02/06/2007 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB21 | |
| HB48 | |
| HB75 | |
| Subcommittee on Ethics: Report | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 21 | TELECONFERENCED | |
| *+ | HB 48 | TELECONFERENCED | |
| *+ | HB 75 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 6, 2007
8:03 a.m.
MEMBERS PRESENT
Representative Bob Lynn, Chair
Representative Bob Roses, Vice Chair
Representative John Coghill
Representative Kyle Johansen
Representative Andrea Doll
Representative Max Gruenberg
MEMBERS ABSENT
Representative Craig Johnson
COMMITTEE CALENDAR
HOUSE BILL NO. 21
"An Act relating to the proper disposal of the state flag."
- MOVED CSHB 21(STA) OUT OF COMMITTEE
HOUSE BILL NO. 48
"An Act amending the powers of the board of trustees of the
Alaska Retirement Management Board to authorize purchase and
sale of transferable tax credit certificates issued in
conjunction with the production tax on oil and gas; and
providing for an effective date."
- MOVED CSHB 48(STA) OUT OF COMMITTEE
HOUSE BILL NO. 75
"An Act relating to driver's licenses and alcohol awareness
testing."
- HEARD AND HELD
Subcommittee on Ethics: Report
PREVIOUS COMMITTEE ACTION
BILL: HB 21
SHORT TITLE: DISPOSAL OF STATE FLAG
SPONSOR(s): REPRESENTATIVE(s) HARRIS, HAWKER, DAHLSTROM, WILSON
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) STA
02/01/07 (H) STA AT 8:00 AM CAPITOL 106
02/01/07 (H) Heard & Held
02/01/07 (H) MINUTE(STA)
02/06/07 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 48
SHORT TITLE: RETIREMENT BOARD PURCHASE PPT CREDITS
SPONSOR(s): REPRESENTATIVE(s) SEATON, KELLY
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) STA, FIN
02/06/07 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 75
SHORT TITLE: DRIVERS LICENSE: ALCOHOL AWARENESS/MINOR
SPONSOR(s): REPRESENTATIVE(s) RAMRAS
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) STA, FIN
02/06/07 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
PETER FELLMAN, Staff
to Representative John Harris
Juneau, Alaska
POSITION STATEMENT: Presented HB 21, on behalf of
Representative Harris, joint prime sponsor.
VERN JONES, Chief Procurement Officer
State of Alaska
Division of General Services
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 21.
REPRESENTATIVE PAUL SEATON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 48, as a joint prime sponsor.
JERRY BURNETT, Legislative Liaison/Director
Division of Administrative Services
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Offered the department's perspective on HB
48.
JANE PIERSON, Staff
to Representative Jay Ramras
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 75 on behalf of Representative
Ramras, prime sponsor.
DUANE BANNOCK, Director
Division of Motor Vehicle
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Reviewed driver's license eligibility
requirements and answered questions.
ACTION NARRATIVE
CHAIR BOB LYNN called the House State Affairs Standing Committee
meeting to order at 8:03:16 AM. Representatives Roses, Coghill,
Johansen, Doll, and Lynn were present at the call to order.
Representative Gruenberg arrived as the meeting was in progress.
HB 21-DISPOSAL OF STATE FLAG
CHAIR LYNN announced that the first order of business was HOUSE
BILL NO. 21, "An Act relating to the proper disposal of the
state flag."
8:04:35 AM
REPRESENTATIVE JOHANSEN moved to adopt the committee substitute
(CS), Version 25-LS0137\E, Bullock, 2/1/07, as a work draft.
There being no objection, Version E was before the committee.
8:05:04 AM
PETER FELLMAN, Staff to Representative John Harris, on behalf of
Representative Harris, joint prime sponsor, explained that HB 21
is before the committee again in order to address the questions
of Representative Doll regarding the size and proportions of an
official state flag. He pointed out the committee packet should
include the standard proportions of the U.S. flag and the state
flag. Mr. Fellman clarified that the size of the flag doesn't
matter but rather if the proportions are accurate, then it's an
official state flag. Therefore, Version E was changed to
specify that the flag "may be respectfully retired by fire." He
noted that the committee packet should also include the U.S.
flag code in which Section 176(k) specifies: "The flag, when it
is in such condition that it is no longer a fitting emblem for
display, should be destroyed in a dignified way, preferably by
burning."
CHAIR LYNN noted the word "may" is permissive rather than
mandatory.
8:07:17 AM
REPRESENTATIVE DOLL [moved to adopt] Amendment 1, which simply
updates the language to reflect that Alaska is already the
forty-ninth star in the national emblem. Amendment 1 read:
Page 1, line 1, following "Act":
Insert "relating to the state flag; and"
Page 1, following line 2:
Insert a new bill section to read:
"* Section 1. AS 44.09.020 is amended to read:
Sec. 44.09.020. State flag. The design of the
official flag is eight gold stars in a field of blue,
so selected for its simplicity, its originality, and
its symbolism. The blue, one of the national colors,
typifies the evening sky, the blue of the sea and of
mountain lakes, and of wild flowers that grow in
Alaskan soil, the gold being significant of the wealth
that lies hidden in Alaska's hills and streams.
