Legislature(2007 - 2008)CAPITOL 120

04/08/2008 04:00 PM House RULES


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04:06:11 PM Start
04:06:21 PM HJR41
04:16:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
* HJR 41 REPEAL OF SEC. 511 OF P.L. 109-222
Moved CSHJR 41(RLS) Out of Committee
Bills Previously Heard/Scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
                 HOUSE RULES STANDING COMMITTEE                                                                               
                         April 8, 2008                                                                                          
                           4:06 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Coghill, Chair                                                                                              
Representative Anna Fairclough                                                                                                  
Representative Craig Johnson                                                                                                    
Representative Ralph Samuels                                                                                                    
Representative Beth Kerttula                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative John Harris                                                                                                      
Representative David Guttenberg                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 41                                                                                                   
Urging the United States Congress to repeal sec. 511 of P.L.                                                                    
109-222 (Tax Increase Prevention and Reconciliation Act of                                                                      
2005).                                                                                                                          
                                                                                                                                
     - MOVED CSHJR 41(RLS) OUT OF COMMITTEE                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR 41                                                                                                                  
SHORT TITLE: REPEAL OF SEC. 511 OF P.L. 109-222                                                                                 
SPONSOR(s): RULES                                                                                                               
                                                                                                                                
04/07/08       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/07/08       (H)       RLS                                                                                                    
04/08/08       (H)       RLS AT 4:00 PM CAPITOL 120                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE MAX GRUENBERG                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HJR 41.                                                                          
                                                                                                                                
KIM GARNERO, Director                                                                                                           
Division of Finance                                                                                                             
Department of Administration;                                                                                                   
Member, National Association of  State Auditors, Comptrollers and                                                               
Treasurers (NASACT)                                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:    During  hearing of HJR 41,  testified that                                                             
the Department  of Administration is  opposed to [Section  511 of                                                               
the Act].                                                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
                                                                                                                                
CHAIR  JOHN COGHILL  called the  House  Rules Standing  Committee                                                             
meeting  to  order  at  4:06:11  PM.    Representatives  Coghill,                                                             
Fairclough, Johnson,  Samuels, and  Kerttula were present  at the                                                               
call to order.                                                                                                                  
                                                                                                                                
HJR 41-REPEAL OF SEC. 511 OF P.L. 109-222                                                                                     
                                                                                                                                
4:06:21 PM                                                                                                                    
                                                                                                                                
CHAIR COGHILL announced that the  only order of business would be                                                               
HOUSE JOINT RESOLUTION NO. 41,  Urging the United States Congress                                                               
to repeal sec.  511 of P.L. 109-222 (Tax  Increase Prevention and                                                               
Reconciliation Act of 2005).                                                                                                    
                                                                                                                                
4:07:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS  moved   to  adopt  Version  25-LS1643\M,                                                               
Bullock,  4/8/08,  as  the  working document.    There  being  no                                                               
objection, Version M was before the committee.                                                                                  
                                                                                                                                
4:07:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MAX GRUENBERG,  Alaska State Legislature, speaking                                                               
as the sponsor  of HJR 41, explained that  the difference between                                                               
Version A and M  is that the language on page  3, lines 15-16, of                                                               
Version  M  was  inadvertently  left  out  of  Version  A.    The                                                               
legislation,  he related,  is the  result of  correspondence from                                                               
the  Fairbanks North  Star Borough.   As  mentioned on  the House                                                               
Floor today,  the Tax Increase Prevention  and Reconciliation Act                                                               
of  2005 contains  Section  511, which  was  designed to  collect                                                               
taxes owed  by governmental contractors.   Apparently, only about                                                               
30 percent  of the money  owed by governmental  contractors makes                                                               
it to  the federal treasury.   Therefore,  HJR 41 is  designed to                                                               
encourage  the payment  by withholding  it at  the source.   This                                                               
resolution only deals  with local and state  governments that pay                                                               
over $100 million annually on goods  and services.  As of January                                                               
1, 2011, the  Act would require [local and  state governments] to                                                               
withhold  3  percent  of  payments  to  nearly  all  vendors  and                                                               
contractors  for federal  income  tax purposes.    He noted  that                                                               
there  are some  exceptions.   The  problem, he  opined, is  that                                                               
virtually  all  the material  given  to  the joint  congressional                                                               
conference committee was in regard  to the benefit to the federal                                                               
treasury and  the unfairness when  people escape taxes  merely by                                                               
not paying  them.   There was  little if  any recognition  of the                                                               
problems that  [Section 511  of the Act]  would create  for local                                                               
and  state  governments.   Although  Congress  was informed  that                                                               
there  would be  significant problems  for local  governments, it                                                               
wasn't   recognized   by  the   Joint   Tax   Committee  or   the                                                               
congressional  conference committee.   However,  since that  time                                                               
Congress has been informed that  this provision will be extremely                                                               
expensive and  difficult to  enforce, which  has resulted  in the                                                               
introduction of congressional legislation, SB 777 and H.R. 1023.                                                                
                                                                                                                                
