Legislature(1995 - 1996)
02/27/1996 01:05 PM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 27, 1996
1:05 p.m.
MEMBERS PRESENT
Representative Ivan Ivan, Co-Chair
Representative Alan Austerman, Co-Chair
Representative Kim Elton
Representative Al Vezey
Representative Pete Kott
Representative Irene Nicholia
MEMBERS ABSENT
Representative Jerry Mackie
OTHER HOUSE MEMBERS PRESENT
Representative Pete Kelly
COMMITTEE CALENDAR
HOUSE BILL NO. 409
"An Act combining parts of the Department of Commerce and Economic
Development and parts of the Department of Community and Regional
Affairs by transferring some of their duties to a new Department of
Community and Economic Development; transferring some of the duties
of the Department of Commerce and Economic Development and the
Department of Community and Regional Affairs to other existing
agencies; eliminating the Department of Commerce and Economic
Development and the Department of Community and Regional Affairs;
adjusting the membership of certain multi-member bodies to reflect
the transfer of duties among departments and the elimination of
departments; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 383
"An Act relating to reimbursement by the state to municipalities
and certain established villages for services provided to
individuals incapacitated by alcohol; and providing for an
effective date."
- PASSED CSHB 383(CRA) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 409
SHORT TITLE: DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT
SPONSOR(S): REPRESENTATIVE(S) KELLY, Therriault, James, Kohring
JRN-DATE JRN-DATE ACTION
01/11/96 2409 (H) READ THE FIRST TIME - REFERRAL(S)
01/11/96 2409 (H) CRA, FINANCE
01/16/96 2456 (H) COSPONSOR(S): KOHRING
02/01/96 (H) CRA AT 1:00 PM CAPITOL 124
02/01/96 (H) MINUTE(CRA)
02/03/96 (H) CRA AT 1:00 PM CAPITOL 124
02/03/96 (H) MINUTE(CRA)
02/06/96 (H) CRA AT 1:00 PM CAPITOL 124
02/06/96 (H) MINUTE(CRA)
02/13/96 (H) CRA AT 1:00 PM CAPITOL 124
02/13/96 (H) MINUTE(CRA)
02/22/96 (H) CRA AT 1:00 PM CAPITOL 124
02/22/96 (H) MINUTE(CRA)
02/27/96 (H) CRA AT 1:00 PM CAPITOL 124
BILL: HB 383
SHORT TITLE: REIMBURSE FOR LOCAL SERVICE TO INEBRIATES
SPONSOR(S): REPRESENTATIVE(S) IVAN, Brown, Elton
JRN-DATE JRN-DATE ACTION
12/29/95 2366 (H) PREFILE RELEASED
01/08/96 2366 (H) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2366 (H) CRA, STATE AFFAIRS, FINANCE
01/16/96 (H) CRA AT 1:00 PM CAPITOL 124
01/16/96 (H) MINUTE(CRA)
01/23/96 (H) CRA AT 4:00 PM CAPITOL 124
01/23/96 (H) MINUTE(CRA)
01/25/96 (H) CRA AT 1:00 PM CAPITOL 124
01/25/96 (H) MINUTE(CRA)
02/21/96 2846 (H) COSPONSOR(S): BROWN
02/22/96 (H) CRA AT 1:00 PM CAPITOL 124
02/22/96 (H) MINUTE(CRA)
02/27/96 (H) COSPONSOR(S): ELTON
02/27/96 (H) CRA AT 1:00 PM CAPITOL 124
WITNESS REGISTER
TOM WRIGHT, Legislative Assistant
to Representative Ivan Ivan
Alaska State Legislature
State Capitol Building, Room 503
Juneau, Alaska 99801
Telephone: (907) 465-4942
POSITION STATEMENT: Presented changes in committee substitute for
HB 383.
DENNIS OAKLAND, Chief of Police
Police Department
City of Homer
4060 Heath Street
Homer, Alaska 99603
Telephone: (907) 235-3150
POSITION STATEMENT: Referenced previous testimony in support of
HB383.
CRISTY TILDEN, Program Director
Drug and Alcohol Services
Bristol Bay Area Health Corporation; and
Board Member, Advisory Board on
Alcohol and Drug Abuse
P.O. Box 130
Dillingham, Alaska 99576
Telephone: (907) 842-5266
POSITION STATEMENT: Supported CSHB 383.
JEWEL JONES, Manager
Social Services Division
Health and Human Services Department
Municipality of Anchorage
P.O. Box 196650
Anchorage, Alaska 99519-6650
Telephone: (907) 343-4667
POSITION STATEMENT: Testified on CSHB383.
