Legislature(2001 - 2002)
04/11/2001 01:44 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 11, 2001
1:44 P.M.
TAPE HFC 01 - 82, Side A
TAPE HFC 01 - 82, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:44 P.M.
MEMBERS PRESENT
Representative Bill Williams, Co-Chair
Representative Eldon Mulder, Co-Chair
Representative Con Bunde, Vice-Chair
Representative Eric Croft
Representative John Davies
Representative John Harris
Representative Bill Hudson
Representative Ken Lancaster
MEMBERS ABSENT
Representative Carl Moses
Representative Richard Foster
Representative Jim Whitaker
ALSO PRESENT
David Stancliff, Staff, Representative Scott Ogan;
Representative Norman Rokeburg; Representative Drew Scalzi;
Jim Kelly, Director of Communications, Alaska Permanent Fund
Corporation, Department of Revenue; Neal Slotnick, Deputy
Commissioner, Department of Revenue; Chuck Halamert, Section
Chief, Tax Division, Department of Revenue.
SUMMARY
HB 3 An Act relating to deposits to the Alaska
permanent fund from mineral lease rentals,
royalties, royalty sale proceeds, net profit
shares under AS 38.05.180(f) and (g), federal
mineral revenue sharing payments received by the
state from mineral leases, and bonuses received by
the state from mineral leases, and limiting
deposits from those sources to the 25 percent
required under art. IX, sec. 15, Constitution of
the State of Alaska; and providing for an
effective date.
HB 3 was passed out of Committee with a "do pass"
recommendation and with a fiscal note by
Department of Revenue dated 3/13/01.
HB 95 An Act relating to control of space in the state
capitol and other buildings occupied by the
legislature and its agencies; and providing for an
effective date.
HB 95 was HEARD and HELD in Committee for further
consideration.
HB 154 An Act relating to security for the payment of
fishery business taxes and to payment of estimated
fisheries resource landing taxes and penalties.
CS HB 154 (FSH) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by Department of Revenue dated 3/22/01.
HB 194 An Act relating to fees for commercial fishing
licenses and permits; and providing for an
effective date.
HB 194 was POSTPONED for a hearing at a latter
date.
HOUSE BILL NO. 194
An Act relating to fees for commercial fishing licenses
and permits; and providing for an effective date.
Co-Chair Williams stated that HB 194 would be HELD until a
satisfactory solution could be resolved. He encouraged the
sponsor of the bill to work with Co-Chair Mulder.
HOUSE BILL NO.3
An Act relating to deposits to the Alaska permanent
fund from mineral lease rentals, royalties, royalty
sale proceeds, net profit shares under AS 38.05.180(f)
and (g), federal mineral revenue sharing payments
received by the state from mineral leases, and bonuses
received by the state from mineral leases, and limiting
deposits from those sources to the 25 percent required
under art. IX, sec. 15, Constitution of the State of
Alaska; and providing for an effective date.
REPRESENTATIVE NORMAN ROKEBURG noted that the legislation
would return the percentage of all mineral lease royalties
and bonuses deposited into the Permanent Fund to the
constitutionally mandated 25% percent. HB 3 proposes
changes to a statute, not the Constitution. He advised that
the surplus situation with State revenues no longer exists
today. He claimed that it is time for the State to redirect
the extra 25% to the General Fund. Passage of the bill
would generate an estimated $29 million dollars per year
over the next thirteen years. As Prudhoe Bay and Kuparuk
fields, which currently contribute to the general fund at a
25% rate diminish, the State needs to replace that
production with new, smaller satellite fields contributing
at the same 25% rate, not at the 50% rate.
Representative Rokeburg claimed that while the State can and
should continue to make budget reductions, it would be
foolish to ignore the source of general fund revenue in
solving the budget problem. Prudent fiscal management
requires a statutory change. HB 3 would be a small step in
the right direction. He urged the Committee's support of
what he called "fiscally prudent" legislation.
JIM KELLY, DIRECTOR OF COMMUNICATIONS, ALASKA PERMANENT FUND
CORPORATION (APFC), DEPARTMENT OF REVENUE, provided
information to Committee members. [Copy on File]. He noted
that the impact on oil contributions would total $333
million dollars between 2001-2011. The impact on per capita
dividends would total $90 million dollars over the same
eleven years. He offered to answer questions of the
Committee.
In response to queries by Representative Croft, Mr. Kelly
explained that it would be the income earned on the oil
revenues and would be averaged over five years. A reduction
taken in oil revenues would amount to $40 million dollars a
year. That would amount to the expected income earned on
the $40 million dollars.
Representative Harris asked if the effect on the dividend
would be higher than the Capital Budget Reserve (CBR). Mr.
Kelly replied that the amount of money coming out of the CBR
for FY02 was approximately $500 billion dollars. That is
more than the legislation proposes to take over the next ten
years. To replace that with Permanent Fund income, the
impact would be much more dramatic. The market during the
past few months has reduced the dividend by more than the
bill would reduce it over the next ten years.
