Legislature(1997 - 1998)

02/11/1998 08:40 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE                                                       
11 February, 1998                                                              
8:40 am                                                                        
SFC 98  # 28, Side A (000-452)                                                 
CALL TO ORDER                                                                  
Senator Drue Pearce, Co-Chair, convened the meeting at                         
approximately 8:40 am.                                                         
In addition to Co-Chair Pearce, Senators Torgerson, Adams                      
and Phillips were present when the meeting was convened.                       
Senator Donley arrived shortly thereafter.                                     
Also Attending:  DEBORAH VOGT, Deputy Commissioner,                            
Department of Revenue; BOB BARTHOLOMEW, Deputy Director,                       
Division of Income and Excise Audit, DOR; CHRIS CHRISTENSEN,                   
Staff Council, Alaska Court System; GORDON EVANS, Alaska Bar                   
Association;  MIKE GREANY, Director, Division of Legislative                   
Finance; GRETCHEN MANNIX, Fiscal Analyst, DLS; and aides to                    
committee members and other members of the Legislature.                        
via Teleconference:  From Anchorage: DAVID BUNDY, Member,                      
Alaska Bar Association.                                                        
SUMMARY INFORMATION                                                            
SENATE BILL NO. 179                                                            
"An Act authorizing the Department of Corrections, for                         
the benefit of the state, to enter into an agreement to                        
use space within a correctional facility in the                                
Matanuska-Susitna Borough that is built, owned, and                            
operated by a private contractor, and setting                                  
conditions on the operation of the correctional                                
facility affected by the use agreement; and authorizing                        
the Department of Corrections, for the benefit of the                          
state, to enter into an agreement with the City of                             
Seward to use space within a correctional facility that                        
is built, owned, and operated by a private contractor,                         
and setting conditions on the operation of the                                 
correctional facility affected by the use agreement."                          
Senator Torgerson, chair of a subcommittee formed to address                   
this legislation, gave a brief report of the subcommittee's                    
findings.  He presented a Committee Substitute drafted by                      
the group and encouraged the full Committee to use it as a                     
working draft.  At this point, he moved for adoption of CSSB
179(FIN).  Senator Adams objected, then withdrew his                           
objection citing his intention to offer an amendment at a                      
later time.  Without objection, Co-Chair Pearce announced                      
the CS adopted.                                                                
Senator Adams moved to adopt Amendment #1.  Senator                            
Torgerson objected, giving as his reason the fact that this                    
amendment was just brought to the Committee and members                        
hadn't had a chance to study its implications.  He noted the                   
plan to hold the bill in Committee, therefore, giving time                     
to consider changes to the CS.  Senator Adams agreed to                        
WITHDRAW his amendment on the condition that the bill is                       
held in committee pending further discussion.                                  
At this point, Co-Chair Pearce ordered CSSB 179 (FIN) held                     
in Committee.                                                                  
HOUSE BILL NO. 86                                                              
"An Act relating to the payments in lieu of taxes                              
program for cities in the unorganized borough; and                             
providing for an effective date."                                              
A Senate Finance subcommittee had been formed to study this                    
proposal and make recommendations to the full Committee.                       
Senator Torgerson gave a brief overview of those                               
recommendations contained in a committee substitute draft                      
and subsequently move to adopt the CS.                                         
Senator Adams objected saying he felt the CS was unfair to                     
rural communities with over one thousand residents.  Senator                   
Torgerson retorted observing that communities in his                           
district were the ones paying for these services.  Senator                     
Donley voiced concerns about the Village Public Safety                         
Officers (VPSO) program in general and specifically the 32                     
percent of the budget being spent for administrative                           
overhead.  He stated he would like to examine the source of                    
funding for the program and how the monies are being spent.                    
He admitted he would like to see communities other than                        
Anchorage shoulder some of the program costs.  He concluded                    
by saying he does not support the CS because Anchorage pays                    
at a much higher rate.                                                         
Senator Adams cited examples on the Kenai Peninsula where                      
the state funds extensive Alaska State Trooper services.  He                   
said he would rather eliminate some State Trooper coverage                     
in favor of more VPSO activities.  He stated his main                          
concern is for public safety in all communities.  Senator                      
Donley expanded on his observations of the imbalance of                        
state-funded services provided for rural communities versus                    
Anchorage.  His examples included police training, water and                   
sewer, transportation and school construction.  He perceives                   
Anchorage as being discriminated against.  Senator Adams                       
Co-Chair Pearce then called for a vote on adoption of SCSHB
86(FIN).  The CS passed by a vote of four to one (Pearce,                      
Donley, Phillips and Torgerson for adoption and Adams                          
opposed.)  Co-Chair Pearce announced the CS be adopted and                     
held the bill in committee for further consideration.                          
