Legislature(1999 - 2000)
04/14/1999 01:50 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 14, 1999
1:50 P.M.
TAPE HFC 99 - 79, Side 1.
TAPE HFC 99 - 79, Side 2.
TAPE HFC 99 - 80, Side 1.
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 1:50 P.M.
PRESENT
Co-Chair Therriault Representative Foster
Co-Chair Mulder Representative Grussendorf
Vice Chair Bunde Representative Kohring
Representative Austerman Representative Moses
Representative J. Davies Representative Williams
Representative G. Davis
ALSO PRESENT
Representative Gail Phillips; Joe Balash, Staff, Co-Chair
Therriault; Jeff Keys, Alaska Travel Adventure, Juneau; Ken
Dole, President, Alaska Visitors Association, Ketchikan;
Tina Lindgren, Executive Director, Alaska Visitors
Association, Anchorage; Steve Behnke, Executive Director,
Alaska Wilderness Recreation and Tourism Association,
Juneau; Duane Epton, Small Business Owner, Anchorage; Ginny
Fay, Legislative Liaison, Acting Director of Alaska Tourism
Marketing Council, Department of Commerce and Economic
Development.
SUMMARY
HB 136 An Act relating to tourism and tourism marketing;
eliminating the Alaska Tourism Marketing Council;
and providing for an effective date.
HB 136 was HELD in Committee for further
consideration.
HJR 20 Urging the Congress to amend the Internal Revenue
Code of 1986 to eliminate the marriage penalty by
providing that income tax rate bracket amounts,
and the amount of the standard deduction, for
joint returns shall be twice the amounts
applicable to unmarried individuals.
HJR 20 was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note
by the House Special Committee on Economic
Development and Tourism dated 3/31/99.
HOUSE JOINT RESOLUTION NO. 20
Urging the Congress to amend the Internal Revenue Code
of 1986 to eliminate the marriage penalty by providing
that income tax rate bracket amounts, and the amount of
the standard deduction, for joint returns shall be
twice the amounts applicable to unmarried individuals.
REPRESENTATIVE GAIL PHILLIPS pointed out that for the past
28 years, married couples have paid a higher tax rate and
have received a lower standard deduction than two single
individuals under the Internal Revenue Service (IRS) Code
law of 1986. The proposed resolution would send a message
to Congress emphasizing Alaska State Legislature's support
of removing that penalty.
Representative Phillips noted that at this time, there are
several bills before the U.S. Congress proposing to
eliminate the marriage tax penalty primarily through
increasing the standard deduction allowed for married
couples and adjusting the tax brackets. She urged the
Committee's support of HJR 20.
Representative Foster MOVED to report HJR 20 out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
HJR 20 was reported out of Committee with a "do pass"
recommendation and with a fiscal note by the House Special
Committee on Economic Development and Tourism dated 3/31/99.
HOUSE BILL NO. 136
An Act relating to tourism and tourism marketing;
eliminating the Alaska Tourism Marketing Council; and
providing for an effective date.
CO-CHAIR GENE THERRIAULT discussed HB 136, a bill that is
based on a plan brought forward by the tourism industry and
which is similar to legislation sponsored last session by
the House and Senate Finance Committees. He advised that
during the meeting, discussion would be made to the House
Labor and Commerce version of the legislation. That version
would:
* Consolidate the State's tourism marketing efforts;
* Reduce the size and function of the Division of
Tourism; and
* Allow the State to reduce its contribution to
tourism marketing over time.
Currently, Alaska's statewide tourism marketing efforts are
carried out by three organizations:
* Alaska Tourism Marketing Council
* Alaska Visitors Association
* Division of Tourism
Those efforts would be consolidated into a single marketing
function that is broadly representative of various sectors
of the visitor industry in the State. The organization will
put together a marketing program to address media
advertising, visitor inquiries, would publish and distribute
information regarding vacation planning, and would establish
and maintain Internet sites that provide tourism
information.
Co-Chair Therriault stated that the Division of Tourism will
provide inquiry assistance, administer visitor information
centers, plan and advocate for tourism and tourism
development in coordination with the private sector,
municipalities, and state and federal agencies. They would
enter into a contract with a single, qualified trade
organization for the purpose of planning and executing the
State's destination tourism marketing campaign. The
contract may include promotion of distinct segments of
tourism, such as highway, seasonal, cultural, regional,
rural, and ecotourism. He clarified that the proposed
venture would take the State out of the business of
marketing and reduce the number of employees required to
carry out the functions of the division.
