Legislature(2007 - 2008)
03/05/2008 08:11 AM House L&C
| Audio | Topic |
|---|---|
| Start | |
| HB391 | |
| HB350 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 5, 2008
8:11 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Gabrielle LeDoux
Representative Jay Ramras
Representative Robert L. "Bob" Buch
MEMBERS ABSENT
Representative Carl Gatto
Representative Berta Gardner
COMMITTEE CALENDAR
HOUSE BILL NO. 391
"An Act relating to project labor agreements."
- HEARD AND HELD
HOUSE BILL NO. 350
"An Act providing for an amount to be deducted and retained for
collecting and submitting the vehicle rental tax."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 391
SHORT TITLE: STATE CONSTRUCT'N PROJECT LABOR AGREEMENT
SPONSOR(s): REPRESENTATIVE(s) KELLY
02/19/08 (H) READ THE FIRST TIME - REFERRALS
02/19/08 (H) L&C, FIN
03/05/08 (H) L&C AT 8:00 AM CAPITOL 17
BILL: HB 350
SHORT TITLE: VEHICLE RENTAL TAX COLLECTION
SPONSOR(s): REPRESENTATIVE(s) HARRIS
02/04/08 (H) READ THE FIRST TIME - REFERRALS
02/04/08 (H) L&C, FIN
02/25/08 (H) L&C AT 3:00 PM CAPITOL 17
02/25/08 (H) Heard & Held
02/25/08 (H) MINUTE(L&C)
03/05/08 (H) L&C AT 8:00 AM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE MIKE KELLY
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 391 as the prime sponsor.
REBECCA LOGAN, President
Associated Builders and Contractors, Alaska Chapter (ABC)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 391.
JAMES GILBERT, President, Udelhoven Oilfield System Services,
Inc. (UOSS)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 391.
DON ETHERIDGE, Lobbyist
Alaska AFL-CIO
Juneau, Alaska
POSITION STATEMENT: Testified on HB 391.
CHIP THOMA
Juneau, Alaska
POSITION STATEMENT: Testified on HB 391.
PETE FELLMAN, Staff
to Representative John Harris
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on HB 350.
JOHANNA BALES, Deputy Director
Anchorage Office
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 350.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 8:11:12 AM. Representatives
LeDoux, Ramras, Neuman, and Olson were present at the call to
order. Representative Buch arrived as the committee was in
progress.
HB 391-STATE CONSTRUCT'N PROJECT LABOR AGREEMENT
8:11:50 AM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 391, "An Act relating to project labor
agreements."
8:12:01 AM
REPRESENTATIVE NEUMAN moved to adopt the proposed committee
substitute (CS) for HB 391, labeled 25-LS1493\C, Wayne, 2/26/08,
as the working document. There being no objection, Version C
was before the committee.
8:12:11 AM
REPRESENTATIVE MIKE KELLY, Alaska State Legislature, explained
that one provision in the Alaska Gasline Inducement Act (AGIA)
requires the successful licensee to enter into a collective
bargaining project labor agreement. Collective bargaining
project labor agreements require contractors to remit fringe
benefit payments into union health and pension plans on behalf
of project workers. When non union companies are employed on
such projects, their workers must make contributions to the
union health, training, and pension contribution plans instead
of their own. However, their contributions may provide little
or no benefit to them, since the employee may not be employed
long enough to meet the vesting thresholds of the union plan.
At the same time, the employee is either not contributing to
his/her non union company pension plan or is required to
contribute to both plans. This bill would provide employees the
option to elect to have fringe benefit payments or other
contributions made on his/her behalf to either the employer's
program or to the applicable union trust fund. This bill would
ensure that the project labor agreement contains adequate
safeguards to protect non union workers so they will benefit
from the pension contributions that they make.
REPRESENTATIVE KELLY also pointed out that under HB 391, any
state mandated collective bargaining project labor agreement
must allow employees to elect whether to participate in the
employer's existing fringe benefit plan or in the applicable
union trust fund. He related that all unions he is familiar
with offer good plans. However, non union companies also offer
competitive plans, too. Nevertheless, the point is to allow the
employee to make the final decision of which plan to accrue
benefits. This bill would require contractors, under collective
bargaining project labor agreements, to permit their employees
to execute a "Benefits Election Declaration". Thus, HB 391
would support Alaskan workers such that non union workers will
have the opportunity to benefit from the pension plans that they
have been making contributions. He characterized HB 391 as a
bill that addresses a fairness issue, one that would provide
equity for non union workers.