Representative Hudson noted his support for the legislation.
The total revenue received from oil at the original time was
over $3.5 billion dollars. Currently, oil revenues are at
$800-$900 billion dollars. He stressed that oil provides
the State two dividends.
· It provides the permanent fund dividends; and
· It provides for the funding of essential services
of government.
Representative Hudson stated that funding has been deposited
in excess to the statutory requirement. He observed that
the Legislature has been an outstanding trustee. At this
time, there is not enough funding in the second dividend for
essential services. It is time to redirect the income
stream to where it was originally. The 25% contribution
would be the number excluding the bonus originally given.
The bonus should be stopped, allowing the State of Alaska to
provide an income stream and continue to provide essential
services.
Representative Hudson MOVED to report HB 3 out of Committee
with the accompanying fiscal note. Representative Davies
OBJECTED for the purpose of discussion.
Representative J. Davies agreed that HB 3 was a piece of a
long-range fiscal plan, but he emphasized that it is a
"small" piece relative to what the problem is. He expressed
concern that the State's fiscal problem is being addressed
"piece meal". Representative J. Davies WITHDREW his
OBJECTION.
Representative Croft OBJECTED and stressed that there has
been no comprehensive discussion on a fiscal plan. He
reiterated that no components of a plan have been addressed
to date. Representative Croft maintained that there should
be a comprehensive discussion and indicated that a five-year
fiscal plan should raise revenues.
Representative Harris commented that the legislation would
raise revenues into the General Fund that otherwise, would
not have been available.
Representative Rokeberg disagreed with the indication that
the legislation was a mistake except as part of a total
plan.
A roll call vote was taken on the motion.
IN FAVOR: Bunde, Davies, Harris, Hudson, Lancaster,
Williams
OPPOSED: Croft
Representatives Moses, Foster, Mulder, and Whittaker were
absent from the vote.
The MOTION PASSED (6-1).
HB 3 was reported out of Committee with a "do pass"
recommendation and with a fiscal note by Department of
Revenue dated 3/13/01.
HOUSE BILL NO. 154
An Act relating to security for the payment of fishery
business taxes and to payment of estimated fisheries
resource landing taxes and penalties.
REPRESENTATIVE DREW SCALZI, stated that in recent years, the
fishing industry has seen the development of fish "brokers"
who like e-commerce businesses, facilitate or broker
interstate commerce between parties without actually
handling the product. Because the brokers export the
product, they are subject to the fisheries business tax.
However, some businesses may have a small working capital
and may not possess "real" property of lien-able value
against which a tax may be collected, should the business
default.
Presently, absent a lien-able value of property equal to
three times the amount of the estimated tax, a surety bond
must be paid equal to twice the estimated amount of the tax.
He commented that the cost of the bond is a burden to a
company operating on a small margin.
Representative Scalzi maintained that the bill would amend
the statutes by offering an additional option so that
applicants may avoid posting a bond for twice the amount of
the estimated taxes if the business:
· Remits all tax obligations on a monthly basis by
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paying the taxes due on or before the 15 day of
the month following the month in which the tax
liability was incurred;
· Files a bond in the amount of $50,000; or
· Provides the Department with proof that the
applicant is the owner of lien-able real property
in the State of a value of at least $100,000
dollars.
Representative Scalzi stated that the bill would reduce the
operating costs of fish broker businesses, facilitates
competition and increased markets for fishermen, while
ensuring a measure of security for fish business taxes.
Representative Lancaster inquired how many applicants would
be affected. Representative Scalzi estimated that three
business would be affected. He enumerated that there are
two or three in the halibut and sablefish market alone in
the Homer and Seward area that would be affected. He
suspected that there would be many smaller operators that
the legislation would not affect.
Representative Croft asked the difference between Sections
1, 2 & 3. Representative Scalzi did not know, however,
th
noted that they do cite the 15 of each month, taken the
Administrative Code. Representative Croft commented that
each appears to be a different type of fish tax.
Vice-Chair Bunde questioned if the proposed legislation
would fall under "special interest" legislation.
Representative Scalzi acknowledged that the legislation
would pertain to a small group of "entrepreneurs". He
emphasized that area of business is new and growing and
should be encouraged.
NEAL SLOTNICK, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
offered to answer questions of the Committee.
CHUCK HALAMERT, SECTION CHIEF, TAX DIVISION, DEPARTMENT OF
REVENUE, referenced that Section C was the alternate
methodology for the security for that type of fisheries
business. It tends to mimic the existing security with one
additional option.
Representative Croft requested taxes be identified from
Sections 1-3. Mr. Halamert replied that AS 16.51 is the
Seafood Marketing tax in the amount of .3%. He continued,
AS 43.76 is part of the Salmon tax, and AS 43.77.020 is the
landing tax.
Representative Croft noted that AS 43.77 contained both the
tax component and the amount that needed to be collected.