Co-Chair Therriault advised the central feature would be
that the organization awarded the contract would be required
to match the State's effort with 30% of its own money. It
is expected that the organization will grow and that
membership collections will increase. Consequently, the
match will rise to 60% by 2002. Co-Chair Therriault
enumerated the twofold benefits:
* The State would be able to reduce its contribution
without doing extreme harm to the industry; and
* The private sector would contribute more of its
own funds towards the marketing efforts from which
they benefit.
Co-Chair Therriault summarized that the industry would be
coming forward with more of its own dollars. He suggested
that coupled with efficiencies provided by the
consolidation, marketing efforts to bring more visitors to
the State hopefully would be more effective. He suggested
this would be a responsible approach to reducing the State's
monetary contribution without harming the industry's growth.
JEFF KEYS, ALASKA TRAVEL ADVENTURE, JUNEAU, testified in
support of the proposed legislation. He noted that Alaska
Travel Adventures (ATA) relies on a strong marketing
program. He believed that HB 136 could provide such a
service to the State to market products.
KEN DOLE, PRESIDENT, ALASKA VISITORS ASSOCIATION (AVA),
KETCHIKAN, commented that the main goal of the proposed
legislation would be to get more money into the market
place. The effort will include placing money from the
private sector through a qualified marketing program while,
at the same time reducing the amount of expected State
funding.
Currently, there is a Division of Tourism as well as the
Alaska Tourism Marketing Council (ATMC), which splits the
responsibility for Alaska tourist marketing. The intent of
the legislation would be to roll those functions into one
program that would be handled with a contract through the
new qualified association. The State would provide
decreasing funds while the private sector would have
increased funds contributed. The original start match would
be 30% private funding which would by increased to a 60%
match by the fiscal year 2003.
Mr. Dole pointed out that the bill would provide the vehicle
to dissolve the Alaska Tourism Marketing Council and remove
the main functions of the Division of Tourism.
Additionally, the legislation would put into place, the main
mechanism to contract with a qualified trade association.
TINA LINDGREN, EXECUTIVE DIRECTOR, ALASKA VISITORS
ASSOCIAITON (AVA), ANCHORAGE, voiced appreciation to Co-
Chair Therriault for introducing the bill. She pointed out
that it is critical to the industry to come up with a
solution for a problem that has existed since 1990. Other
states have been increasing their funding for tourism by
about 30%, while Alaska has slipped from being in 7th place
for nationwide funding to the 29th position. The entire
State is looking for ways to turn this around and increase
our competitive edge.
Ms. Lindgren believed that HB 136 would work on some mutual
desired increments including consolidation, privatization,
increased private sector funding and reduced State funding,
which would strengthen Alaska's competitive position and
hopefully broaden the number of people participating in the
program.
Ms. Lindgren continued, to date, application cards have been
sent out to tourism industries throughout the State
requesting enrollment as a charter member for a $25 dollar
fee. The expectation is that would create a broad-based
organization. It is the intent that when that organization
is up and running, the Alaska Visitor's Association and the
Alaska Marketing Council will cease to exist and that the
role of the Division will continue in an oversight capacity.
She advised that over 6000 business have been surveyed, all
of which have supported the concept of this legislation as
well as receiving approval from the Department of Commerce
and Economic Development.
Representative Grussendorf asked if a "trade association"
existed at this time. Ms. Lindgren explained that the best
features of some of the existing organization would be
retained. She suggested that AVA could possibly meet some
of the requirements put forth for a trade association. The
intent would be to create a much broader organization giving
one membership and one vote.
Representative Austerman commented that he agreed with the
concept, however, noted his concern with the drop in funding
the industry has experienced since 1989 compiled with the
lack of adequate taxing. He questioned the methods proposed
by the task force to help fund that industry.
Ms. Lindgren replied the task force was formed two years ago
and that to date, they had not arrived at any consensus
regarding a future taxation. However, a list has been
distributed regarding "possible" taxes. There is little
consensus within the tourism industry as to what tax would
be equitable. When researching possible ideas, the best plan
is the one submitted in HB 136 promoting a self-tax.
Representative Austerman discussed the number of situations
which could be taxed. He emphasized that the tourism
industry does place demands on State structures and
facilities. Ms. Lindgren countered that there is a
perception that the industry does not pay any tax, however,
there are bed taxes in most communities, visitors pay motor
fuel tax, corporate taxes, and tax for fishing licenses.
There is about $124 million dollars in taxes paid each year
through the tourism industry.