8:17:15 AM
REPRESENTATIVE KELLY, in response to Representative Neuman,
recapped action on HB 177, the Natural Gas Pipeline (AGIA). He
noted that he offered an amendment to AGIA that did not require
a collective bargaining element. However, HB 177 was amended on
the House floor to add the collective bargaining project
agreement process.
8:18:43 AM
REPRESENTATIVE NEUMAN inquired as to whether a union welding
apprentice would have preference over a welder who had worked
for 30 years.
REPRESENTATIVE KELLY answered that HB 391 does not address
hiring preferences, but focuses on the fringe benefits portion.
He reiterated his earlier testimony regarding the employee's
choice of pension plans. He posed a scenario in which an
employee who is hired by the IBEW 1547, but has worked for a non
union employer, could elect to select the benefit plan offered
by IBEW 1547 or the non union employer with whom the employee
has a long history of employment. He further explained that HB
391 has a narrow scope, limited to the selection of the benefit
package. This bill would benefit non union employees who may
work for six months or a year under a collective bargaining plan
by electing to have their benefits continue to go into the non
union plan rather than to switch to the union plan, he stated.
8:22:01 AM
REPRESENTATIVE NEUMAN inquired as to whether the non union
company would be encouraged to increase its benefits to match
the union benefit plan.
REPRESENTATIVE KELLY opined that an employee certainly would
compare plans to select the best benefit plan.
CHAIR OLSON announced that public testimony would be held open
on HB 391.
8:23:45 AM
REBECCA LOGAN, President, Associated Builders and Contractors,
Alaska Chapter (ABC), characterized HB 391 as a good bill for
all Alaskan workers. Everyone is looking forward to working on
some of the mega projects that the state is considering, along
with the financial boom, she opined. However, the majority of
non union workers are financially disadvantaged under typical
project labor agreements by being forced to contribute to fringe
benefits in the union trust fund. She posed a scenario in which
a typical trade craft fringe benefit package ranges from $14-17
per hour, which translates to a total of $25,000-$36,000
annually that is paid into fringe benefits packages. However,
if an employee works on a project that is covered under a
project labor agreement and returns to his/her non union job,
that person leaves behind fringe benefits paid into the
collective bargaining benefits plan. She opined that HB 391
does a good job of addressing that basic issue by allowing them
a choice of which plan to opt for during the hiring process.
She encouraged members to support HB 391.
8:25:18 AM
JAMES GILBERT, President, Udelhoven Oilfield System Services,
Inc. (UOSS), read from a prepared statement as follows
[original punctuation provided]:
My company employs about 450 Alaskan workers.
I am here to testify in support of HB 391.
Project Labor agreements limit competition by forcing
non-union employers to pay benefits twice: once to the
union plan and once to their existing plans. This
double payment causes non-union contractors to have a
bloated labor cost and therefore, to be non-
competitive in the bidding process. AGIA mandates
that a project labor contract agreement be negotiated
at the same time that it mandates that the project
owner use Alaska contractors to the maximum extent
possible.
These two mandates contradict each other.
In addition to the double payment standard - standard
project labor agreements state that non-union
employers who contribute fringe benefits into local,
regional, or national trust funds are bound to all
lawful terms and conditions of such trust agreements
and all amendments thereto. This means that a non-
union contractor is bound to cover future unfunded
vested liabilities of a union pension plan. Several
months ago, a non-union contractor in Fairbanks was
given a bill for close to $100,000 for his portion of
the unfunded vested liability of a local union pension
plan. The threat of such future liability is another
barrier to competition.
HB 391 goes a long way in addressing some of the
unfair, discriminatory terms of a project labor
agreement.
I encourage your support of the bill.
8:27:15 AM
MR. GILBERT, in response to Representative Neuman, answered that
without HB 391 project costs would be increased and it is likely
that non union companies would not be involved in the project.
8:27:50 AM
REPRESENTATIVE LEDOUX stated that Mr. Gilbert has testified that
project labor agreements require the employer to bear a portion
of unfunded liabilities. She inquired as to whether the sponsor
could speak to unfunded liabilities.
REPRESENTATIVE KELLY related his understanding that employers
are sometimes required to pay a portion of the unfunded vested
liability of a local union pension plan, but noted that he is
not an expert. In further response to Representative LeDoux,
Representative Kelly answered that he thought an employee's
decision to elect to select union benefits would trigger the
situation that Mr. Gilbert described.