C. JOE DIMATTEO, Director
Alaska Council on the Prevention of Alcohol
and Drug Abuse
3333 Denali Street
Anchorage, Alaska 99503
Telephone: (907) 258-6021
POSITION STATEMENT: Supported CSHB 383.
LOREN JONES, Director
Central Office
Division of Alcohol and Drug Abuse
Department of Health and Social Services
P.O. Box 110607
Juneau, Alaska 99811-0607
Telephone: (907) 465-2071
POSITION STATEMENT: Presented department's position and answered
questions on CSHB 383.
BOB BARTHOLOMEW, Deputy Director
Central Office
Income and Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
Telephone: (907) 465-4773
POSITION STATEMENT: Presented department's position and answered
questions on CSHB 383.
RICHARD B. LAUBER, Lobbyist
Anheuser-Busch Company, Inc.
321 Highland Drive
Juneau, Alaska 99801
Telephone: (907) 586-3636
POSITION STATEMENT: Testified on CSHB 383.
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 Second Street
Juneau, Alaska 99801
Telephone: (907) 586-1325
POSITION STATEMENT: Testified on CSHB 383.
ACTION NARRATIVE
TAPE 96-16, SIDE A
Number 0001
CO-CHAIR IVAN IVAN called the House Community and Regional Affairs
Committee meeting to order at 1:05 p.m. Members present at the
call to order were Representatives Ivan, Austerman, Elton, Vezey,
Kott and Nicholia. Absent was Representative Mackie.
HB 409 - DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT
Number 0073
CO-CHAIR IVAN explained that HB 409 had been the subject of
extensive hearings during the past month. The committee had heard
from numerous people throughout rural Alaska and the rest of the
state. The committee had given the bill close scrutiny and
listened to testimony about the impacts HB 409 would have on rural
Alaska and those dependent on services provided by the Department
of Commerce and Economic Development (DCED) and the Department of
Community and Regional Affairs (DCRA). In addition, the impacts
had been discussed with the bill's sponsor, Representative Pete
Kelly, and other members of the majority caucus.
CO-CHAIR IVAN said that should the bill have made it through both
legislative bodies and been sent to the Governor, there was no
assurance it would not be signed. The Administration, according to
the bill sponsor and testimony provided to the committee, had
remained neutral on the legislation.
Number 0159
CO-CHAIR IVAN expressed admiration, understanding and respect for
the effort and time put into the legislation by Representative
Kelly, whose intent was to prevent further cuts to services.
However, Co-Chairs Ivan and Austerman, with concurrence of the
majority members of the committee, Representatives Kott and Vezey,
believed that HB 409 was not in the best interests of rural Alaska
or the rest of the state.
CO-CHAIR IVAN stated the intention of holding HB 409 in the House
Community and Regional Affairs Committee in order to protect those
persons in both rural and urban Alaska who would have been affected
had this bill been signed into law.
Number 0256
CO-CHAIR ALAN AUSTERMAN affirmed his agreement with Co-Chair Ivan's
statement. He believed the bill was best left in committee. If
there were a savings to be made as far as DCED or DCRA was
concerned, he thought that could best be made through the budget
process, rather than by totally revamping the two departments and
creating "the heartburn" that would have been generated in rural
Alaska. He indicated he hoped the bill would not be seen again.
Number 0324
REPRESENTATIVE KIM ELTON said he was making "a short statement on
behalf of the minority." He expressed appreciation for the
opportunity given by Co-Chair Ivan to the people of Alaska to
testify on all elements of the bill. "I appreciate the latitude
that you gave to those people who did testify, whether it was here
in person or over the teleconference, and the courteous way in
which you treated those people who were testifying," he said. "If
I had been asked about this, I would have encouraged you to do
exactly what you're doing." He added, "I think you've handled this
issue in a manner that has been fair to the sponsor, to the members
of the committee and to the agencies - and to the people who
testified on it. I just commend you for your decision."
Number 0390
CO-CHAIR IVAN replied, "That commendation, of course, belongs to
the rest of the committee with us here."
REPRESENTATIVE PETE KOTT extended his appreciation for the great
amount of effort put into the bill by the sponsor, Representative
Kelly. He emphasized that he had gone into the original hearing
open-minded. After the second or third hearing, he was not
convinced that the consolidation was in people's best interests.