Co-Chair Therriault commented that the bill was a way of
providing for marketing while at the same time ratcheting
down the State's expenditures. He acknowledged the impact
from tourism on State roads and facilities. HB 136 would
not be addressing that problem, however, there will be
continuing discussion with the industry in addressing those
concerns.
Representative Bunde noted a possible conflict of interest
having worked in the Lake Hood tourism industry. He voiced
appreciation for the bill to solve the on going problem of
subsidizing the tourism industry. He too looked forward to
the industry helping to make a contribution to the general
fund in the years to come.
Co-Chair Therriault acknowledged that it was difficult to
create a tax that would not isolate one specific segment of
the industry. Additionally, he questioned how a tax could be
incorporated which would not tax the Alaskan business
traveler within the State.
Representative Bunde commented that he had explored the
option of a "watchable" wildlife license. He suggested that
the industry could be taxed, which they then could pass on
to the tourists. Representative J. Davies agreed and
offered an additional mechanism of 1/2% to 1% sales tax to
be calculated on the approximate contribution of tourism
enterprises and then dedicated that to that market. Co-
Chair Therriault thought it would be debatable where those
funds would end up being placed.
Representative Austerman questioned how the 30% - 60%
transition would take place. Ms. Lindgren noted that was
addressed at the end of the bill, Lines 21 & 22, noting that
all sections would take effect by July 1, 2000 except
Section 8, which would be implemented at 60% in fiscal year
2002.
Ms. Lindgren spoke to the timing of the contract
negotiation. She explained that Page 4, Line 25, speaks to
the Department contracting on August 1st of each fiscal year
with a qualified trade association for the expressed purpose
of planning and executing a tourism marketing campaign,
which would be subject to legislative appropriation. In
essence, the Department and the trade association will need
to assess a list of components which the Department
determines important for the State to achieve. The proposed
legislation calls for the Legislature to approve the
marketing plan in advance of the plan to be executed. The
concept is to have everything in under one roof.
Co-Chair Therriault pointed out that the intent was to keep
"one" overall marketing effort. The members of the
qualified trade association would participate in a yearly
contract. The Department and the Legislature would evaluate
the success of that effort. He believed that the proposed
system contained enough checks and balances. A conversion
study would be moved to the Division of Tourism, to
determine if the contractor was having the desired effect in
maintaining inquiries.
Representative Austerman asked what the relationship would
be between the Division of Tourism and the Council. Co-
Chair Therriault commented that the Division would no longer
be handling the marketing. Representative Austerman foresaw
problems with two organizations trying to gather funds from
the membership. Ms. Lindgren shared Representative
Austerman's concern. She acknowledged that to bring that
amount of money to the table would require the industry to
be cohesive and working together. That would give the
Department an "out" if there was a disagreement. If there
is no organization willing to match funds for the program
which the State is proposing, then it would not be a viable
program. The Division will have an important role in
overseeing the contract, planning, advocacy and business
development.
Mr. Dole noted the reason the compromise was added was
because everyone wants to see a vehicle which could address
a future disagreement. Additionally, with the continuation
of State dollars, will provide businesses, two places to use
as a sounding board.
Representative J. Davies asked about the match increase from
30% to 60% in the third year. Ms. Lindgren replied that the
intent was to ratchet up the amount paid by the industry as
quickly. She agreed that it would be a "giant" leap to that
number.
(Tape Change HFC 99 - 79, Side 2).
Ms. Lindgren stressed that members of the Committee must
understand that if the proposed plan should pass accompanied
with a statewide tax, she believed that many of the members
would withdraw their support.
STEVE BEHNKE, EXECUTIVE DIRCTOR, ALASKA WILDERNESS
RECREATION AND TOURISM ASSOCIAITON (AWRTA), JUNEAU, voiced
support of the consolidation effort. AWRTA's main concern
would be to maintain a strong role with the Division of
Tourism to guarantee that the transition will work. He
warned that AWRTA has concern with the rapid levels of
proposed funding cuts to tourism marketing. Mr. Behnke
emphasized that Alaska is competing with tourist travel in
Canada, Australia, and New Zealand. Other countries are now
focusing on the tourist market using the same high points
that Alaska offers, however, those countries are providing
much more money to market it. He informed Committee members
that Alaska is now on a tremendous "down-slide" for
generating tourism.
Mr. Behnke agreed with previous comments made by Ms.
Lindgren regarding further taxation to the tourist industry.
He stated that it is important for the State's long-term
interest to see that tourism works and is sustainable. He
agreed that the tax issue has not been resolved and that
AWRTA supports the proposed role of AVA.
