Legislature(2019 - 2020)SENATE FINANCE 532
01/22/2019 09:00 AM Senate STATE AFFAIRS
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ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE STATE AFFAIRS STANDING COMMITTEE
SENATE FINANCE COMMITTEE
January 22, 2019
9:01 a.m.
9:01:42 AM
CALL TO ORDER
Co-Chair Stedman called the joint Senate Finance Committee
and Senate State Affairs Committee meeting to order at 9:01
a.m.
MEMBERS PRESENT - SENATE FINANCE
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Peter Micciche
Senator Donny Olson
Senator Mike Shower
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
Senator Lyman Hoffman
MEMBERS PRESENT - STATE AFFAIRS
Senator Mike Shower - Chair
Senator John Coghill - Vice Chair
Senator Lora Reinbold
Senator Peter Micciche
Senator Scott Kawasaki
MEMBERS ABSENT
None
ALSO PRESENT
Senator Cathy Giessel; John Quick, Commissioner Designee,
Department of Administration; Bruce Tangeman, Commissioner
Designee, Department of Revenue.
SUMMARY
CONFIRMATION: COMMISSIONER, DEPARTMENT OF ADMINISTRATION:
JOHN QUICK
CONFIRMATION: COMMISSIONER, DEPARTMENT OF REVENUE: BRUCE
TANGEMAN
Co-Chair Stedman reminded attendees to silence cell phones.
He introduced the Senate Finance Committee members.
Chair Shower introduced the members of the Senate State
Affairs Committee.
Co-Chair Stedman noted that Senate President Cathy Giessel
was in attendance.
9:03:26 AM
AT EASE
9:03:32 AM
RECONVENED
^CONFIRMATION: COMMISSIONER, DEPARTMENT OF ADMINISTRATION:
JOHN QUICK
9:03:57 AM
JOHN QUICK, COMMISSIONER DESIGNEE, Department of
Administration (DOA), discussed his background. He relayed
that he was born and raised in Iowa. He stated his family
had three to four generations of entrepreneurs. He had been
married for 15 years and had three children. He attended
Northwest University and received a business degree. He
continued his education at Wayland Baptist University to
study for a Master of Business Administration. Midway
through the MBA program he took a job as a regional
director for Samaritan's Purse overseeing Operation
Christmas Child. The job taught him about managing big
projects, how to manage people in a positive way, and how
to execute strategy and vision at a high level.
Mr. Quick related that a year or two later he reconnected
with a high school friend to open a caf?/restaurant/frozen
yogurt shop and a wholesale food business. That led to an
online business and other entrepreneurial activities.
Thereafter he started consulting and later worked as chief
of staff for the Kenai Peninsula Borough mayor. He
recounted that in his job for the mayor his team took a
historical deficit budget to almost breaking even by
utilizing efficiencies in government and technology. Mr.
Quick concluded that he would love to serve as the
commissioner of DOA.
9:07:00 AM
Co-Chair Stedman asked if he had a background or any
involvement in a retirement and benefits structure.
Mr. Quick explained that when he was a small business owner
and entrepreneur his businesses administered health care
plans to their staff. The Kenai Peninsula Borough was self-
insured and had a third-party administrator. He continued
that the borough offered full benefits and a retirement
package similar to the State of Alaska. He offered that
this gave him experience in understanding how retirement
and benefits work.
Co-Chair Stedman asked if he had concerns about the
retirement and benefits structure of the state.
Mr. Quick relayed that he recently met as a member of the
Alaska Retirement Management (ARM) Board, and they voted to
reset the rate of return from eight percent to 7.38
percent. He said he voted in favor of the change, but it
was a concern that it would further obligate the general
fund. He assured the committee that the DOA would
investigate ways to improve processes and cut costs.
9:08:47 AM
Co-Chair Stedman asked him to briefly explain why a
decrease in the rate of return would increase liability to
the state.
Mr. Quick explained that as the fund makes less money over
time, the general fund would make up for the loss.
Co-Chair Stedman summarized that it would increase the
state's unfunded liability.
Mr. Quick replied yes. He added that the inflation rate was
adjusted to match the standard of the lower 48 but the real
rate of return stayed the same.