He thought spending time to evaluate the process, to ensure the
right thing was being done, was better than stepping ahead "off the
deep end" and finding out the cost savings were not as great as
hoped but that the disruption to lives and programs was more than
intended. Representative Kott acknowledged that in many cases,
programs would have continued to operate in the existing form.
However, he applauded Co-Chair Ivan for taking a close look at the
issue and holding the bill over.
Number 0587
REPRESENTATIVE AL VEZEY had no comment.
REPRESENTATIVE IRENE NICHOLIA voiced her appreciation for
Representative Kelly's work on HB 409 and for his statement that he
would work hard to keep the Head Start program funded. She
indicated willingness to work with him to keep it funded.
Representative Nicholia expressed appreciation for the testimony
received from people throughout the state. She believed that HB
409 would dissolve the existing bridge to rural Alaska and
applauded efforts to keep the bill in committee.
HB 383 - REIMBURSE FOR LOCAL SERVICE TO INEBRIATES
Number 0657
CO-CHAIR IVAN noted that HB 383 had been heard previously by the
committee and been discussed by a subcommittee chaired by
Representative Austerman. It had undergone substantial change.
Co-Chair Ivan asked for a motion to adopt the committee substitute
for HB 383, draft 9-LS1447\F, for discussion purposes.
Number 0715
CO-CHAIR AUSTERMAN moved that the committee accept work draft CSHB
383, version F, for discussion purposes. There being no objection,
it was so ordered.
Number 0773
TOM WRIGHT, Legislative Assistant to Representative Ivan, sponsor
of HB 383, explained the intent of finding a way to reimburse
municipalities for the cost associated with the Title 47 public
inebriates. One of the problems with the first draft of HB383 had
been that the Mental Health Trust Fund was the source of funding.
There had been discussions among Representative Austerman and his
staff, Representative Ivan and his staff and the Mental Health
Trust Fund representatives to try to find solutions for undertaking
the program. Although the Mental Health trustees expressed
interest in the program, they did not see how they could fund it,
since it only earned approximately $2 million per year and had to
fund other programs.
Number 0816
MR. WRIGHT continued, saying in order to try to fund the program
without using general fund revenue, they came up with the alcohol
excise tax to fund the program under HB 383 and generate revenues
for the state. He referred to CSHB 383, Section 1, and pointed out
that HB 96 and HB 97 were incorporated into the new draft. Those
bills were sponsored by Representative Kay Brown, who had concurred
with incorporating them into HB 383. One of those two bills was
the municipal tax bill, under which a municipality may impose an
alcoholic beverage sales tax equal to, higher than or lower than
the applicable sales tax in the municipality.
Number 0834
MR. WRIGHT referred to Section 2, addressing the alcohol tax, and
said the numbers inserted in CSHB 383 were those recommended by the
Long Range Financial Planning Commission. He said Section 3
allowed the Department of Revenue each year to "adjust the tax
rates imposed under (a) of this section to reflect increases in the
Consumer Price Index for all urban consumers for all items for the
Anchorage metropolitan area compiled by the Bureau of Labor
Statistics". Mr. Wright referred to Section 4 and Section 5, which
he said were really the meat of the original bill, the
reimbursement program to municipalities. He indicated
representatives were available from the Department of Revenue and
the Department of Health and Social Services to answer questions.
Number 0929
REPRESENTATIVE ELTON asked Mr. Wright about Section 5, page 3,
relating to municipalities or traditional village councils seeking
an offset to services provided to incapacitated individuals. He
wondered if consideration had been given to broadening the language
so prevention and education programs would also be eligible through
this revenue source. "That way, you're not just treating a symptom
at the end, but you're also doing some prevention at the
beginning," he added.
Number 0979
MR. WRIGHT responded that it had been discussed, although probably
not at as great a length as for the reimbursement program. Some of
those programs were already established, funded either through
Mental Health Trust funds, general funds or program receipts. What
CSHB 383 was trying to accomplish was establishment of the new
program. The legislature could then decide where to dedicate the
other revenues.
Number 1009
REPRESENTATIVE ELTON thought this area was important to the state.
He was concerned about just supplanting general fund dollars with
a new revenue source, instead of increasing treatment or prevention
services. He asked if that had been discussed as the committee
substitute was put together.
Number 1035
MR. WRIGHT replied he would defer to Co-Chair Austerman for that
aspect. He mentioned another piece of legislation, HB493, which
dealt with involuntary commitments of people who were "going
through a revolving door process." He noted that HB 493 was
currently in the House Judiciary Committee and said, "that's
another piece of the puzzle." He explained that with so many
pieces to it, it had been difficult to ascertain what existed just
for the program under consideration.