The stars, seven of which form the constellation Ursa
Major, the Great Bear, the most conspicuous
constellation in the northern sky, contains the stars
which form the "Dipper," including the "Pointers"
which point toward the eighth star in the flag,
Polaris, the North Star, the ever constant star for
the mariner, the explorer, hunter, trapper,
prospector, woodsman, and the surveyor. For Alaska the
northernmost star in the galaxy of stars represents
Alaska, [AND WHICH AT SOME FUTURE TIME WILL TAKE ITS
PLACE AS] the forty-ninth star in the national emblem.
The flag of the Territory of Alaska is the official
flag of the state. The standard proportions and size
graphically delineated herein shall be used in the
manufacture of the official flag of Alaska. The stars
shall be the color of natural yellow gold and the
field of blue shall be of the same shade of blue used
in the official manufacture of the national emblem of
the United States. The design, standard proportions,
and size are as follows:
(THE DESIGN, STANDARD PROPORTIONS, AND SIZE OF THE
STATE FLAG ARE SET OUT IN THE PRINTED STATUTES.)"
Page 1, line 3:
Delete "Section 1"
Insert "Sec. 2"
8:07:58 AM
CHAIR LYNN objected for discussion purposes.
MR. FELLMAN, in response to Representative Johansen, related
that Representative Harris agrees with Amendment 1.
CHAIR LYNN removed his objection. There being no further
objection, Amendment 1 was adopted.
8:09:06 AM
VERN JONES, Chief Procurement Officer, State of Alaska, Division
of General Services, Department of Administration, informed the
committee that the division is responsible for 13 buildings,
most of which are located in Juneau. The maintenance staff
raises and lowers the flags in most of the state office
buildings. He related the division's support of HB 21. In
fact, the division is already retiring the state flag as it does
the U.S. flag and thus, HB 21 wouldn't impact the division.
REPRESENTATIVE COGHILL expressed gratitude for the actions
already taken by the division.
8:10:32 AM
REPRESENTATIVE COGHILL moved to report CSHB 21, Version 25-
LS0137\E, Bullock, 2/1/07, as amended, with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 21(STA) was reported from the House State
Affairs Standing Committee.
The committee took an at-ease from 8:11:39 AM to 8:13:16 AM.
HB 48-RETIREMENT BOARD PURCHASE PPT CREDITS
8:13:32 AM
CHAIR LYNN announced that the next order of business was HOUSE
BILL NO. 48, "An Act amending the powers of the board of
trustees of the Alaska Retirement Management Board to authorize
purchase and sale of transferable tax credit certificates issued
in conjunction with the production tax on oil and gas; and
providing for an effective date."
8:13:47 AM
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, presented
HB 48, as joint prime sponsor. First, the bill would allow the
Alaska Retirement Management (ARM) Board to purchase the
transferable tax credit allowed under the Petroleum Profits Tax
(PPT) passed last year. He reviewed some of the history of the
Public Employees' Retirement System (PERS) and the Teachers'
Retirement System (TRS) and the unfunded liability that has
resulted from those systems. He said the proposed legislation
offers ways of decreasing that unfunded liability; one of those
ways is to increase the return on the investments made by the
ARM Board.
CHAIR SEATON reviewed that the duty of the ARM Board is to
invest the money and be the fiduciary responsible for all the
assets of both PERS and TRS. He indicated that the proposed
legislation would authorize the ARM Board to "act like an oil
company" - purchasing transferable credits earned by another oil
company and reimbursing them from the State of Alaska. He
emphasized, "This is absolutely neutral as far as the cost to
the State of Alaska."
8:16:37 AM
REPRESENTATIVE SEATON directed attention to a handout in the
committee packet, entitled, "Tradable Capital Investment Tax
Credits - 43.55.023(a)-(h)." He said, for example, a new
company or company with no current production of oil, would not
owe PPT taxes. If that company were to invest $100 million in
capital, that money would create $20 million of capital credit -
an incentive to get people to develop. However, until oil is
flowing, the company would not be able to do anything with those
credits. He indicated that the bill would allow that company to
apply for a certificate "that makes those tradable." The
tradable tax credits, he said, could then be bought by one of
the four big [oil] producers in the state. Those producers
would write that $20 million off against their tax bill, as long
as the amount did not exceed 20 percent of their total tax bill
for the year.
REPRESENTATIVE SEATON said the bill also provides a plan for a
net operating loss tax credit. If a company has a net operating
loss - not enough production to offset the credits earned by
operations - that can also be made a tradable tax credit to be
bought by another oil company to write off against its tax
credit, he said.
REPRESENTATIVE SEATON continued:
There was a lot of concern that the oil company that
you're selling this to might say, "Gee, well we'll
give you 70 cents on the dollar, and then we'll turn
them in and make - as somebody that didn't do the
exploration, that didn't do the investment - ... 30
percent of the tax credit, without doing any of the
work." Well, the big thing is that it reduces their
incentive and their refund on their exploration. So,
[the] ... PPT ... generated another thing that you
could do with these tax credits: ... If you had $100
million of combined net operating loss and capital,
... at 20 percent, you would generate $20 million, and
you could go to the Department of Revenue, they would
give you the certificate, and you'd say, "I want to
cash this in." And, under the provision of PPT, up to
$25 million per company, the state would directly
reimburse them the full face value.