9:09:21 AM
Senator Wilson asked him to review the DOA's plan
concerning shared services and where he would consolidate
services.
Mr. Quick stated he would continue to implement shared
services. He opined that the shared services initiative was
not implemented fully, but it would be possible to see more
efficiencies by implementing shared services across all
departments, especially the Office of Information
Technology. Instead of each department operating its own IT
system and processes, centralizing into one system would be
more efficient.
9:10:26 AM
Co-Chair von Imhof referenced the automation of processes
and noted that the Municipality of Anchorage SAP software
upgrade and other large projects took more time and money
than anticipated but there was still an effort to move in
that direction because it eventually leads to efficiencies
in both time and cost. She recalled that the committee
heard legislation last year pertaining to efficiencies
involving boat boilers by having small automated processes
on an iPad rather than carbon paper. She asked if there was
discussion at DOA about how the state could start to
automate processes over time to gain efficiencies.
Mr. Quick said yes. He cited the Doc uSign technology the
Kenai Peninsula Borough implemented which made it legally
possible to sign contracts or documents electronically. He
said this was cost effective and he intended to utilize
similar processes at DOA. He mentioned that DOA was also
investigating the use of online timesheets for all
departments.
9:12:36 AM
Senator Shower referenced Mr. Quick's review of the
processes and issues within DOA and other agencies and
asked if he had identified specific areas of concern that
are driving up costs and potential solutions.
Mr. Quick answered that he thought there were major holes
in the processes and systems. He recounted that the
department had started to look through the state leases to
identify efficiencies in cost per square foot and whether
square footage could be reduced in various departments. He
said DOA was also looking at duplicative contracts and
services and in centralizing procurement. He opined that
same technology could also be shared across departments.
9:14:43 AM
Senator Reinbold stated that the state's administive costs
were five times the national average, so she found it
impressive that Mr. Quick had reduced the Kenai Peninsula
Borough deficit. She asked how he prioritized budget
responsibilities to accomplish those reductions.
Mr. Quick shared that borough savings were garnered
primarily through audit and restructuring which was his
current approach for DOA. He referenced a forthcoming
document pertaining to shared services that would aid in
centralizing services in a more efficient and effective
way. He offered that the process gave ownership and buy-in
from staff because they were part of the process. He said
the process was close to finalization and the compilation
of documents would offer a playbook of how to achieve
budget reductions.
9:16:34 AM
Senator Micciche disclosed that he had known Mr. Quick for
some time. He said he was impressed with Mr. Quick's
ability as an outsider to break down some of the processes
and find reductions. He said he thought Mr. Quick brought a
fresh perspective and influenced existing stakeholders at
the borough. He questioned how he would use that experience
to his advantage at the DOA. He also asked how the
longstanding administrators initially reacted when he
assumed his current position.
Mr. Quick offered his belief that his outside perspective
brought something valuable. He said his staff indicated
that they wanted leadership, vision, and direction. He said
the governor brings that to the table and he was eager to
serve such a strong leader and a man of integrity.
9:18:29 AM
Co-Chair Stedman asked him to address personnel and labor
relations and the embedded contracts concerning these
issues that are throughout the state. He asked Mr. Quick
what his history was pertaining to labor relations and
negotiations.
Mr. Quick recounted that he had a great relationship with
the union at the Kenai Peninsula Brough. Contract
negotiations were starting when he left for this job. He
said he intended to work toward a good relationship with
unions here which he considered his staff. He expressed
full confidence in his division director as the DOA
prepared for union negotiations.
9:19:49 AM
Senator Wielechowski asked if he supported the previously
negotiated contracts as currently written.
Mr. Quick responded that it was against labor relation laws
not to support those contracts.
Senator Wielechowski asked if he would seek changes to the
existing contracts.
Mr. Quick replied that he would not change existing
contracts at this time but would follow up if that changed.
