                                                
MR. MILKS said he did not know.                                                                                                 
                                                                                                                                
SENATOR COGHILL  advised that the  Colorado constitution  is much                                                               
more  complex and  the Constitution  of the  State of  Alaska has                                                               
significant  barriers to  protect  the rights  of  the people  of                                                               
Alaska that  differ from the Colorado  constitution. He suggested                                                               
the  administration  look  at  the   interplay  between  the  two                                                               
constitutions   because  Colorado   provides  voters   much  more                                                               
prescriptive authority.                                                                                                         
                                                                                                                                
MR. MILKS said he'd look at  that but he ultimately believes that                                                               
the tax  restrictions are the  same and the Alaska  Supreme Court                                                               
would look  at that  and the  intent of  the legislature  as this                                                               
legislation goes through the process.                                                                                           
                                                                                                                                
SENATOR COGHILL requested  the committee members who  are also on                                                               
the Judiciary Committee  ensure that the language is  as clear as                                                               
possible so the intent is not open to interpretation.                                                                           
                                                                                                                                
3:55:01 PM                                                                                                                    
SENATOR  REINBOLD asked  him  to clarify  his  comment about  the                                                               
barriers in the Alaska constitution  to protect the rights of the                                                               
people.                                                                                                                         
                                                                                                                                
SENATOR  COGHILL said  the barriers  he was  referring to  in the                                                               
Alaska  constitution   are  unique  among  all   the  states.  He                                                               
referenced  [Article  VIII]  that  treats fish,  game,  and  land                                                               
management  differently  than Colorado  or  any  other state.  He                                                               
explained  that   he  used  the   term  "barriers"   because  the                                                               
legislature is  barred from writing  laws that don't  respect the                                                               
rights of the people.                                                                                                           
                                                                                                                                
SENATOR  KAWASAKI  reiterated  his  earlier  question  about  the                                                               
genesis  of   the  legislation.  "Is  this   something  that  the                                                               
Department of Law  boiled down from the state  constitution or is                                                               
this   something  that   was  boiled   down  from   the  Colorado                                                               
constitution to fit the state Constitution?"                                                                                    
                                                                                                                                
MR. MILKS replied the policy  comes from the Colorado legislation                                                               
that deals with  state tax but the legislation  was drafted based                                                               
on the Alaska  Constitution. For example, the  one hundred twenty                                                               
day  provision  is   based  on  the  timeframes   in  the  Alaska                                                               
constitution.                                                                                                                   
                                                                                                                                
CHAIR SHOWER  asked for  clarification that SJR  4 is  modeled on                                                               
the concept of  that provision in the  Colorado constitution, but                                                               
it is not an exact copy.                                                                                                        
                                                                                                                                
MR. MILK confirmed  that the concepts are the same  but SJR 4 was                                                               
drafted to fit the Alaska constitution.                                                                                         
                                                                                                                                
3:59:28 PM                                                                                                                    
SENATOR KAWASAKI noted  that in Colorado the  second iteration of                                                               
the Tabor Amendment dealt with  the contracting of state debt. He                                                               
asked if the Dunleavy Administration considered that as well.                                                                   
                                                                                                                                
MR.  MILKS replied,  "A tax  amendment  was the  Administration's                                                               
choice here, not  a wholesale following other  states approach to                                                               
all fiscal issues."                                                                                                             
                                                                                                                                
SENATOR KAWASAKI asked  if there was consideration  given to also                                                               
limiting the state's ability to collect fees.                                                                                   
                                                                                                                                
MR. MILKS  replied SJR 4  was drafted to  amend art. IX,  sec. 1,                                                               
which deals with taxes. It is not intended to include fees.                                                                     
                                                                                                                                
CHAIR SHOWER cautioned  against asking the presenter  to give the                                                               
Governor's opinion.                                                                                                             
                                                                                                                                
SENATOR KAWASAKI asked if the  request for this proposal from the                                                               
Administration to  the Department  of Law  included a  request to                                                               
look at fees and state debt.                                                                                                    
                                                                                                                                
MR.  MILKS replied  the communications  between attorneys  at the                                                               
Department of Law and the Governor are confidential.                                                                            
                                                                                                                                