8:21:12 AM
And it's important to remember that whether they have
it reimbursed or they sell these to another company
and the other company reimburses it, the State of
Alaska always pays 100 percent of the full face value
of the certificate. So, what this bill does: it lets
the retirement board act like a purchasing oil company
- like one of the big three or four - and say, "We
will offer you 92 percent of the face value of the tax
credit," and then it allows them to get reimbursed
from the Department of Revenue for the full face
value, making 8 percent.
We wanted to make sure that we did not have the state
in a bad financial position and get boxed into making
these reimbursements. So, there is a condition on
this bill that says the commissioner of [the
Department of] Revenue has to certify that the state's
financial position is such that he will reimburse it.
So, first of all, this bill allows the ARM Board to do
it, and it also allows the commissioner of [the
Department of] Revenue to say, "Now's not the time,
don't buy that."
Now, we would think there'd have to be some
coordination, but I want you to remember that the
commissioner of [the Department of] Revenue ... [has]
a designated seat on the ARM Board. So, before the
ARM Board makes this [decision], one of their members
basically has to certify - and that's the commissioner
of [the Department of] Revenue - that the state is in
a position where they would do this.
Now, 8 percent is ... basically what the ARM Board
tries to make as their target for investment, but
that's on an annual basis. So, if you make 8 percent,
you buy it at 92 percent - and we're fixing that in
the statute so they're not getting into a bidding war
and all those kinds of things - if you buy it at 92
percent you get it for 100 percent, it's 8 percent.
Of course, if you did that at the beginning of the
month and got the return at the end of the month,
that's 12 times 8 percent, or a 96 percent return.
Now, of course, if you're doing it in an overnight or
a two-day transaction, that increases tremendously.
So, that's how this investment can increase the
percentage that the ARM Board will make on its
investment. It's totally going to be dependent on how
much exploration we get; it's totally going to be
dependent on how much credit we get; but remember that
right now ... we're just doing oil. If ... there's a
gas line that comes on line, and we get this massive
exploration, we could be looking at a lot of money
that could be turning over in these tax credits, as
long as the commissioner of [the Department of]
Revenue certifies that ... we have ample tax revenue
coming in to offset this .... Because remember, it's
offset against that Petroleum Profits Tax that the
companies are paying, and this is a credit against
that amount of taxes that are coming in. It could be
significant and it could help reduce the unfunded
liability. So, that's the entire purpose of this
bill, and that's the mechanism at work. I know it's
pretty hard to explain the unfunded liability and the
PPT and all those things in a short time, and I'd be
perfectly happy to answer questions, and the
Department of Revenue is here, as well, if you have
other questions that I can't answer.
8:24:37 AM
REPRESENTATIVE SEATON said the Department of Revenue has pointed
out that the bill omitted exploration tax credits, which he said
had been in place for many years and were extended through the
year 2016 in the PPT legislation; therefore, [language for] a
conceptual amendment is available in the committee packet to
include those credits.
REPRESENTATIVE SEATON said the bill would also help "the small
guys" by establishing a floor related to expected reimbursement.
The floor is 92 percent of the investment tax credit.
8:26:51 AM
REPRESENTATIVE DOLL said 92 percent seems rather generous, and
she asked Representative Seaton how he arrived at that amount.
REPRESENTATIVE SEATON responded that 92 percent seemed like a
fairly good number, because 8 or 8.25 percent is the target
percentage rate used by the ARM Board in bargaining. He said,
"... We don't want to get into a bidding war, but we want to
establish a good floor, and we want to make something that has
the potential for reducing the unfunded liability." He
reiterated that the commissioner has control and the state "is
still on the hook ... for the Department of Revenue, for
offsetting oil taxes at 100 percent of the face value of the tax
credit."
8:30:15 AM
REPRESENTATIVE SEATON, in response to a request from
Representative Roses, reiterated his explanation of the
compounding effect.
REPRESENTATIVE ROSES stated:
My understanding is you aren't going to sell this
every month. You're going to buy these credits, which
is an annual credit. Is that correct? So, ... if you
had $20 million, you buy that at 92 percent. That
means that you're gaining 8 percent, which would be
$1.6 million. And so, the only thing the ARM Board is
going to do with that additional $1.6 million is
invest it into what they already have, which is
gaining 8.25 percent a year. So, you're only going to
get 8 percent on the $1.6 million, because you had to
spend the other $18.4 million in order to get that
$1.6 [million]. So, you've withdrawn $20 million out
of your investments to buy the credit, for which
you're getting an additional $1.6 [million] return.
So, you're really only going to get 8 percent on the 8
percent, which would be .64 percent. So, ... you're
not going to get 96 percent. I mean, if we did that,
we could cure our unfunded liability in two years.