9:20:34 AM
Senator Olson stated appreciation for the value of a fresh
perspective but was concerned that too many fresh
perspectives meant people were unfamiliar with issues the
state faced. He cited the value and importance of public
broadcasting to the people of Alaska. He asked Mr. Quick
what his vision was regarding public broadcasting and the
possibility of that service being cut in the upcoming
budget. He identified the OMB (Office of Management and
Budget) director as one of the individuals who was
overseeing this service and perhaps did not appreciate its
value. He asked Mr. Quick how he could allay his
constituent's concerns around potential shutdowns of public
broadcasting in rural Alaska.
Mr. Quick acknowledged that public broadcasting played an
important role in rural Alaska and the state overall. He
described the budget process and said that at the end of
the day he would support the budget the legislature
approved.
Senator Olson asked once more what kind of vision Mr. Quick
had regarding public broadcasting.
Mr. Quick clarified that his vision was to always have
public broadcasting in Alaska. He opined there was room for
efficiencies within every agency and department. He said he
was willing to work with every agency to determine how to
best serve the state of Alaska. He maintained that public
broadcasting would remain an integral part of the state.
Senator Olson asked if it would be funded at the state
level.
Mr. Quick responded that the governor's amended budget had
not been released and he would not disclose any details
before it was released.
9:24:00 AM
Senator Bishop asked if he had ascertained whether the
state had a recruitment and retention problem.
Mr. Quick offered his belief that there was more of a
leadership problem than a recruitment and retention
problem. He added that his staff was excited to be a part
of the vision and direction of the new administration.
9:25:11 AM
Senator Coghill expressed appreciation that Mr. Quick was
willing to take the governor's vision and put it to work.
He mentioned that the Department of Administration and many
of its agencies played a huge role in the governor's public
safety approach. He asked Mr. Quick for his thoughts
concerning DOA's public safety elements and the governor's
vision to improve this arena.
Mr. Quick stated agreement that one of the governor's main
priorities was public safety. He explained that his
approach as commissioner would be to create a better
connection between the Public Defender Agency and the
Office of Public Advocacy (OPA). The directors of OPA and
the Public Defender Agency were reviewing and comparing
caseloads. He said the information gathered from that
review would provide insight into how to operate more
effectively.
9:27:23 AM
Senator Kawasaki thanked Mr. Quick for meeting with him
previously. He noted that the Department of Administration
had 10 divisions and a $340 million budget that Mr. Quick
would manage. He referenced that Mr. Quick's resume
indicated that he was a co-owner of three businesses. He
asked how the experience as an owner gave him the skills to
lead such a big department.
Mr. Quick asserted that throughout his life he endeavored
to outperform expectations. He opined that his experience
starting and owning a business gave him insight into what
drives success in business. He maintained that working at
the Kenai Peninsula Bourgh also prepared him to
successfully manage the Department of Administration.
9:29:37 AM
Senator Coghill discussed victim advocacy and the recent
criminal justice reform efforts to better aid victims. He
highlighted that the Violent Crimes Compensation Board was
helping victims who found themselves in unfortunate
economic circumstances, but it seemed as though the numbers
were increasing. He asked if he had taken look at that and
if that board would likely struggle to keep up with the
need.
Mr. Quick answered that the Violent Crimes Compensation
Board was self-funded. He said the board had seen an influx
but was able to keep up because the great staff had risen
to the challenge. The board has the unique ability to
immediately step in to help someone who is a victim of
violent crime.
9:31:48 AM
Senator Reinbold shared that when she met with Mr. Quick
she expressed frustration with the former commissioner of
DOA and that her many requests for information pertaining
to the state's leases were unfulfilled. She asked what
assurance he would give that the DOA agencies would respond
to information requests in a timely manner.
Mr. Quick responded that he was committed to providing
requested information to members in a timely manner unless
it pertained to pending litigation or a personnel file. He
said he had an open-door policy and would receive phone
calls personally to help expedite requests.
9:33:21 AM
Senator Wielechowski referenced Mr. Quick's resume and that
he was a business platform owner on Amazon.com. He asked
what businesses he owned and how many people he employed.
Mr. Quick replied that he had an online supplement company
called Island Vibrance through Amazon.com. He noted it was
the top-selling supplement company on Amazon at the time.
9:33:59 AM
Senator Shower asked if he had explored the complex issue
of funded but unfilled positions and what he discovered,
especially relating to the issue of efficiency.