Number 1086
CO-CHAIR AUSTERMAN, in response to Representative Elton's question,
said, "Mr. Wright is correct. We did talk about this quite
extensively." He explained part of the problem was lack of a
cohesive, overall, umbrella-type structure in Alaska that
encompassed alcoholism problems all together, directing education,
prevention and other aspects. Co-Chair Austerman suggested that
was the direction towards which they were leaning, for future
legislation, in the hopes of addressing alcoholism on a statewide
basis. He indicated that HB 383 was a stop-gap measure but that it
was a step in the right direction. Rather than taking on the
whole, broad issue of alcoholism this late in the session, they had
decided to push through legislation on one part of it.
Number 1162
CO-CHAIR IVAN pointed out the problem addressed by HB 383 had
initially been recognized in the Dillingham area, where the
municipality paid a quarter of a million dollars per year for
services to inebriates. There had been a debate between the
community of Dillingham and the regional health corporation that
provided services under contract with the Indian Health Service.
Co-Chair Ivan expressed he had first thought it was a simple
solution; the first draft of HB 383 had targeted Mental Health
Trust funds to pay for those costs. However, he now realized they
were just scratching the surface of a problem that existed
statewide. He mentioned there were other bills, including the one
relating to involuntary commitment, HB 493, brought up earlier by
Mr. Wright. There was also a resolution asking for establishment
of a task force to take a close look at these problems across the
state. Co-Chair Ivan noted that taxation was the second source of
funds that the committee had looked at for reimbursement to
municipalities.
Number 1283
CO-CHAIR AUSTERMAN stated that the people with whom they had met,
in reference to the Mental Health Trust Fund, had been highly
supportive of the concept of trying to come up with a concrete,
statewide plan. They recognized their responsibility, as well, he
said. By next year, he suggested, a fairly decent plan could be
arrived at if they could get started in the interim.
Number 1330
MR. WRIGHT pointed out that the Department of Revenue had prepared
a fiscal note for the blank committee substitute that had been
provided to committee members.
REPRESENTATIVE NICHOLIA moved that CSHB 383 move with attached
fiscal notes and individual recommendations.
Number 1346
CO-CHAIR IVAN expressed that he wanted to take further testimony on
the bill and provide opportunity for discussion.
REPRESENTATIVE NICHOLIA withdrew the motion.
Number 1376
DENNIS OAKLAND, Chief of Police, Police Department, City of Homer,
testified via teleconference. Although he had no new comments, he
wanted to reference previous testimony by himself and William
Walters, Judicial Services Officer in Homer, in support of HB 383.
He hoped that testimony, presented January 16, 1996, had been
incorporated into the new draft, which they had not had the
opportunity to review.
Number 1424
CRISTY TILDEN, Program Director, Drug and Alcohol Services, Bristol
Bay Area Health Corporation, and Board Member, Advisory Board on
Alcohol and Drug Abuse, testified via teleconference from
Dillingham. "We are still in support of the bill and even more
so," she said. She noted that the regional advisory committee, the
opinions of which guided their program, had one source of
discomfort with the original bill, which was using the Mental
Health Trust Fund as a source of revenue. They therefore believed
this version was much improved. She drew the committee's attention
to state of Alaska Bulletin Number 6, dated February 5, 1996, which
concluded that increases in alcohol taxation had been associated
with decreased alcohol consumption, cirrhosis mortality and motor
vehicle injury rates.
Number 1497
JEWEL JONES, Manager, Social Services Division, Health and Human
Services Department, Municipality of Anchorage, testified via
teleconference that this was the first opportunity to see the
committee substitute. Therefore, the municipality had not yet
taken an official position related to the sales tax. She noted
that the tax had been discussed by the municipality for some time.
She indicated she would take the committee substitute to the
municipality and ask that something be forwarded to the committee.
Number 1537
MS. JONES said in general, the municipality spent a considerable
amount of money on, and was very much in favor of, reimbursements
for this particular service. Under the Title 47 statute, they
picked up people who were incapacitated or otherwise of danger to
themselves or to others due to alcohol. They provided what they
called a "minimal humanitarian services," which included picking
people up, taking them some place safe, performing occasional
medical screening, and letting them sleep off the intoxication.