In response to Co-Chair Therriault, Mr. Behnke noted that
many members of the tourist industry believe that the
industry has been dominated by the larger corporations and
has not worked to the advantage of the small Alaskan
business. Co-Chair Therriault asked if the concerns would
be satisfied with the one business, one vote component. Mr.
Behnke agreed that could work in addition to developing a
contract which represents a full range of interests and
maintaining a strong Division of Tourism.
Representative G. Davis spoke to the comments in opposition
to imposing additional taxes. He pointed out that many
businesses make money in the State because of the natural
beauty of the State, however, the State continues to provide
benefits to make these sights accessible with funding for
the highway systems and State Trooper services.
DUANE EPTON, SMALL BUSINESS OWNER, ANCHORAGE, spoke to the
problems of the small "mom and pop" tourism businesses
throughout the State. He commented that the small
businesses are in support of the proposal in that they will
have an equal say with the one vote, one business inclusion.
The bottom line is that State funding has helped those
businesses stay afloat. He urged that the Committee support
providing the dollars needed to make the new program work.
Representative Bunde interjected that the money, which the
State invests into tourism must come in from some place. He
asked private business owners where the money for the
tourism industry should come from. He cautioned, for the
industry to receive what it thinks it needs, other costs
could be associated with it.
Representative J. Davies questioned how members of the "mom
& pop" group could participate in the marketing effort. Mr.
Epton replied that determination would be the work of the
newly to be formed trade association. An opportunity to
become involved will be the main thrust of the bill.
Representative J. Davies emphasized the importance of
participation when creating such an enterprise. He asked if
Mr. Epton foresaw businesses willing to contribute money to
this effort. Mr. Epton hoped that these businesses would
seize the opportunity to put their dollars into action. Mr.
Epton pointed out that the $25 initial contribution was the
beginning of that process.
GINNY FAY, LEGISLATIVE LIAISON, ACTING DIRECTOR, DIVISION OF
TOURISM MARKETING, DEPARTMENT OF COMMERCE AND ECONOMIC
DEVELOPMENT, commented that the Department has worked very
hard with AVA and other groups to create the proposed
legislation. She acknowledged that the bill was a
compromise and that the Department looks forward to
implementing it as it will be a major positive step forward
putting tourism marketing into one entity. She emphasized
that it was important to guarantee that the entity is
responsive to all tourism business throughout the State.
She explained that the Department of Commerce and Economic
Development is interested in:
* Job growth;
* Retaining jobs;
* Retaining income from tourism ventures in the
State; and
* That the diverse industry needs are met and
protected.
Ms. Fay pointed out that during the past several years with
the State's fishing and oil industries down, there has been
a big shift to the tourism industry, particularly in rural
areas, where tourism offers opportunities for economic
development.
Ms. Fay noted that the Department supports the bill as
written, however, that a strong part of that position is the
intent to secure a Division of Tourism that will continue to
carry out the protection of small business and market
tourism development.
She noted that the focus of past conversations with the
Legislature has been on tourism marketing. Ms. Fay agreed
that is an important element, however, pointed out the
State's role in tourism development, as they provide
coordination between state agencies with federal agencies,
provide long-use planning, transportation and access, and
working with foreign countries to access air travel into
Alaska. She guaranteed that unless the State looks at ways
of transporting people and disbursing them when they arrive,
there will be major problems with a lot of crowding in a few
small areas.
Ms. Fay pointed out that since FY93, the Division of Tourism
has suffered over 1/3 budget loss. There are approximately
6000-tourism businesses in Alaska, while AVA membership
amounts to only 600 businesses or 10% of that total market.
Communities come to the Department to do planning, provide
feasibility studies and help determine needs and goals. At
the present time, the Division of Tourism has 5 professional
staff. Across the United States, the numbers of staff in
the Division of Tourism ranges from 4 - 150 employees with
an average of 36 employees in these offices.
Ms. Fay continued, tourism marketing in Alaska at this time
is done by contract. There are no marketing people in the
Division Marketing Council or the Division of Tourism. The
bill will consolidate contracting versus a consolidation of
staffing. After the consolidation has taken place, there
will be six less employees. The Department of Commerce and
Economic Development, Division of Tourism, will be expected
to oversee the contract. Ms. Fay emphasized that the
Department has trouble with the draft fiscal note, as it
will continue to reduce the salaries of the Division of
Tourism, while at the same time, establishes a program where
the State gives $4 to $5 million dollars of marketing money
to tourism. She advised that this would not be an
appropriate action to take when discontinuing the resources
needed to implement that program.