Mr. Quick reported that currently there were 3,100 vacant
positions in Alaska. He said his current position was that
the current staffing levels were acceptable.
Senator Shower asked him to discuss his personal philosophy
regarding reducing expenditures and operating costs without
eliminating agencies and programs.
Mr. Quick opined that it was possible to cut operating
costs by eliminating duplicated services and processes and
utilizing technologies. In addition, centralizing many IT
(information technology) services would prove to be cost
effective.
9:35:53 AM
Senator Shower asked for confirmation that currently there
were 3,100 funded yet unfilled state positions.
Mr. Quick answered yes; that was correct.
Senator Shower noted that it took a lot of disciplinary
actions to remove a classified state employee. He asked if
he had any tools or ideas to help managers develop a more
streamlined disciplinary process when an employee does not
meet workplace standards. He also inquired about how to
incentivize state employees to enhance work performance.
Mr. Quick restated the question and emphasized the
importance and value of employee evaluations. He committed
to look into implementing an effective evaluation to
enhance performance in the workplace.
9:37:50 AM
Senator Reinbold described her disappointment with the
Integrated Resource Information System (IRIS), which
allowed Alaskans to view financial records in state
government. She related that each time she used it during
the subcommittee process it seemed less effective. She
asked for assurance that IRIS would be improved to better
provide more transparency for legislators and the public.
Mr. Quick agreed that IRIS still needed to be fixed. He
highlighted that it had not been fully implemented but he
was committed to delivering a functional product.
9:39:25 AM
Senator Micciche commented that a populist opinion was that
everything could be privatized to achieve efficiencies and
reduce state government. He opined that the state was a key
candidate for bulk procurement and privatized services. He
asked what kind of process he would use to evaluate whether
privatization really would lower the cost of a service.
Mr. Quick replied that DOA division directors were working
on a strategy document to find centralized services. When
they find a potential opportunity for public private
partnership, they will submit a Request for Information
(RFI) to determine whether creating a public private
partnership would be beneficial. He noted that this type of
partnership exists with GCI and ACS (Alaska
Communications). DOA will take a more active interest in
these partnerships in the next few months, he said.
9:41:03 AM
Senator Wielechowski asked when he sold his ownership
interest in the Anthem Coffee & Tea and Elements Frozen
Yogurt business and who the co-investors were.
Mr. Quick stated that he sold his business in 2014 and the
co-owner was a friend who probably preferred to remain
private.
9:41:45 AM
Co-Chair von Imhof opined that addressing IRIS was
critical. IRIS provides the data for making strategic
managerial decisions. She offered her understanding that
IRIS was an accounting system, but it was not able to
generate reports. She advised that the finance committee
was working toward asking commissioners to use data to
inform their allocation decisions. She asked if IRIS would
be capable of reporting once it was fully implemented.
Mr. Quick replied that his goal was to have IRIS 100
percent implemented and complete in the next couple of
months, which includes generating reports.
9:43:31 AM
Co-Chair Stedman relayed that members could forward any
additional questions to Mr. Quick.
Co-Chair Stedman MOVED to FORWARD the appointment of John
Quick, in accordance with AS 39.05.080, to a joint
legislative session for consideration as commissioner of
the Department of Administration.
Co-Chair Stedman stated that this did not reflect an intent
by any of the members to vote for or against the
confirmation of the individual during any further sessions.
9:44:20 AM
AT EASE
9:49:47 AM
RECONVENED
[The Senate Finance Committee continued the meeting without
the Senate State Affairs Committee.]
^CONFIRMATION: COMMISSIONER, DEPARTMENT OF REVENUE: BRUCE
TANGEMAN
9:49:47 AM
BRUCE TANGEMAN, COMMISSIONER DESIGNEE, for the Department
of Revenue, related that he grew up in a small town in
Indiana in a self-sufficient household. He studied finance
at the University of Indiana, minoring in economics and
management. He met his wife, who was from Juneau, at the
university. He highlighted that during college he had a job
at a steel mill every summer which allowed him to
completely pay for college.
9:52:55 AM
Mr. Tangeman explained that his first job after university
was as a district executive for the Boy Scouts of America.