SENATE BILL NO. 240                                                            
"An Act repealing the tax on punchboards and coin-                             
operated amusement and gaming devices; and providing                           
for an effective date."                                                        
Bob Bartholomew, Deputy Director of the Division of Income                     
and Excise Audit, Department of Revenue, was invited to the                    
table to testify in support of this bill.  He gave a brief                     
history of events that lead to this request.  The original                     
tax was imposed by the Territorial Legislature in 1947.  Mr.                   
Bartholomew said he has been unable to find documentation to                   
show the reasoning behind this original action.  While the                     
tax rate was in increased in 1987, since that time, the                        
department costs of administering the program have risen and                   
can no longer be justified by the small amount of earnings                     
brought in.                                                                    
The department is trying to maintain a high level of service                   
on a continually decreasing amount of operating funds.  This                   
program requires approximately 500 man-hours a year to                         
administer and brings in less than $30,000 annually.  Mr.                      
Bartholomew said his office feels their efforts could be                       
better spent on enforcement of other programs that generate                    
higher revenues. He explained that although revenue from                       
this tax is distributed between municipalities and the                         
state, the municipalities have given their support for                         
repealing this tax.  Their reasons are the same as the                         
departments: focusing resources on collection of other tax                     
programs, with higher revenue, is more fiscally                                
Mr. Bartholomew answered a question from Senator Torgerson                     
saying that repealing this tax will have no affect on a                        
municipality's authority to regulate businesses.  Senator                      
Donley noted this bill did not address vending machines and                    
asked if they were taxed.  Mr. Bartholomew told him that                       
other than cigarette machines, he was unaware of any other                     
vending machine taxes.                                                         
Senator Adams pointed out that the changes proposed in SB
240 would affect 14 statutes.  He wondered if the                              
legislature would be required to address video machines and                    
pulltabs.  Mr. Bartholomew anticipated the need for                            
completely new regulations to govern gaming machines.  Co-                     
Chair Pearce shared that it is normal for states to collect                    
a percentage of the income generated by these machines                         
rather than impose a straight tax on their presence.                           
There was more discussion on the division's intent to focus                    
the savings into the Compliance Group if this measure                          
passed.  This group was formed within the Department to work                   
to bring taxable parties into compliance with the law.                         
Senator Adams moved SB 240 out of committee and without                        
objection, and with an updated zero fiscal note from                           
Department of Revenue, Division of Income and Excise Audit,                    
it was reported out.                                                           
SENATE BILL NO. 234                                                            
"An Act extending the termination date of the Board of                         
Governors of the Alaska Bar Association."                                      
Co-Chair Pearce pointed out to the committee materials                         
before them relating to this bill.  They included a                            
statement from the Board of Governors of the Alaska Bar                        
Association, a Legislative Budget and Audit report and a                       
written response to that report from the Alaska Bar                            
David Bundy, and attorney and member of the ABA, testified                     
in favor of the bill that would extend the sunset deadline.                    
He stated that the current program has been running well for                   
many years and, because of membership dues, no state funding                   
is required to administer.                                                     
When Co-Chair Pearce opened the floor to questioning,                          
Senator Phillips asked if the state was considering changes                    
recommended by the Supreme Court.  Mr. Bundy answered that                     
this bill would approve those changes.                                         
Senator Torgerson announced his membership on a committee of                   
the ABA and asked advice of the chair whether he should be                     
allowed to participate in discussion and voting on this                        
measure.  Co-Chair Pearce ruled that by giving this                            
disclosure, it would be appropriate for him to fully                           
Senator Donley requested an outline of the current budget of                   
the ABA.  He voiced concerns with the amount of spending                       
incurred by the ABA.  He said he would like to see back up                     
material showing justifications for these expenditures.  Co-                   
Chair Pearce offered the option of holding the bill in                         
committee until this information is produced and committee                     
members have a chance to analyze.                                              
She had a question on how excess revenue is administered.                      
Mr. Bundy explained a long-range budget plan in place that                     
raises dues in anticipation of higher budget years.  Extra                     
monies are invested during the first few years after a                         
membership dues hike.  Over the following years, as budget                     
needs increase, funds are taken from those investments thus                    
delaying the next dues increase.  Co-chair Pearce commented                    
that while this is not necessarily a bad system, it does                       
differ from other boards and commissions in the state.                         
Co-Chair Pearce then ordered SB 234 held in committee with a                   
time specific date of February 24.  She asked that Mr. Bundy                   
get the requested information to Senator Donley before this                    
Co-Chair Pearce adjourned the meeting at approximately                         
9:25 am.                                                                       
SFC-98 (5) 2/11/98 am                                                          

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