REPRESENTATIVE ROSES said, as a former member of the ARM Board,
he supports [HB 48], because one of the strategies that the
board looks for is additional ways to make investments. He
concluded, "It's not going to be a huge cash cow, but it
certainly is another way to leverage and make the target
investment slightly above the 8 percent."
8:32:25 AM
REPRESENTATIVE SEATON said both the ARM Board and a former
commissioner of the Department of Revenue have informed him that
"they have cash coming in all the time from the deposit," and
thus would not be "taking any investments out." He said the
transactions will be one-day or perhaps overnight. He said,
"... If it turns out as a gas line goes forward that there's $3
or $4 million, and you make 8 percent on $3 or $4 million
overnight, that's a pretty good return; that really can help
your investment." He emphasized that if the state can
marginally increase its return on investment, it will help the
outlying years considerably. He offered further details.
8:35:26 AM
REPRESENTATIVE COGHILL asked why this plan would be more
attractive than "other market forces."
8:36:03 AM
REPRESENTATIVE SEATON, in response to a question from
Representative Coghill, offered an explanation of the market
dynamics. He said, "What we're doing is saying [to] those small
guys, 'If our economic situation is good, we'll guarantee you
that ... you, as the person that made the investment, can get 92
percent of the face value of the tax credit.'" He added:
So, only oil companies ... can use this, and only oil
companies that are making a profit in Alaska, and they
can only use them to 20 percent of their tax
liability. So, with such a small group of players you
can see how the market dynamics could be that people
would say, "Yeah, we'll buy them from you, but ... we
want to make a higher return on that." And so, we
could be rewarding not the people that are making the
investment, but just people that have petroleum
product status.
8:39:00 AM
REPRESENTATIVE COGHILL asked how fast the credit can be passed
around that it would remain valuable, especially if a high value
is going to be set on the credit and then be passed off.
REPRESENTATIVE SEATON explained that a "small player" would make
an investment and then apply to the Department of Revenue for a
credit certificate. He said, "Now, no other small player is
going to buy that, because they've got nothing to do with it;
they've got nothing to write it off again. The only [person]
that can use that is somebody that's paying petroleum profits
tax or the $25 million cash refund from the state - and that's
limited to $25 million per year." He said the small player
could hold the money, but most companies want to get the cash so
that they can reinvest it. He added, "Anyone can buy these -
that's the law - but it can only be written off against the
petroleum profits tax."
8:41:55 AM
REPRESENTATIVE SEATON, in response to a question from
Representative Coghill, said the state is the buyer. In
response to a follow-up question from Representative Coghill, he
offered his understanding that there are 14 small companies
operating in Alaska, and those companies currently could be
generating net operating losses. He said a company with a net
operating loss less than $25 million will "go for the 100
percent." The company with net operating loss and capital
credits totaling more than $25 million has two choices: hold it
or sell it to another company. He said, "If I sell it, I'm
going to take whatever they're going to give me for it. And in
the past, that's been somewhere around 90 percent - some have
been less." He mentioned an amendment that would allow
exploration tax credit. He said, "The reason I say ... it
establishes a floor [is] because we just say you can buy it at
92 percent. We're not getting into the bidding war with
[ExxonMobil Corporation] and [ConocoPhillips Alaska, Inc.] ...;
we don't want to make the ARM Board negotiate or anything else."
8:44:56 AM
REPRESENTATIVE COGHILL asked, "Would the 92 percent ever be a
real market buyout?"
8:45:49 AM
REPRESENTATIVE SEATON stated:
Our information is that ... they have been willing to
buy these credits for ... 90 percent and keep 10
percent .... Or, because now somebody has an option.
If ExxonMobil Corporation will only give them 80
percent, they can come to the ARM Board and, if the
Commissioner of Revenue agrees, the ARM Board could
purchase it at 92 percent, the unfunded liability gets
reduced somewhat, and we also direct at least 92
percent of the money to the people that made the
investment.
REPRESENTATIVE COGHILL asked, "Why would anybody ever do it at
92 percent if the market flow was at 88 percent, for example?"
CHAIR SEATON responded that the reason is money. He explained
as follows:
You've spent $100 million, and you've got $20 million
dollars-worth of credit. And you want as much of that
$20 million back in your pocket as you can. If you
sell it to the ARM Board, you get 92 percent; if you
sell it to [ExxonMobil Corporation], you only get 88
... or 85 percent. So, you, as small explorer, you're
not going to sell it to another explorer, because they
won't pay you anything for it - they can't use it.
All they can do is resell it to somebody else. Now,
you have the possibility that one small company would
be there, would get a tax credit certificate, would
sell it to another one for 50 percent, and the other
guys would sell it to the ARM Board for 92 percent. I
mean, nobody's preventing anything like that, but ...
the marketability of these is for cash and to
reimburse you for ... expenses that you have incurred.