4:02:28 PM                                                                                                                    
SENATOR KAWASAKI asked if any  special advisors were consulted to                                                               
discuss the  proposed constitutional  amendment and how  it would                                                               
match state law.                                                                                                                
                                                                                                                                
MR. MILKS  replied the Department  of Law advised  the Governor's                                                               
Office    and   drafted    a   constitutional    amendment.   The                                                               
Administration  made  the  policy  decisions. He  added,  "I'm  a                                                               
lawyer for the Administration."                                                                                                 
                                                                                                                                
SENATOR KAWASAKI said he was trying  to find out if the nonprofit                                                               
organization, Americans  for Prosperity,  had any  influence over                                                               
the constitutional amendment proposed  in SJR 4. The organization                                                               
is based  in Colorado and  has advocated for the  Tabor Amendment                                                               
in other states.                                                                                                                
                                                                                                                                
MR.  MILKS replied  he worked  on SJR  4 as  a Department  of Law                                                               
attorney    and   he    believes   that    the   Administration's                                                               
representatives  have  explained  that  this   is  one  of  three                                                               
proposed  constitutional amendments  that reflect  the policy  of                                                               
the Administration.                                                                                                             
                                                                                                                                
CHAIR SHOWER  said these questions  should go to the  Governor or                                                               
his representatives.                                                                                                            
                                                                                                                                
4:04:38 PM                                                                                                                    
SUZANNE   CUNNINGHAM,  Legislative   Director,   Office  of   the                                                               
Governor,  Anchorage, stated  that  no  outside organization  was                                                               
involved in creating  or drafting this policy. "It  was a concept                                                               
he was interested in that he  was aware of and we started working                                                               
with  the Department  of Law  and how  to draft  a constitutional                                                               
amendment to the Alaska state constitution."                                                                                    
                                                                                                                                
SENATOR  REINBOLD asked  Senator Kawasaki  his intent  for asking                                                               
the question.                                                                                                                   
                                                                                                                                
CHAIR SHOWER stopped the line of questioning.                                                                                   
                                                                                                                                
He solicited  a motion  for the  first of  the two  amendments he                                                               
wanted the committee to consider.                                                                                               
                                                                                                                                
4:06:17 PM                                                                                                                    
SENATOR COGHILL  motioned to  adopt Amendment  1, work  order 31-                                                               
GS1070\A.1, Nauman, 3/28/19.                                                                                                    
                                                                                                                                
                          AMENDMENT 1                                                                                       
                                                                                                                                
                                                                                                                                
    OFFERED IN THE SENATE                  BY SENATOR SHOWER                                                                    
          TO:  SJR 4                                                                                                            
                                                                                                                                
                                                                                                                                
     Page 1, line 13, following "effective":                                                                                    
          Insert "on the later of"                                                                                              
                                                                                                                                
     Page 1, line 14, following "governor":                                                                                     
          Insert "or an effective date provided for by                                                                          
     concurrence of two-thirds of the membership of each                                                                        
     house"                                                                                                                     
                                                                                                                                
CHAIR SHOWER  explained that both amendments  clarify language to                                                               
ensure the intent is clear. He  asked Mr. Milks to comment on the                                                               
process and what the clarification does.                                                                                        
                                                                                                                                
4:07:04 PM                                                                                                                    
MR.  MILKS explained  that Amendment  1  clarifies the  effective                                                               
date of  a law  enacted by  the legislature  and approved  by the                                                               
voters. It also  provides flexibility for the  legislature to set                                                               
a different effective date.                                                                                                     
                                                                                                                                
SENATOR KAWASAKI questioned the  reason for requiring concurrence                                                               
of two-thirds of the membership of each house.                                                                                  
                                                                                                                                
MR.  MILKS replied  that aligns  with the  effective date  in the                                                               
Constitution of the State of Alaska.                                                                                            
                                                                                                                                
4:09:55 PM                                                                                                                    
SENATOR  MICCICHE asked  if  the legislature  should  be able  to                                                               
extend the effective date of  ninety days after the certification                                                               
of the election  to accommodate situations where the  vote was on                                                               
an initiative and it took longer  than ninety days to execute the                                                               
tax.                                                                                                                            
                                                                                                                                