Often, she said, treatment was not available. It was a vicious
circle and not very cost-effective. For just the service they did
provide, it cost the municipality over half a million dollars per
year, not including money expended by the community nor funds for
police services. Ms. Jones explained that Anchorage had, through
the years, attempted to address the problem of public inebriation
through task forces. She expressed interest in participating with
the legislature and pointed out that the municipality had compiled
data and information that was available.
Number 1744
C. JOE DIMATTEO, Director, Alaska Council on the Prevention of
Alcohol and Drug Abuse, testified via teleconference from
Anchorage, saying, "I am very supportive and I echo everything that
my colleagues and friends from around the state have talked about."
With the funds coming through the state, there was no way all the
problems could be solved. "I certainly support any new revenues
that we can bring into our communities to help the communities get
a start to combat this," he said.
MR. DIMATTEO expressed approval of the prevention and education
aspects mentioned by Representative Elton. He referred to the idea
of an umbrella agency and said he thought some of that was already
in place with the Division of Alcohol and Drug Abuse, which was the
state agency with experts in the field. That, he said, would be
the ideal starting place for this. He mentioned his own council's
statewide prevention effort but indicated Alaska's size made it
difficult. The council's approach, he said, included sending
people into communities to help persons there take ownership of
their own problems and to provide technical assistance, locate
resources and so forth. However, that needed expanded. He thought
the umbrella approach was good, but he hated "to see the wheel
reinvented." Things were in place but the amount being expended
only took care of a certain portion of the problem. He referred to
a recent study, but did not specify what it was, that showed the
success of the statewide treatment programs. "Don't forget us out
there," he added.
LOREN JONES, Director, Central Office, Division of Alcohol and Drug
Abuse, Department of Health and Social Services (DHSS), said the
Administration was supportive of the tax increases included in
CSHB383. He noted that the Long Range Financial Planning
Commission had recommended those taxes, as well as tobacco taxes,
as a means to raise revenue to shorten the fiscal gap; on that
basis, the Administration supported them.
Number 1938
MR. JONES said that DHSS's concern was with public health and
ameliorating issues around alcohol and drug abuse. Therefore, DHSS
supported the tax, as well. The department felt increasing the tax
would affect availability of alcohol to young persons, who were
sensitive to economic costs. Mr. Jones acknowledged that was a
debate that "everybody is positive of" on the tobacco tax.
However, there was dissention as to whether price affected alcohol
consumption; Mr. Jones said he would argue that it did. He
referred to a packet provided to the committee that showed some of
the research that had been done, as well as some of the impacts
this tax could have on consumption.
Number 1974
MR. JONES stated support for the ability of municipalities to have
a differential sales tax. He explained that the City and Borough
of Juneau was the only community that had passed a differential tax
prior to the law being changed. Although the amount of experience
with it was not great, it worked in Juneau and was a source of
funds that the local community contributed to prevention,
education, early intervention and treatment services. It was a way
for local communities to have revenues available to address the
issue. Mr. Jones reaffirmed that both the Administration and DHSS
were supportive of the tax increases.
Number 2033
MR. JONES said, "We are not, however, supportive of the last part
of the bill that, in essence, without a cap or without any
discussion of how, simply allows communities to bill for what they
feel is the amount of expenses they pay for the public inebriate.
We are not in agreement that this is an unfunded mandate. We feel
that even without Title 47, communities would deal with citizens
that were having problems with alcohol and drug abuse." Mr. Jones
indicated there was funding available through DHSS for some
services. In addition, some communities contributed local
revenues. He emphasized that it was hard to get a handle on how
much money a community thought it was spending on incapacitated
persons and what that definition was. He did not want to just
"open a checkbook" for people submitting bills.
Number 2083
MR. JONES stated that if the intent of the legislation was, as he
thought it was, to find a way to provide income or a revenue stream
to a community, so that the community had ownership over how they
addressed their problems, that was something that DHSS supported.
One possible way to do that, he suggested, would be looking at a
mechanism to share back the revenues collected to the communities.
That way, the communities would have a source of money. They
could, then, through their desires, design how they wanted to spend
that money on the problem. Mr. Jones requested that if that were
taken under consideration, that there also be some responsibility
placed on the municipalities to show that they were using those
funds for the problem, rather than just have them, at the end of
the year, submit a bill to the Department of Revenue.
Number 2126
MR. JONES provided a brief recap, saying, "We are supportive of the
tax increases in here. We are not supportive of the method of
payment in the back of the bill." He added that the bill discussed
adjusting the tax based on the Consumer Price Index (CPI) every
year. Although they agreed it should be adjusted, they recommended
thinking about doing so every two or three years instead.