8:29:49 AM
DON ETHERIDGE, Lobbyist, Alaska AFL-CIO, applauded
Representative Mike Kelly for his work in the best interest of
employees who work under the project labor agreement(PLA). The
AFL-CIO is not opposed to HB 391. However, he expressed concern
over some provisions of the bill. He related his hope to offer
specific recommendations as the bill moves through the process
and the AFL-CIO attorneys' review any legal issues.
8:31:12 AM
MR. ETHERIDGE partially read a prepared statement, as follows:
[original punctuation provided]
First of all, the notion that the PLAs discriminate
against non-union workers is a fallacy. Most non-
union workers who have gone to work under the terms of
a PLA have realized the superior benefits offered by
the joint labor-management trust fund. In fact many
of the workers that realize the benefits of a PLA stay
on with the unions after the project is completed,
once they realize how good the benefits are under the
terms of the collective bargaining agreement.
Rep. Mike Kelly in his press release identified three
primary fringe benefits that would discriminate
against non-union employees working under a PLA:
health or medical, training, and pension plans.
Contrary to the claims the non-union employers fringe
benefit plans offered under the project labor
agreements do not discriminate against non-union
employees.
I'd like to address each one in order.
MEDICAL: Health plans are typically superior and
employees become participants as soon as the minimum
qualifying requirements are met. In a typical labor-
management sponsored health plan an employee puts in
around 300 qualifying hours, usually not more than a
month and a half on a 7-10 schedule, and no different
than what a long time union member must do to qualify.
Additionally, unlike typical non-union plans,
participants build up an hour bank that can cover them
with the finest medical plans for up to a year after
the project is finished. I know of no non-union
employer plan that offers comparable health benefits.
Typically coverage under non-union plans cease
immediately upon termination of the employee.
TRAINING: Training contributions make participants
eligible to avail themselves of any skill improvement
training available to union members as well. If
contributions are made on behalf of any employee, that
employee is entitled to training such as OSHA
st
training, Hazwopper, CPR, 1 aid, skill specific
upgrade training and dozens of other classes. I don't
know of any comparable training programs in the non-
union sector.
The only question that often arises and which is
probably the impetus for the introduction of this bill
comes in the context of PENSION CONTRIBUTIONS. I know
you are all familiar with defined benefit plans.
Universally, DB plans require 5 years of vesting for
participants to earn benefits not 10 years like it
used to be when the TAPS line was constructed, and the
fact is that a gas pipeline project may not last long
enough for a new participant to vest, though that is
uncertain at this point.
Accordingly, organized labor fully expects for the
licensee or whomever is negotiating the terms of a PLA
to bring up alternatives to defined benefits
negotiations, and of course many of the unions offer
both defined benefit as well as defined contribution
plans and fully expect the unions will agree to some
sort of hybrid agreement that would allow fully vested
union members to continue with their existing pension
plans and an option that would allow what has been
suggested in this bill.
8:35:29 AM
CHIP THOMA informed members that he has held four good jobs,
which have all been union jobs. He related that he was a
painter's apprentice in the Washington, D.C. area during high
school, which helped him pay for his first year of college. He
went on to describe his union jobs working for a mill in the
Washington state area and later on the Alaskan pipeline. He
also related his own substantial bicycle injury and major
surgery that were covered by the excellent medical coverage that
was offered in his benefit package.
8:39:12 AM
CHAIR OLSON announced that he would hold public testimony open
on HB 391.
HB 350-VEHICLE RENTAL TAX COLLECTION
8:39:48 AM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 350, "An Act providing for an amount to be
deducted and retained for collecting and submitting the vehicle
rental tax." [Before the committee was proposed committee
substitute (CS) labeled 25-LS1362\C, Bullock, 2/22/08.]
PETE FELLMAN, Staff, to Representative John Harris, Alaska State
Legislature, outlined issues the committee raised on HB 350. He
explained that HB 350 only applies to the vehicle rental tax and
does not suggest a rebate for all taxes collected by third
parties. He referred to a chart labeled, "FY 2007 timely filing
credits 2% not to exceed $4,000" and explained that the original
bill established a 3 percent rebate of the 10 percent state
vehicle rental tax collected by businesses on behalf of the
state. He pointed out that the chart identifies all state taxes
collected by third parties. He stated that the [column labeled,
"current credit"] shows the amount that is rebated to businesses
that collect certain state taxes. He noted the fees that credit
card companies charge businesses. And lastly, he pointed out
that if the rebate had a cap placed on it by quarter, it would
adversely affect businesses in tourism due to fluctuation
between earnings for quarters.