MR. MILKS  said the  ninety day provision  is also  in subsection                                                               
(c) and it aligns with the way an initiative works now.                                                                         
                                                                                                                                
SENATOR  MICCICHE clarified  that he  was asking  about extending                                                               
the ninety-day  window to enact  a very complicated tax  law that                                                               
the voters approved by initiative.  His understanding is it would                                                               
likely take longer  than ninety days to enact an  income tax or a                                                               
sales tax.                                                                                                                      
                                                                                                                                
4:12:12 PM                                                                                                                    
CORI   MILLS,  Assistant   Attorney   General,  Civil   Division,                                                               
Department of Law, Juneau, said  the proposed resolution could be                                                               
amended to  provide a  process to extend  that timeline,  but the                                                               
legislature could also  pass a bill to extend  the effective date                                                               
as it considers approval of an initiative enacted by the voters.                                                                
                                                                                                                                
SENATOR MICCICHE asked if the same  would apply for a bill passed                                                               
by the  legislature. He clarified  that he was supportive  of the                                                               
amendment, he was just looking at how it would work both ways.                                                                  
                                                                                                                                
MR. MILLS  said the  difference is one  of timing.  Something the                                                               
legislature passes  is placed  on the  next statewide  ballot and                                                               
goes  into  effect  ninety  days after  that  if  it's  approved.                                                               
Anything the voters  approve in an election can't  be approved by                                                               
the legislature until the next session.                                                                                         
                                                                                                                                
SENATOR MICCICHE expressed satisfaction with the answer.                                                                        
                                                                                                                                
4:14:51 PM                                                                                                                    
SENATOR  REINBOLD highlighted  that initiating  new or  increased                                                               
taxes is not an issue in her district.                                                                                          
                                                                                                                                
SENATOR  MICCICHE  clarified  that   the  intention  here  is  to                                                               
responsibly evaluate  all the potential  effects of  the proposed                                                               
law.                                                                                                                            
                                                                                                                                
4:15:34 PM                                                                                                                    
CHAIR SHOWER removed his objection.  Finding no further objection                                                               
or discussion, he stated that Amendment 1 passes.                                                                               
                                                                                                                                
4:16:10 PM                                                                                                                    
SENATOR COGHILL  motioned to  adopt Amendment  2, work  order 31-                                                               
GS1070\A.2, Nauman, 3/28/19.                                                                                                    
                                                                                                                                
                          AMENDMENT 2                                                                                       
                                                                                                                                
                                                                                                                                
    OFFERED IN THE SENATE                 BY SENATOR SHOWER                                                                     
          TO:  SJR 4                                                                                                            
                                                                                                                                
                                                                                                                                
     Page 1, line 7:                                                                                                            
          Delete "Any"                                                                                                          
          Insert "Notwithstanding Section 18 of Article II, a"                                                                  
          Delete "Sections 14 - 18"                                                                                             
          Insert "Sections 14 - 17"                                                                                             
                                                                                                                                
     Page 1, line 10:                                                                                                           
          Delete "proposed"                                                                                                     
                                                                                                                                
     Page 1, line 11:                                                                                                           
          Delete "proposed"                                                                                                     
                                                                                                                                
     Page 1, line 15:                                                                                                           
          Delete "proposed"                                                                                                     
                                                                                                                                
CHAIR  SHOWER  objected for  discussion  purposes  and asked  Mr.                                                               
Milks to discuss the clarification.                                                                                             
                                                                                                                                
MR. MILKS  explained that Amendment  2 clarifies that any  law to                                                               
amend art. II, secs. 14-17  of the constitution is only effective                                                               
on a  vote of the people.  He described the amendment  as further                                                               
clarification  of a  contingency provision.  "The legislature  is                                                               
passing a  law, but  the law  is contingent on  a future  act and                                                               
that future act is the vote of the people."                                                                                     
                                                                                                                                
SENATOR MICCICHE  asked why it  was important to remove  the term                                                               
"proposed."                                                                                                                     
                                                                                                                                