Number 2177
CO-CHAIR AUSTERMAN requested that Mr. Jones submit his suggestions
in writing, so that the committee could use them to put together a
committee substitute to present to the House State Affairs
Committee.
REPRESENTATIVE ELTON said he also appreciated some of Mr. Jones's
suggestions. He asked Mr. Jones if, for example, a local person
who was inebriated broke his arm and went to Bartlett Hospital, the
hospital could then seek reimbursement for the medical services
provided for the broken arm.
Number 2229
MR. JONES replied that if he were to look at the language of CSHB
383 to make that decision, he could not do it. "That's part of our
objection," he said. He pointed out that there was a specific
definition of "incapacitated person." "The section of statute it
references is a person that is incapacitated that has been put in
protective custody by a police officer," he explained. If, for
example, an intoxicated person broke his arm and was brought in by
a relative, the hospital probably would not be eligible for
reimbursement. On the other hand, if he was brought in by a police
officer, he would be in protective custody and would fit that
narrow definition. While CSHB 383 hinted at that, the rules were
not written. "I think that complicates the issue for the
Department of Revenue as a CS bill, as to how you figure out who's
billing you for what and is it an appropriate billing," Mr. Jones
stated. "And that kind of thing costs some money."
Number 2286
REPRESENTATIVE ELTON asked if Mr. Jones was talking about a "shared
revenue kind of tax, so that municipalities could then make the
decision on their own on which costs would be reimbursable."
MR. JONES replied there were various mechanisms used in statute to
share revenues back. For example, for the fish processor's tax,
there was a certain percentage of the tax collected shared back
with the communities affected by offshore processing. In Title 4,
for individuals having licenses for alcohol sales, including bars
and package stores, a portion of those fees were turned back to
local communities for enforcement of liquor laws.
Number 2333
REPRESENTATIVE ELTON referred to sales taxes collected on the local
level and asked if the sales tax was also collected on the tax
being assessed through this bill.
MR. JONES said he would assume that was correct. He believed the
current excise tax was collected at the wholesale level.
Number 2384
REPRESENTATIVE KOTT asked Mr. Jones if he was aware of other states
with similarly adjusted taxation rates on alcoholic beverages and,
if so, what the consumption rates had shown after the adjustment.
MR. JONES replied that taxing alcoholic beverages was not a popular
thing and did not change a lot in most states. He referred to
materials provided to the committee and said he believed the last
tax increase in Alaska was in 1983. Beginning about 1984 and 1985,
the consumption in Alaska started to drop and had dropped steadily
every year since. In the last year, he said, they had seen "a
little flattening of that and going back up." He felt that because
the tax was not indexed to inflation, liquor was becoming
relatively inexpensive compared to amounts of disposable income.
Unlike tobacco, he pointed out, this relationship had been
discussed and researched more in theory than in practice, because
tax rates on alcohol in many states had not changed often.
Number 2454
MR. JONES explained that one of the main concerns and main targets
was kids. For them, it was price-sensitive. If it cost more for
them to purchase something, it would decrease their use of it.
REPRESENTATIVE KOTT suggested there may have been other reasons for
the reduction after the last tax increase. It could have been
tougher DWI laws or greater public awareness, for example.
TAPE 96-16, SIDE B
Number 0004
REPRESENTATIVE KOTT referred to a 10-cent-per-glass increase for a
12-ounce glass of beer. "I could hardly believe that those
adjustments would do anything at that level," he said.
MR. JONES responded that in Alaska, beer was the beverage for which
consumption had continued to rise, whereas consumption for wine and
distilled spirits had decreased in Alaska and the rest of the
country. "I don't believe that a person that sells 4 ounces of
wine is going to raise their price 4 cents because that's the
increase in tax. More than likely, they would raise it 10 or 25
cents," he said. He believed that would have an impact.
Number 0046
REPRESENTATIVE KOTT expressed agreement with Mr. Jones's
assessment. "I've talked with a number of establishments and
they've indicated that if there was anything less than a 25-cent
increase, it's going to 25 cents."
Number 0089
BOB BARTHOLOMEW, Deputy Director, Central Office, Income and Excise
Audit Division, Department of Revenue, explained that his division
was responsible for administering the alcohol tax program. He
referred to the fiscal note and affirmed that the last increase to
the alcohol tax rate was in 1983. The proposed legislation would
change the rates effective July 1, 1996, and would raise $15
million in the first year. The bill required annual increases,
according to the CPI, every July 1st. Mr. Bartholomew expressed
support for indexing or some kind of regular mechanism to increase
the tax, in order to keep up with inflation. However, he
recommended that adjustments not be made annually, because of the
burden that would create from changing tax rates and communicating
changes to the taxpayers. He suggested doing something every two
or three years, catching up to the CPI for that number of years,
which would make the tax easier to administer.