And you ... want ... the most of that money you can
[get] back. That's why I say when we raised the
direct credit back up to ... $25 million, it took away
some of the usefulness of this tool for the normal
exploration amounts that are going on with a lot of
these small companies now, because it's less than the
$25 million. And, I mean, if I was a small company,
there's no way I would sell it to the ARM Board for 92
percent if I can just turn it in to the Department of
Revenue for 100 percent. I mean, you want the money
in your pocket.
8:49:05 AM
REPRESENTATIVE COGHILL remarked, "I know you're not going to be
able to see this in a vacuum because of various different
agreements that oil companies would have on exploration or
operation."
REPRESENTATIVE SEATON reiterated that the language of the bill
is totally permissive.
8:51:31 AM
REPRESENTATIVE COGHILL said he is attempting to figure out the
benefit to the state.
8:52:04 AM
CHAIR LYNN asked what the worst-case scenario would be in
passing the proposed legislation.
REPRESENTATIVE SEATON proffered:
The only down-side to this is if you were one of the
large producers that had a large tax bill, you would
not be able to leverage small companies that were
investing to sell you their tax credit at a very
reduced rate. So, if you were a large company that
had a lot of PPT, you might not want there to be ...
an effective floor on what you would offer these small
companies.
CHAIR LYNN commented that the bill gives "the small guy" choice.
8:53:09 AM
REPRESENTATIVE DOLL said she understands the advantages the bill
would bring to the small company, and she stated her support of
HB 48.
REPRESENTATIVE COGHILL said he would like to know if the
legislation would change the dynamics to investment incentive.
8:53:58 AM
REPRESENTATIVE SEATON responded that the bill would increase the
investment incentive for small operators, because they would
know that "above the $25 million, they can at least get 92
percent of their credits back." He offered further details. In
response to a comment from Chair Lynn, he confirmed that the
legislation expands the market, but without costing the State of
Alaska one dime. He highlighted the zero fiscal note.
REPRESENTATIVE SEATON, in response to a concern expressed by
Representative Coghill, said he wants to ensure that the credits
are only applied against the PPT, in case "something goes bad
for us for a year or two." He concluded that HB 48 is a method
of making tax credits valuable to the person who makes the
investment in Alaska and tries to get back the most amount of
money, while creating a reasonable return for the state, [which
could have a positive effect on the unfunded liability].
8:58:30 AM
JERRY BURNETT, Legislative Liaison/Director, Division of
Administrative Services, Department of Revenue, offered the
department's take on HB 48. He said the sponsor effectively and
accurately portrayed the bill and the effects it would have on
the state and the ARM Board. He stated the department's belief
that the bill has merit as a vehicle to increase the revenue to
the ARM Board, with little cost to the state's general fund.
Furthermore, he recognized that the bill would provide a floor
for investment credits, which could enhance small oil producers'
abilities to utilize exploration credits, which would in turn
enhance exploration and production in Alaska.
9:00:03 AM
MR. BURNETT, in response to a question from Representative
Johansen, explained that the fiscal note is zero for operating
costs and the revenue effects are indeterminate. He said there
may be a cost related to a timing issue, wherein the department
could make a payment to the ARM Board more quickly than it was
getting reduction in revenue from an oil company as a result of
the use of a tax credit. In that scenario, he explained, there
would be a difference in investment results from the general
fund relative to the ARM Board investment results.
9:01:03 AM
REPRESENTATIVE ROSES opined that timing is the issue, because
the ARM Board has caps on the dollar amount that can be invested
at any one particular investment group, and it must shift
dollars into liquid assets until such time as it can find a
better investment. At that point, the money invested takes some
time to build. He said, "But with this type of a purchase
option, you get an instant return on your money, as opposed to
waiting for that investment to start to grow." He said that's
why he likes "this option."
MR. BURNETT told Representative Roses that the department sees
the transaction as being "fairly, nearly, instantaneous."
9:02:44 AM
CHAIR LYNN closed public testimony.
9:02:52 AM
REPRESENTATIVE ROSES [moved to adopt] Conceptual Amendment 1,
which read as follows [original punctuation provided]:
Page 2, line 4: after "43.55.023" insert "and
43.55.025"
Page 2, line 5: after "43.55.023(f)" insert "and
43.55.025"
9:03:32 AM
REPRESENTATIVE SEATON said Amendment 1 would allow exploration
tax credits, which was a suggestion from the Department of
Revenue.
9:03:48 AM
CHAIR LYNN asked if there was any objection to [Amendment 1].
There being none, it was so ordered.
9:03:59 AM
REPRESENTATIVE COGHILL moved to report HB 48, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 48(STA) was
reported out of the House State Affairs Standing Committee.
The committee took an at-ease from 9:04:22 AM to 9:06:25 AM.
HB 75-DRIVERS LICENSE: ALCOHOL AWARENESS/MINOR
9:06:30 AM
CHAIR LYNN announced that the last order of business was HOUSE
BILL NO. 75, "An Act relating to driver's licenses and alcohol
awareness testing."
9:06:56 AM
REPRESENTATIVE JOHANSEN moved to adopt the committee substitute
(CS) for HB 75, Version 25-LS0348\E, Luckhaupt, 1/26/07, as a
work draft. There being no objection, Version E was before the
committee.