Ms. Fay pointed out that in the 2000 fiscal note, the
Division of Tourism and Marketing is kept pretty much in
tact. It would not be until the year 2001 that the deep
cuts to tourism occur. She emphasized that at present time,
the trade organization, which the Division will be
contracting with, does not exist. No details have been
worked out as to what that contract will look like. She
requested no reduction to the fiscal note from the one
submitted by the Department.
In response to Representative Austerman, Ms. Fay explained
that the Division continues to have dealings with oversea
contractors. Those marketing activities are done primarily
through those contractors. The Department now travels a lot
less than before. She noted that the trade missions, in the
Division of Trade Development and the Division of Tourism,
are entirely self-funded.
(Tape Change HFC 99 - 80, Side 1).
JOE BALASH, STAFF, REPRESENTATIVE GENE THERRIAULT, walked
the Committee through the fiscal notes prepared by the
bill's sponsor. He spoke to two of the notes, one for the
ATMC component and one for the Tourism Development
component. He reminded members that the House Finance
Committee had passed an amendment which eliminated all the
funding from that BRU. For that reason, the entire fiscal
note 2000 budget is reflected in the proposed fiscal notes.
Mr. Balash pointed out that the numbers for FY00 in both
notes reflect those budgets and are similar to the numbers
requested by the Department. The proposed fiscal notes
reflect action taken when the Subcommittee closed out.
Co-Chair Therriault referenced fiscal note #1, ATMC. He
pointed out that ATMC would be going away, which would cause
a zeroing out in the first year. The entire effort would
then be reflected in the second note, Tourism Development.
Representative J. Davies asked if there would be $6.7
million total dollar funds. Mr. Balash stated that was
correct. Co-Chair Therriault advised that would include
"other" statutory program receipt funds received from the
industry.
Mr. Balash pointed out that the explanation of benefits for
fiscal note #2 was on Page 2. He advised that a subtotal of
$411,266 dollars indicates the same 4% vacancy factor as the
Department had requested. The Department's fiscal note
rolls the two divisions together. He noted that staffing
for ATMC was expensive and is the first difference between
the Department's fiscal note and that of the legislation's
sponsor. He noted that the note would be discussed in
further detail at a later date. Ms. Fay questioned only the
fiscal note submitted for Division of Tourism. (Testimony
inaudible).
Mr. Balash pointed out that the total would amount was just
under $700 thousand dollars. The contractual line decreases
by $500 thousand dollars by FY00 and in FY03, it will again
decrease an additional amount, leveling out to a State
contribution of $4 million dollars.
Ms. Fay indicated that the Division's main concern is that
the note is focused on the resources of implementing the
contract, which does not take into consideration what work
is being done now, and the critical role that State
government plays in assuring the industry has in Alaska.
Staffing in that office is currently too small and they are
not capable of implementing the obligations of the
Department. She continued, much of the travel undertaken
supports tourism development in the State. Ms. Fay
reiterated that the fiscal notes proposed do not accurately
portray the responsibilities expected.
Co-Chair Therriault suggested that the overseas work would
be done by the trade organization and would not be part of
the State's staff function. Ms. Fay advised that Alaska has
held the contracts and will continue to have the
responsibility to negotiate and decide what the contracts
will look like.
Representative J. Davies asked how many staff currently
works for the Department in these areas. Ms. Fay replied
that there are 11 year round and 3 part time staff. The
note provided by the Department reflects current staffing
minus a $100 thousand dollar reduction; $673 thousand
dollars would pay for the current staffing.
Mr. Balash clarified that 11 positions had been left in the
Department, giving them the authority to decide where to
absorb the $100 thousand dollar decrease. He pointed out
that positions to date have been vacated and it is presumed
that various employees will vacate their positions knowing
that the program will no longer be running after June 30,
2000. Consequently, funding was deducted from the personal
services line.
Representative Austerman asked if the FY00 allocation had
enough staff. Ms. Fay replied that it was not sufficient
staffing to meet the basic development activities.
Representative Austerman commented to his concern with the
expressed threats regarding any imposed tax. He believed
that was a "sad" commentary on the tourism industry and
added that he would not let the concept of taxation "fall
through the cracks".
Representative G. Davis questioned the $60 thousand dollar
grant for the rural tourism development. Mr. Balash replied
it is in place for the current fiscal year and proposed for
the year 2000, a function of the rural village initiatives.
Ms. Fay interjected that it has been an on going grant for a
number of years in conjunction with the Alaska Village
Initiatives. Their main base is located in Anchorage.
HB 136 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 3:40 P.M.
H.F.C. 13 4/14/99
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