Number 0148
MR. BARTHOLOMEW referred to the issue of whether price would affect
consumption, which in economists' terms was called the "elasticity
factor." As Mr. Jones had indicated, for fiscal notes prepared on
tobacco taxes, it was much easier to find information on what
factors to use. In the current fiscal note, however, the
Department of Revenue had not yet included elasticity, although
they had requested information from numerous agencies and were
planning to come up with a recommendation on what the reduction
would be. "And there would be a reduction in the fiscal note for
that," he stated.
Number 0184
MR. BARTHOLOMEW referred to "the other part of the fiscal note,"
and said, "we do have personal service costs of $20,000 and
contractual of $1,000 to deal with communicating out to the
taxpayers." He explained the Department of Revenue was not asking
for a new position. However, the proposed legislation would more
than double the taxes collected, with a total of nearly $30 million
per year. Currently, the department had "a little over one-and-a-
half full-time equivalents" that dealt with the alcohol tax
program, including monthly filings and following up to ensure that
people were making payments. Because of the large increase, extra
compliance work would need to be done by the department to address
the potential for finding loopholes or looking at other ways to
bring alcohol into the state. The money would fund part of a Tax
Examiner II position.
Number 0238
MR. BARTHOLOMEW referred to Section 5 of the bill, which required
the Department of Revenue to administer the refunding of costs back
to local governments. As previous testimony reflected, the
Administration did not feel that was an effective or appropriate
way to refund the money. He pointed out that the bill originally
asked DCRA to perform that role; that department had a fiscal note
on file requesting $42,000 to administer and run the cost-
reimbursement program. "Our feeling is, we don't have anyone that
could administer that program currently," he said. "If the thought
was for the Department of Revenue to do it, the fiscal note that
Community and Regional Affairs has put in would be similar to what
we would do." He suggested that if it moved forward, they would
even discuss which agency was the most appropriate to do that, as
it might not be the Department of Revenue. He added, "we would
hope to come up with a different solution than that."
Number 0306
RICHARD B. LAUBER, Lobbyist, Anheuser-Busch Company, Inc.,
indicated he was only addressing that portion of the committee
substitute concerning tax increases. "I think it should be made
very clear that what you're doing is imposing a tax on a large
portion of the citizens of the state of Alaska that consume
beverages of an alcoholic nature in the form of beer, wine and hard
liquor," he said. If the bill passed, Alaska would have, by far,
the highest taxes in the United States on alcoholic beverages. He
asserted that the Department of Revenue would find that substantial
tax increases would reduce consumption. However, he said, it would
not reduce consumption by the people with problems with alcohol.
Instead, it targeted the average person who consumed a few drinks
per day. "A person goes in for a weekly case of beer; they may
reduce that to a couple of six-packs," he said. Persons who were
addicted, however, would drink anything they could.
Number 0440
MR. LAUBER discussed drinking by youths and suggested a dollar or
two would not make the difference if young people wanted to drink.
He discussed the high prices charged by bootleggers. An alcoholic
or person who really wanted that drink would be willing to pay that
price, whereas the average citizen would not pay exorbitant prices.
He suggested that the tax would increase the risk of illegal
activities. "You'll think you're reducing consumption, but
actually it may not be reducing it as much as you think," he said.
"If nothing else, people [will be] brewing their own."
Number 0520
MR. LAUBER referred to the concept of "sin taxes" and said that
term no longer applied. He mentioned the health benefits of
consuming small amounts of beer or wine. He indicated it was the
abuse of the alcoholic beverage, not the consumption of minor
amounts, that was the problem. "The vast majority of this tax is
going to be paid by people who are moderate consumers of alcohol
beverage, not the people you're targeting," he said.
REPRESENTATIVE KOTT referred to his earlier question about whether
the Department of Revenue was aware of a correlation between
increasing taxes on alcoholic beverages and consumption. He asked
whether Mr. Lauber was aware of any statistics based on what other
states had done.