Mr. Halamert agreed. He noted that some are paid and some
are collected.
Representative Scalzi added that under the Individual
Fishery Quota (IFQ) system, the fisherman cannot be a direct
fish seller without proper authorization from the National
Marine Fisheries Service.
Representative Lancaster MOVED to report CS HB 154 (FSH) out
of Committee with individual recommendations and with the
accompanying fiscal note.
Representative Davies asked who would be excluded in the
reference on the bottom of Page 2. Mr. Halamert explained
that language was used to prevent an existing taxpayer from
establishing an existing company and obtaining a license to
buy fish.
There being NO OBJECTION, it was so ordered.
CS HB 154 (FSH) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by
Department of Revenue dated 3/22/01.
HOUSE BILL NO. 95
An Act relating to control of space in the state
capitol and other buildings occupied by the legislature
and its agencies; and providing for an effective date.
DAVE STANCLIFF, STAFF, REPRESENTATIVE SCOTT OGAN, stated
that HB 95 is a bill to bring the entire capital building
under the management by the Legislature. He noted that at
the present time, the Legislature occupies and controls by
law all but the Governor's floor of the State Capitol
building.
Mr. Stancliff noted that that the bill would allow the
Legislative Council to create more space in the building for
the public. He added that the bill would not cause any
fiscal impact, as it would be an "internal transfer" of
authority to Legislative Council. He pointed out the fiscal
note submitted by Department of Administration. Mr.
Stancliff stated that the fiscal note is not appropriate
since the bill does not cause any expenditure to occur at
present time.
Representative Davies noted that the purpose of the bill is
to create more room in the Capitol Building. He asked if
the intent really was not to "do anything", and if so, why
should the Committee be considering it and why should the
bill be passed. Mr. Stancliff responded that the bill would
create a step that would allow the Legislative Council to
address these concerns. He pointed out that Representative
Ogan, in the House State Affairs Committee, indicated that
it was not his intent to move the current Administration.
He noted that he would hope that an orderly transition would
create a more appropriate time to discuss the matter.
Representative Croft inquired what "Move It or Loss It"
means. Mr. Stancliff replied that the capitol move issue
ties in with how well served the public feels with the space
of the Capitol Building and how efficiently the Legislature
operates. The theory is that the better off in both process
and accommodation of the public, the less apt Juneau would
be to loose the capital.
JIM DUNCAN, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
stated that the Governor and the Administration does not
view a relocation of the offices as a priority of the use of
State dollars at this time. Until other spending priorities
are addressed, the concern should not be considered.
TAPE HFC 01 - 82, Side B
Commissioner Duncan added that if the bill should pass, it
would cost money to make the changes. He stressed that the
cost must be determined for that relocation. To relocate
one office, the Governor's office, other offices would have
to be relocated to compensate for that change. The
Department of Administration fiscal note reflects cost of
relocation of all agencies involved and includes capital
costs for renovation and improvements.
Commissioner Duncan noted that the capital costs would be
approximately $8.8 million dollars to renovate and upgrade
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the 11 floor of the State Office Building (SOB). Included
in that cost would be new construction costs for the Court
Plaza Building to make it suitable to relocate a major
department. In addition, certain parts of the agencies such
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as the Lt. Governor's offices could not fit into the 11
floor of the SOB, so space would have to be leased to cover
costs of those business that would no longer fit.
Commissioner Duncan ascertained that there would be an
ongoing lease space cost of approximately $1 million dollars
per year. The fiscal note adequately reflects those costs.
Commissioner Duncan stated that the Governor does believe
that there are higher priorities for the use of those monies
at this time. It is imperative that the Legislature
understands that there are costs associated with the
proposed legislation.
Representative Davies pointed out that Mr. Stancliff stated
that the intent was to "perhaps" wait until the next
Administration. He questioned if the Administration had
concerns that Legislative Council would be in charge of the
space currently occupied.
Commissioner Duncan reiterated that it is important and the
Administration wants the Legislature to understand the full
costs associated with the move. He stressed that it is not
possible to relocate offices without substantial
renovations. He reiterated that the Administration does not
believe that this is a priority.
Representative Davies asked what would happen if the bill
was passed without a fiscal note and the entire State
Capitol would be under the control of the Legislative
Council. Commissioner Duncan acknowledged that would be a
huge problem and that is imperative that the fiscal note
accompanies the legislation.
Representative Hudson questioned how long the Legislature
and Governor has shared the current building. Commissioner
Duncan stated that it has been since 1906. He spoke in
support of financing the move of the third floor if the
Legislature allocated the $8.8 million dollars.
Representative Hudson maintained that the legislation is an
attempt to appropriate control. He stated that it was not
good public policy. He maintained that the building should
be co-managed until an alternative is found.
Representative Hudson suggested that the legislation is a
"power grab". He reiterated that he would support the move
if the funding was forthcoming.
Representative Hudson MOVED to TABLE HB 95.
HB 95 was HEARD and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 2:45 P.M.
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