9:07:07 AM
JANE PIERSON, Staff to Representative Jay Ramras, Alaska State
Legislature, presented HB 75 on behalf of Representative Ramras,
prime sponsor. She paraphrased from the sponsor statement
included in the committee packet, which read as follows
[original punctuation provided]:
House Bill 75 continues my efforts to improve alcohol
management and awareness in Alaska.
It stipulates that all drivers' licenses issued to a
person under 21 years of age will expire within two
weeks of the person's 21st birthday.
HB 75 will further require that a person turning 21
years of age or a person 21 years of age or older
applying for a new license must take a test regarding
alcohol safety and awareness, and laws related to
drinking and driving, prior to receiving an Alaska
driver's license.
Once HB 75 takes effect, all drivers' licenses of
Alaskans 21 years of age will reflect that they have
passed the alcohol awareness and safety test when they
are issued an adult license. The test will serve to
relate the privilege of driving to the responsibility
of consuming alcohol. The test will be designed by
the Division of Motor Vehicles, and it is the
sponsor's intent to have MADD participate in the
process of designing this test.
HB 75 should also help cut down on minors consuming
alcohol, since a license issued to a person over 21
years of age who has passed the test will look
different than a license issued to a minor.
Please join me in supporting this important piece of
legislation.
9:08:51 AM
CHAIR LYNN asked why a teenager would not take alcohol awareness
testing when he/she gets a learner's permit.
9:09:24 AM
MS. PIERSON noted that there are already "a good number of
questions on alcohol awareness" in "the basic test." In
response to a follow-up question from Chair Lynn, she explained
that under the bill, there would be two tests required: the
basic test taken when applying for a permit or license, and an
alcohol awareness test. The bill, she said, would also
encompass people who have had their license revoked and are
applying for a new license.
9:10:32 AM
MS. PIERSON, in response to questions from Representative
Coghill, confirmed that a person coming in for a license at the
age of 35 would have to take both a written test and an alcohol
awareness test. However, she indicated that these tests would
not have to be taken at every renewal of the person's driver's
license.
9:11:31 AM
MS. PIERSON, in response to further questions, reviewed the
changes made in Version E, Sections 1 and 2. She said the
requirement in Section 1 of the original bill version was that a
person renewing a license for the first time after the effective
date of the bill would have to take a test; however, that
language was removed. She said that change allows those whose
licenses are in good standing to not have to take the alcohol
awareness test when renewing their licenses. In Section 2, she
noted, language was added to clarify the expiration and renewal
of the license at age 21, because the original wording could
have caused problems if the date fell on a weekend.
9:12:35 AM
MS. PIERSON, in response to a question from Representative Doll,
said there is a one-time, $5,000 set-up fee in order for the DMV
to "re-input" the driver's license test machines. She deferred
to the director of the DMV for further comment.
9:13:20 AM
REPRESENTATIVE JOHANSEN said he doesn't see how a provision that
will ultimately require more people to go through the DMV will
not result in the DMV coming before the legislature to ask for
more money. He also questioned what level of education would be
given for each test. He explained his concern is that waiting
to educate and test on certain information until someone is
older could mean that person has lost the chance to understand
an important fact that could prevent him/her from drinking and
driving.
CHAIR LYNN suggested the possibility of including a requirement
for drug education in the bill.
MS. PIERSON said she thinks the bill's sponsor would consider
language to that effect.
9:15:42 AM
REPRESENTATIVE JOHANSEN said he supports the concept of the
bill, but he wants to see information related to his previously
stated concern.
MS. PIERSON offered to provide a booklet, the information in
which she said is also found online, and in that booklet is a
large section on alcohol and alcohol awareness. She offered her
understanding that "when you get your permit, you actually take
the test, and then you take a driver's test, and not another
test when you get your license."
9:16:28 AM
REPRESENTATIVE DOLL surmised that the main intent of the bill is
to have a different form of identification for the purpose of
"carding." She stated, "The education component is there, but
certainly you could put that same education component earlier
on, as was mentioned."
MS. PIERSON concurred. She indicated that there is a perfect
fit between the DMV and educating young people to be aware of
the effects of alcohol.
9:17:15 AM
REPRESENTATIVE ROSES recalled that at one time, licenses for
those underage had a different color background than licenses
for people 21 and older.
MS. PIERSON differed to the director of the DMV for comment.
9:18:07 AM
DUANE BANNOCK, Director, Division of Motor Vehicles, Department
of Administration, reviewed driver's license eligibility
requirements and answered questions. At age 14, he said, a
person is eligible for an instruction permit. The test required
for that permit is called a written test, but is taken on a
computer. He listed the following statutorily required skills
tested: the ability to read and understand official traffic
control devices; knowledge of safe driving practices; knowledge
of the effects of alcohol and drugs on drivers and the dangers
of driving under the influence; knowledge related to laws on
drinking; knowledge regarding laws on financial responsibility,
and knowledge of traffic laws and regulations.