8:42:36 AM
REPRESENTATIVE NEUMAN asked for an explanation of the chart
column titled, "2% not to exceed $4,000" and asked if that caps
the rebate amount to $4,000 for each company.
MR. FELLMAN answered that the chart does not reflect what is
currently in HB 350. The chart attempts to provide information
based on questions by members at the last hearing on HB 350. He
explained that Version C would allow a 3 percent rebate of the
state vehicle rental tax collected by businesses which is capped
at $1,000 per quarter. In further response to Representative
Neuman, Mr. Fellman explained that some businesses earn most of
their income in two quarters, so the effect of the $1,000 cap
per quarter is to limit the rebate to $2,000 annually.
8:44:44 AM
MR. FELLMAN, in response to Representative LeDoux, pointed out
that the chart is to provide information for members to assess
the effect on businesses and the state, as well as the numbers
of businesses that would be affected by the reducing the rebate
to 2 percent with a $4,000 cap.
8:45:58 AM
REPRESENTATIVE RAMRAS inquired as to whether Mr. Fellman could
explain the 2 and 3 percent rebate.
MR. FELLMAN explained that the 3 percent represents the amount
of money the businesses would be allowed to retain for
collecting the vehicle rental tax for the state. Version C sets
the rebate at 3 percent with a $1,000 cap. The chart provides
figures to reflect a 2 percent rebate with a $4,000 cap as a
result of questions that members had at the last hearing.
REPRESENTATIVE RAMRAS asked if the 2 percent rebate is derived
from the 3 percent tax rebate reflected in Version C.
MR. FELLMAN reiterated that the 3 percent is the percent tax
[rebate] to the business owner for collecting the tax. The 2
percent represents a [rebate] for comparison.
8:48:24 AM
REPRESENTATIVE LEDOUX inquired as to the reason that the vehicle
rental tax was singled out for a rebate instead of offering a
rebate to third parties who collect any tax on behalf of the
state as a policy decision.
MR. FELLMAN explained that the vehicle rental industry brought
to the sponsor's attention that collecting the vehicle rental
tax is a financial burden.
CHAIR OLSON suggested that examining all of the excise taxes may
take considerable time. The vehicle rental tax is the only tax
being considered by the committee.
REPRESENTATIVE LEDOUX asked for clarification on a line item in
the chart for other tobacco products tax.
MR. FELLMAN, in response to Representative Ramras, related that
currently, some industries do not offer a timely filing credit.
He explained the chart. In further response to Representative
Ramras, Mr. Fellman offered that HB 350 proposes a 3 percent
rebate to companies. At the last hearing, some committee
members thought the rebate was too high, so the chart reflects 2
percent.
8:56:01 AM
JOHANNA BALES, Deputy Director, Anchorage Office, Tax Division,
Department of Revenue (DOR), explained that Version C represents
the vehicle rental tax only with a three percent timely filing
credit with a cap at $1,000 per quarter. During the last
hearing, Representative Gatto expressed concern about timely
filing credits for all state tax types. He requested that the
division prepare a chart to demonstrate the effects of a timely
filing credit to all taxpayers who collect a tax from a third
party on behalf of the state. Thus, all tax types were
identified ranging from alcohol taxes and salmon enhancement
taxes to tire fees. However, since an income tax is paid on
behalf of the person remitting the tax and not from a third
party, income taxes are not listed in the chart. However,
excise taxes are collected from another person and remitted to
the state. Currently, three tax types are provided a timely
filing credit: [the tobacco products tax, the motor fuel tax,
and the tire fee.] At the last hearing Representative Gatto
also expressed concern that not all taxpayers are entitled to
the timely filing credit. The chart reflects a 2 percent rebate
since at the 3 percent threshold the rebate appeared to
significantly impact the state. She related her understanding
that the prime sponsor is interested in offering the timely
filing credit to the companies that collect the vehicle rental
tax, but would allow the committee to determine whether to
expand the bill to consider other taxpayers.
MR. FELLMAN, in response to the Representative Ramras, responded
that if the committee elected to adopt a CS that reflected 2
percent for timely filing credit, the three percent would be
nonexistent.
8:59:15 AM
REPRESENTATIVE NEUMAN referred to the chart and inquired as to
whether the cost for the vehicle rental tax would be $65,000 per
quarter or year.
MR. FELLMAN answered that the total cost would be a $65,000
reduction in tax collected annually to the state. Of the 117
taxpayers, only 7 would be affected by the cap, which would
result in a total of $65,000 for the timely filing credit.
REPRESENTATIVE NEUMAN referred to the fiscal note of $265,000.