MR. MILKS  replied notwithstanding  the effective date  clause, a                                                               
law enacted under art. II, secs  14 and 17, is no longer proposed                                                               
law. It  is a law with  the contingency provision, a  vote of the                                                               
people.                                                                                                                         
                                                                                                                                
SENATOR MICCICHE asked, "Can a law become law without passage?"                                                                 
                                                                                                                                
MR. MILKS  replied there  are contingency  provisions in  some of                                                               
the  bills the  legislature passes.  This further  clarifies that                                                               
this is a  two-part process. The legislature enacts a  law and it                                                               
is contingent it its effectiveness.                                                                                             
                                                                                                                                
SENATOR COGHILL  directed attention  to art.  XII, sec.  11, that                                                               
deals  with law-making  powers. These  powers generally  refer to                                                               
the  legislature  but  it  also  refers  to  the  people  through                                                               
initiative. He  said it's interesting that  the legislature could                                                               
pass  a law  that couldn't  be  ratified and  it would  therefore                                                               
become  ineffective.  He  opined  that  it's  not  necessarily  a                                                               
proposed law, it's  a law that needs to be  ratified. He admitted                                                               
he was looking for a loophole but he didn't find one.                                                                           
                                                                                                                                
4:20:51 PM                                                                                                                    
CHAIR   SHOWER  removed   his  objection.   Finding  no   further                                                               
discussion or objection, he stated that Amendment 2 passes.                                                                     
                                                                                                                                
CHAIR SHOWER asked for final discussion on SJR 4, as amended.                                                                   
                                                                                                                                
4:21:22 PM                                                                                                                    
SENATOR COGHILL  expressed concern about the  definition of "tax"                                                               
and the sliding scale within the  tax codes. He said he will look                                                               
for clarity  on this issue  as the legislation moves  forward. He                                                               
said  he'll  offer  the  motion   to  move  the  resolution  from                                                               
committee but he has reservations.                                                                                              
                                                                                                                                
CHAIR SHOWER suggested  he provide a list of  questions he'd like                                                               
to have vetted in the Judiciary Committee.                                                                                      
                                                                                                                                
SENATOR  MICCICHE   said  he,  too,   will  support   moving  the                                                               
resolution  along,  but  his  worry   is  that  his  conservative                                                               
district will be  giving up power to  less conservative districts                                                               
that  would  be  more  likely  to support  a  tax  they  view  as                                                               
necessary but his district does  not support. He opined that when                                                               
more control  is given to  the voters, detailed  discussions like                                                               
the one today may be lost in the process.                                                                                       
                                                                                                                                
CHAIR SHOWER found no further discussion and solicited a motion.                                                                
                                                                                                                                
4:24:31 PM                                                                                                                    
SENATOR COGHILL moved to report  SJR 4, work draft 31-GS1070|A as                                                               
amended,  from  committee  with  individual  recommendations  and                                                               
attached fiscal  note(s) and authorization for  Legislative Legal                                                               
Services  to  make  any   appropriate  technical  and  conforming                                                               
changes.                                                                                                                        
                                                                                                                                
4:24:57 PM                                                                                                                    
CHAIR SHOWER found  no objection and CSSJR 4(STA)  moved from the                                                               
Senate State Affairs Standing Committee.                                                                                        

Document Name Date/Time Subjects
SSTA OFFICIAL AGENDA MEMO.pdf SSTA 3/28/2019 3:30:00 PM
agenda
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 3/27/2019 6:00:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 - Amednment #1.pdf SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 4 - Amendment #2.pdf SSTA 3/28/2019 3:30:00 PM
SJR 4
SJR 5 Transmittal Letter.pdf SJUD 4/8/2019 1:30:00 PM
SSTA 3/28/2019 3:30:00 PM
SJR 5
SJR 5 version A.pdf SSTA 3/28/2019 3:30:00 PM
SJR 5
SJR 5 Sectional Analysis.pdf SSTA 3/28/2019 3:30:00 PM
SJR 5
SJR 5 Fiscal Note GOV-DOE.pdf SSTA 3/28/2019 3:30:00 PM
SJR 5
Senate State Affairs - SJR 4 Written Testimony uploaded (04-08-19).pdf SSTA 3/28/2019 3:30:00 PM
SJR 4