MR. BANNOCK said at age 16 a person is eligible for a
provisional Alaska driver's license, and at that point he/she
takes the skills exam, which is commonly referred to as the road
test. A provisional driver's license limits the number and type
of passengers and the hours of operation of the vehicle. Some
states refer to that as a graduated driver's license. After six
months with a provisional driver's license, and with parental
consent, the person, who Mr. Bannock said could be 17 years old
by then, can return to the DMV and acquire a regular driver's
license.
MR. BANNOCK told Representative Roses that the DMV no longer
uses varying background colors to specify the type of license.
He said when the division changed to digital licenses, it
created a license for those under 21 years of age, which is laid
out in a vertical format, which is different from the horizontal
format of licenses given to those over 21. Clearly printed on
the underage license are the words, "under 21 until," followed
by the date of the person's twenty first birthday. Anyone who
has been issued an underage license can return to the DMV after
they turn 21, pay $15, and they will be issued a new
[horizontal] license.
9:22:48 AM
MR. BANNOCK, in response to a question from Representative
Coghill, confirmed that a 20-year-old coming in to the DMV for
the first time today would get a vertical format license that is
valid for five years; however, that person could, upon turning
21 the next year, opt to come in to the DMV to be issued the
horizontal card.
9:23:50 AM
MR. BANNOCK, in response to Chair Lynn, said the division
supports HB 75. He said the DMV is anxious to work with MADD to
establish the secondary test that would be called for by the
bill. Relating to Representative Johansen's previous comment
about future requests for funds, he said although customer time
will increase, there will be no necessity for staff to work
overtime. In response to Chair Lynn, he estimated that the
test, which currently takes applicants 8.5 minutes to complete,
will probably take 12.5 minutes with the additional questions
added.
9:26:23 AM
MR. BANNOCK, in response to a question from Representative
Coghill, offered the following example:
Instead of the 18-year-old getting the statutory five-
year driver's license that we have today, the 18-year-
old would get, arguably, a three-year driver's
license, at which point in time they would come in
after their twenty-first birthday, as per the
directive in Section 2 [of HB 75]. That's when they
would take ... this second test that we're taking
about in Section 1, and be issued then a five-year
driver's license that would expire on their twenty-
sixth birthday.
MR. BANNOCK, in response to a follow-up question from
Representative Coghill, confirmed that should the bill pass, the
extra time spent at the DMV will only pertain to those
undergoing the lengthened test, not other patrons of the
division.
MR. BANNOCK, in response to Chair Lynn, said the DMV would not
object to incorporating questions about drug safety and
awareness into the test that the bill would require.
9:28:34 AM
REPRESENTATIVE DOLL asked, "Each time someone comes in to renew,
and in this case when they come in on their twenty-first
birthday, is there a fee involved in that, in terms of what they
pay to the DMV?"
MR. BANNOCK answered yes, by statute, a renewal fee is $20.
REPRESENTATIVE DOLL suggested that that would mean additional
income for the division.
MR. BANNOCK said that might be true. He explained as follows:
Without this law, the driver's license still expires.
We are just altering the schedule at which time the
driver's license expires. So, that's why I chose not
to put that as additional revenue on my fiscal note.
9:29:23 AM
REPRESENTATIVE COGHILL noted that a DUI can be a result of the
influence of more than just alcohol. He said the DMV has the
right of revocation, and he asked, "Have you given some thought
as to how you might explain those parameters on a test?"
9:29:57 AM
MR. BANNOCK said some of the subjects currently found on the
exam test the person's knowledge of alcohol as a narcotic. He
offered an example of a question: "What is the minimum
revocation period for your first offense for driving under the
influence?" He said there would be a multiple choice for the
answer. He predicted that the test that would be required from
Section 1 of the bill would focus on the actual laws pertaining
to a DUI and some of the physical effects of alcohol.
I envision ... the test that will come out of Section
1 is very concentrated on one of two different things:
the actual laws pertaining to DUI, and perhaps ...
some of the scientific effect of alcohol on the body.
MR. BANNOCK reiterated that he is looking forward to engaging
with MADD for that groups input.
9:32:10 AM
MR. BANNOCK, in response to a question from Representative
Roses, said he knows of at least nine states that issue the
vertical format licenses for those under the age of 21.
9:32:32 AM
REPRESENTATIVE ROSES questioned why the committee wouldn't
approach the concept of making it illegal to sell alcohol to
anybody with a vertical driver's license if the intent of the
bill is to capture those who are the potential drinkers. To do
so, he said, would force those who want to buy alcohol to go to
the DMV and get a new license at age 21. Those who have no
intention of purchasing or drinking alcohol don't have to take
the test; they can continue using their vertical driver's
license until its expiration. He indicated that the bill would
force those doing "the right thing" to have to conform because
of those who are not doing the right thing. He said, "It's sort
of like punishing the entire class because one student
misbehaves."
9:34:29 AM
REPRESENTATIVE JOHANSEN asked Mr. Bannock if it would make any
difference to the DMV, in terms of the division's operations, if
the alcohol-emphasis testing were done at age 16 versus 21.
MR. BANNOCK said he doesn't know. He continued as follows:
But let me just put in a plug for the concept of
having a space/time continuum between the two tests.