4:12:14 PM                                                                                                                    
                                                                                                                                
KIM  GARNERO,  Director,  Division   of  Finance,  Department  of                                                               
Administration; Member,  National Association of  State Auditors,                                                               
Comptrollers  and Treasurers  (NASACT), related  that NASACT  has                                                               
been  actively working  in Washington,  D.C., to  repeal [Section                                                               
511].   In  fact,  NASACT passed  a resolution  in  2006 to  work                                                               
toward  a  fair  and  equitable  approach  in  implementing  [the                                                               
aforementioned  Act], including  seeking a  repeal.   Most states                                                               
face  the  same  situation  as  Alaska  in  that  they  can't  do                                                               
withholding on  vendor payments due  to the state's  existing 23-                                                               
year-old  accounting   system.     Ms.  Garnero  said   that  the                                                               
[division] is looking for relief prior to 2011.                                                                                 
                                                                                                                                
4:13:16 PM                                                                                                                    
                                                                                                                                
CHAIR COGHILL inquired  as to the cost of ramping  up the state's                                                               
accounting system should HJR 41 pass.                                                                                           
                                                                                                                                
MS. GARNERO said that although  she hasn't analyzed the impact to                                                               
the state  accounting system, she  was sure  that it would  be at                                                               
least a year-long project and would  require at least a half of a                                                               
position to deal with reconciliation.                                                                                           
                                                                                                                                
CHAIR  COGHILL  related  his  understanding  that  NASACT  has  a                                                               
resolution opposing [Section 511 of the Act].                                                                                   
                                                                                                                                
MS. GARNERO interjected that the  Department of Administration is                                                               
totally  opposed  to  [Section  511  of the  Act].    In  further                                                               
response  to Chair  Coghill, Ms.  Garnero explained  that DOA  is                                                               
poised to work with the  congressional delegation, but the end of                                                               
session flurry  has postponed  that.  A  letter has  been drafted                                                               
for Commissioner Krietzer's signature, she mentioned.                                                                           
                                                                                                                                
CHAIR COGHILL surmised  then that HJR 41 could  move forward with                                                               
the aforementioned letter.                                                                                                      
                                                                                                                                
MS. GARNERO replied yes.                                                                                                        
                                                                                                                                
4:15:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON inquired as  to how many communities would                                                               
be involved.                                                                                                                    
                                                                                                                                
MS. GARNERO specified  that [Section 511 of the  Act] would apply                                                               
to  any government  that spends  over $100  million on  goods and                                                               
services, a category  in which Fairbanks and  Anchorage and large                                                               
school districts would likely fit into.                                                                                         
                                                                                                                                
4:15:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  pointed out  that the  committee packet                                                               
should include  information specifying  that the  Fairbanks North                                                               
Star  Borough,  the  Fairbanks  School  District,  the  Anchorage                                                               
School District, and  the Municipality of Anchorage  would all be                                                               
impacted  by  [Section  511  of   the  Act].    Furthermore,  the                                                               
committee  packet  should  include  letters of  support  for  the                                                               
repeal of  Section 511 from  all of the  aforementioned entities.                                                               
He further said  that the committee packet should  also include a                                                               
letter  urging the  repeal of  Section  511 of  the Tax  Increase                                                               
Prevention  and  Reconciliation  Act of  2005  from  Commissioner                                                               
Krietzer, DOA.                                                                                                                  
                                                                                                                                
4:16:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS  moved  to  report  Version  25-LS1643\M,                                                               
Bullock,    4/8/08,   out    of    committee   with    individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection,  CSHJR 41(RLS)  was reported  from the  House Rules                                                               
Standing Committee.                                                                                                             
                                                                                                                                
4:16:47 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Rules Standing Committee meeting was adjourned at 4:16:49 PM.                                                                 

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