MR. FELLMAN answered that the fiscal note refers to the original
bill without a cap on the timely filing fee. In further
response to Representative Neuman, Mr. Fellman agreed that
$65,000 would be the amount not retained by the state.
9:01:33 AM
REPRESENTATIVE RAMRAS inquired as to the source of funding.
MR. FELLMAN reiterated the tax represents 2 percent of the tax
collected by the business. In further response to
Representative Ramras, Mr. Fellman answered that a 2.5 percent
rebate could be a compromise rate.
9:04:04 AM
CHAIR OLSON offered to have two committee substitutes prepared
for the committee, along with spreadsheets that reflect the
timely filing credit for the committee's consideration.
9:05:33 AM
MS. BALES, in response to Representative LeDoux, explained that
the current timely filing credit for other tobacco products tax
is .4 percent and not 4 percent, which is less than one percent
without a cap. If the timely filing credit for other tobacco
products tax was increased to 2 percent but was capped at 4,000
a year, the cost to the state would be $4,181. The cost to the
state is relatively small for the projected 2 percent timely
filing credit since it is capped at $4,000. Currently, some
"other tobacco products tax" taxpayers accrue a timely filing
credit of $11,000, even at the lower rate of .4 percent.
MS. BALES, in response to Representative LeDoux answered that
larger dealers would be allowed a smaller timely filing credit
under the proposed cap.
9:07:00 AM
REPRESENTATIVE NEUMAN inquired as to the discussion during the
time the legislature set the vehicle rental tax at 10 percent.
He further inquired if the legislature considered a timely
filing credit at the time the vehicle rental tax was set.
MR. FELLMAN answered that he did not know.
MS. BALES, in response to Representative Neuman, explained that
in 2003 when the vehicle rental was established, the legislature
reviewed other states' taxes and set the passenger vehicle
rental tax at 10 percent. Additionally, the legislature set the
recreational vehicle tax at 3 percent. In further response to
Representative Neuman, Ms. Bales agreed that the vehicle rental
tax is listed as a line item cost so the consumer pays the tax
and the dealer remits the tax to the state.
REPRESENTATIVE NEUMAN inquired as to whether the administrative
costs are passed on to the consumer by the dealer.
Representative Neuman further inquired as to whether the tax,
which could vary between 2 to 3 percent could be tacked on to
the business license fees for simplicity and to reduce paperwork
for businesses.
MS. BALES stated that she thought that businesses probably do
pass on their overhead costs to consumers. She pointed out that
since the individual taxpayer is the ultimate taxpayer, to
require the dealer collect the tax saves the state collection
costs. If the state were to collect directly from the
individual, it would need to contact each person who rented
vehicles. When the state collects the tax from dealers, it
reduces its base for collections. Thus, offering a timely
filing credit to businesses helps offset the administrative
costs businesses incur when collecting the vehicle rental tax.
She noted currently the state allows 3 types of businesses to
qualify for a timely filing credit.
MR. FELLMAN, in response to Representative Ramras, opined that
businesses who receive a timely filing credit ranging from 2 to
3 percent may choose to pass on their administrative costs to
the consumer. However, since the business collects a 10 percent
tax, HB 350 would authorize the business to withhold from 2 to 3
percent. The committee will decide the timely filing credit
amount which will be deducted from the 10 percent total tax
collected.
REPRESENTATIVE RAMRAS inquired as to whether the 2 to 3 percent
tax represents the timely filing credit.
MR. FELLMAN agreed that the timely filing credit is applied
towards the 10 percent total tax collected.
9:14:59 AM
REPRESENTATIVE LEDOUX inquired as to whether the businesses are
required to place the vehicle rental tax collected in an
interest bearing account on behalf of the state to accrue
interest from the collection date to the quarterly remittance
date.
MR. FELLMAN said he was not sure.
REPRESENTATIVE RAMRAS related his experience since his company
collects a 3 percent bed tax and derives benefit for the 30 day
period of time the funds are held prior to remittance. He
opined that interest represents a fractional amount. Thus, the
Fairbanks North Star Borough does not require hotels to account
for the fractional amount of income derived.
9:18:10 AM
MR. FELLMAN, in response to Representative Ramras, answered that
the proposed 2 percent could be taken from the 3 percent tax if
the perspective is that the 3 percent is derived from the 10
percent total vehicle rental tax collected.
[HB 350, Version C, was held over.]
9:19:53 AM
ADJOURNMENT
There being no further business before the committee, the
meeting was adjourned at 9:19 a.m.
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