Quite frankly, it is this director's professional
opinion that that's where we get the added value.
Instead of giving this test at age -- and remember,
the majority of them are not 16, they're actually 14,
that are taking the written test. So, they take a
written test at 14, they take a driving test at 16,
and then the way this bill lays it out, they would
then take another written test later on so as to chop
it up.
MR. BANNOCK said he takes Representative Roses comments to
heart, and he admitted that he may have more experience with
[the 14- to 18-year-old age group than "all of us combined."
Notwithstanding that, he said the division envisions "creating
some separation between them."
9:36:02 AM
REPRESENTATIVE COGHILL noted that the law views underage DUIs
differently than legal-aged DUIs. He asked Mr. Bannock how he
sees that from an administrative standpoint.
9:36:42 AM
MR. BANNOCK responded that a minor driving under influence is
subject to a DUI. He said he does not know if HB 75 would have
an impact on that law.
REPRESENTATIVE COGHILL asked, "Is that emphasized at all when
you get to the driving test?"
MR. BANNOCK said the driving test is strictly on driving skills.
REPRESENTATIVE COGHILL indicated that he would like the
committee to think about the previous comments of Representative
Roses regarding the age requirements before passing out a "21-
only bill." He suggested, "It might be a more appropriate time,
at the driving skills level, to bring this up."
9:38:07 AM
REPRESENTATIVE ROSES said getting a driver's license is the
first level of freedom children obtain. He indicated that
that's when the [education and testing on alcohol awareness]
needs to happen. He added, "And if we want to then add the
language that then they take the test again at the first
renewal, then you're getting a second bite of the apple, and I
wouldn't have a problem with that, because then I think we
accomplish it on both ends. ... I love the concept; it's the
implementation that I have little difficulty with."
9:39:06 AM
MS. PIERSON responded, "I think that would be fine with the
sponsor, too, if we did it at 16 and again at 21."
9:39:17 AM
REPRESENTATIVE ROSES clarified that he doesn't want to see [the
test given again] at age 21. He clarified:
What I would like to see is when they first get their
driver's license, regardless of age, and then at first
renewal. Because it is possible for somebody to not
even get their driver' license until they're 18 or 19.
My oldest daughter didn't care anything about driving;
she didn't get her license until she was 18. My first
one couldn't wait and would have gotten it at 12 if
she could have.
So, getting the second bite at the apple to me would
be "upon first renewal" - so, don't put the age
specific in that. So, if it's 16 and 21 or if it's 18
and 23, it doesn't make any difference; you get the
second bite.
9:39:57 AM
REPRESENTATIVE COGHILL suggested that the bill be held in order
to talk with the prime sponsor about language pertaining to the
testing age and first renewal concept.
9:40:19 AM
CHAIR LYNN suggested that the one amendment could be made adding
the testing of knowledge of other drugs.
CHAIR LYNN asked if there was anyone else to testify. [There
was no response.]
9:40:36 AM
CHAIR LYNN moved to adopt [Conceptual] Amendment 1, as follows:
On page 1, line 9, between "alcohol" and "awareness":
Add "and drug"
CHAIR LYNN asked if there was any objection to [Conceptual]
Amendment 1. There being none, [Conceptual] Amendment 1 was
adopted.
9:41:35 AM
MS. PIERSON suggested that a similar amendment needed to be made
further down the page.
9:41:47 AM
CHAIR LYNN moved to adopt Conceptual Amendment 2, as follows:
On page 1, line 12, between "alcohol" and "awareness":
Add "and drug"
CHAIR LYNN asked if there was any objection to Conceptual
Amendment 2. [There being none, Conceptual Amendment 2 was
adopted].
CHAIR LYNN announced that HB 75 was heard and held.
^Subcommittee on Ethics: Report
9:42:23 AM
REPRESENTATIVE COGHILL offered an update on the work of the
House State Affairs Standing Committee's subcommittee on ethics.
He said assignments had been given out at the last meeting.
Representative Roses was given the task of addressing Title 15
and keeping it "within the parameters of recording"
[requirements]. Representative Gruenberg was assigned Title 39
- the Executive Ethics Act - while Representative Coghill said
he has taken on the subject of Title 24, which is in regard to
lobbyist recording and ethics requirements.
REPRESENTATIVE COGHILL said the subcommittee took various
[ethics] bills and lined them up by subject and outlined how to
proceed with amendments. He said Legislative Legal and Research
Services has been inundated with requests for drafting
amendments, and the results of that drafting have just today
been delivered.
REPRESENTATIVE COGHILL said there will be a meeting of the
subcommittee on Saturday, February 10, at which time the
subcommittee will sift through the language of the statutes to
determine where amendments may be necessary. He said the
subcommittee will bring to the House State Affairs Standing
Committee a committee substitute with recommendations, as well
as amendments not utilized in the committee substitute.
CHAIR LYNN discussed scheduling possibilities.
9:47:04 AM
REPRESENTATIVES ROSES and GRUENBERG expressed appreciation for
the diligence of their staff.
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
9:48:13 AM.
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