Number 0600
MR. LAUBER replied yes, he had seen figures to that effect. He
stated that although Alaska had last increased alcohol taxes in
1983, the federal government had doubled its taxes on beer since
that time. "Their records indicate a drop in consumption ...
directly related to the tax increase," he said. He thought this
might be the largest increase percentage-wise in the history of the
United States. "It's certainly greater than doubling of the tax on
beer," he added. "It will reduce consumption." He mentioned the
law of economics, which said increasing prices lowered consumption.
He emphasized that the vast majority of beer was consumed by
moderate drinkers, not by people who had to have it. Those
moderate drinkers had the option of not buying as much.
Number 0706
REPRESENTATIVE NICHOLIA commented on reasons for decreasing alcohol
consumption. She thought the decrease was not a direct result of
a tax increase. In the late 1980s, there was more of an awareness
of alcohol and drug prevention program. There was also a
prevention movement across the state. From her experience of being
in a rural area, it was not until about 1987 that these prevention
programs became more noticeable, with increased awareness and
pushing for sobriety. She thought that was probably the largest
force in decreasing consumption of alcohol.
Number 0758
MR. LAUBER specified that the decrease he knew about was
nationwide, following an increase in federal tax. He acknowledged
there were many reasons why people changed their drinking habits.
REPRESENTATIVE KOTT pointed out the law of economics would apply in
almost any case; as the price of a commodity increased, the chances
of buying it at the same level would decrease. Furthermore, people
on budgets for entertainment would have less purchasing power if
the price was increased.
Number 0864
KEVIN RITCHIE, Executive Director, Alaska Municipal League,
testified that the Alaska Municipal League was strongly in support
of allowing local communities to set their own rates for the
alcohol tax. The league was also generally in support of the
concept of the entire bill. "This is one area where municipalities
and the state really come together," Mr. Ritchie said. There was
a wide range of costs attributable to alcohol, not only on the part
of people who drank frequently, but also in health areas including
insurance and others, he added.
Number 0899
MR. RITCHIE explained he had been involved with the Long Range
Financial Planning Commission. "During that time, one of the
questions asked was, `how can we decrease court costs, corrections
costs and other public safety cost,' and the answer was `control
alcohol.'" Mr. Ritchie acknowledged that CSHB 383 may or may not
affect consumption. However, on a level of taxation in
municipalities, people had generally been more supportive when they
knew a tax being imposed would solve a problem related to that tax.
He thought the legislation was a very positive step and offered the
assistance of the Alaska Municipal League.
Number 0958
CO-CHAIR AUSTERMAN thought there had been several good suggestions
for possible changes. He noted that the bill had two more
committees of referral, the House State Affairs Committee and the
House Finance Committee. "I would like to see it move on and we'll
take a good look at those suggestions and propose a CS," he said.
Number 0977
REPRESENTATIVE ELTON said he was greatly encouraged by the kind of
debate and testimony that had been heard. He did not see this as
a tax increase. "We already have the tax. We could just say that
we're accounting for inflation over the last 14 years, since it was
last raised," he said. He added, "even with the new provisions, we
fall far short of reimbursing the state and local communities for
the costs incurred through the use of alcohol." He applauded the
work that had been done and endorsed Co-Chair Austerman's comment
that this was a first step. He suggested looking at consolidation
and some of the prevention and education programs. He hoped the
revenues would not be used to simply supplant other general fund
dollars that were already being applied to the problem, because the
dimensions of the problem necessitated this being an increment to
the programs now in place.
Number 1061
REPRESENTATIVE KOTT noted that there were two issues being
addressed. The first was whether the increase in revenues would
substantially change social behavior. As for the second, he felt
this indeed was a tax increase. He questioned the concept of
imposing a tax of any kind on Alaskans in order to close the fiscal
gap. "I can't answer any of those in the affirmative, so I won't
be supporting the bill," he concluded.
Number 1096
REPRESENTATIVE NICHOLIA moved that CSHB 383 be moved from committee
with attached fiscal notes and individual recommendations.
CO-CHAIR IVAN noted that there was an objection and asked for a
roll call vote. Voting in favor of moving CSHB 383 from committee
were Representatives Nicholia, Elton, Austerman and Ivan. Voting
against the motion were Representatives Kott and Vezey. Therefore,
CSHB 383 moved from committee with attached fiscal notes and
individual recommendations.
CO-CHAIR IVAN mentioned that HB 474 and HB 488 would be addressed
at the next meeting.
Number 1166
ADJOURNMENT
There being no further business to conduct, CO-CHAIR IVAN adjourned
the House Community and Regional Affairs Committee meeting at 2:20
p.m.
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