Because his wife's student loans were coming due, they
decided to move to Alaska to participate in the student
loan forgiveness program. The first job he held in Juneau
was managing the parking lot at the Juneau Airport. Several
years later he took a position with the state as an
accounting technician for the Department of Corrections.
Thereafter he worked as a budget analyst for DHSS then as a
fiscal analyst for the Legislative Finance Division (LFD).
After that he and his wife moved to Anchorage and he worked
for the Alaska Railroad as their corporate budget officer.
9:56:25 AM
Mr. Tangeman said he next moved to Fairbanks to work as the
CFO for Doyon Utilities. He described how the company grew
from a zero-balance sheet to the third largest utility in
Alaska. He also discussed the things Doyon did for the Army
that also benefitted the state.
10:01:44 AM
Mr. Tangeman discussed his employment as deputy
commissioner at the Department of Revenue (DOR) over the
tax division. He said one of the larger accomplishments was
setting a more realistic production curve in place which
helped the legislature and created a more realistic revenue
picture for current and future budgets. This gave him
exposure to the rating agencies and how the corporate world
viewed Alaska. During this time at DOR they were tasked
with negotiating an equal partnership between three
companies and the state to pursue monetizing gas
10:04:30 AM
Mr. Tangeman explained that when he went to work at AGDC
(Alaska Gasline Development Corporation) he was the CFO. He
noted that some of Dan Fauske's management style influenced
him. He learned to be solution-oriented when solving
problems.
Mr. Tangeman said he transitioned from AGDC to work for
former Senator Pete Kelly in the Senate majority. After the
election, Governor Dunleavy asked him to serve as
commissioner of DOR. He concluded that his career had given
him a well-rounded diverse perspective.
10:08:22 AM
Co-Chair Stedman asked him to discuss his management style,
and how he planned to pursue the management of the GeFONSI
(General Fund and Other Non-segregated Investment) funds
and the Constitutional Budget Reserve (CBR). He asked what
documentation he would provide to help the committee
understand the decisions he might make.
Mr. Tangeman outlined that there were some things over
which the DOR commissioner was the sole fiduciary and some
that he just sits on a board. He listed the Alaska
Retirement Management Board (ARM); Alaska Industrial
Development and Export Authority (AIDEA) Board; Alaska
Energy Authority (AEA); Mental Health Trust Authority;
Alaska Municipal Bond Bank Authority; Alaska Railroad;
Alaska Student Loan Corporation; and Alaska Permanent Fund
Corporation. He clarified he was not the sole fiduciary of
the corporations. He explained that GeFONSI was a host of
subaccounts including the AGDC and AKLNG accounts, that he
was solely responsible for as fiduciary.
10:11:49 AM
Mr. Tangeman described his management style as fairly
conservative. Unfortunately, the CBR account that he
inherited to work with was significantly reduced which
makes a conservative approach that much more important. He
explained that he had flexibility to manage and make
changes to the accounts with either a more conservative or
more aggressive approach.
10:13:07 AM
Mr. Tangeman said he had been to one meeting of the
Permanent Fund Board and he planned to continue his
conservative approach. He explained that the chief
investment officer and the commissioner of DOR do an annual
asset allocation review that discusses investment decisions
and opportunities. He reminded the committee that he
provided the annual revenue overview last week. He
discussed that a part of his management style was to
collaborate with the strong, intelligent experts within his
department to assist him in the decision-making process.
10:14:44 AM
Co-Chair Stedman encouraged Mr. Tangeman to keep minutes of
his meetings to provide the committee with a record of how
and why decisions were made. He suggested this would aid in
communication between the department and the legislature.
10:15:26 AM
Senator Wielechowski asked Mr. Tangeman if the budget
should be adjusted annually based predominantly on oil
revenue or if other revenue sources should be considered.
Mr. Tangeman offered his belief that the current
administration would pursue a stable budget, living within
its means, and matching expenditures to revenues. He looked
forward to seeing the work produced by OMB (Office of
Management and Budget). He said he thought the process of
matching budgets to oil revenues would need to be addressed
head-on. He said he was a firm believer in driving the
budget down to meet revenue. He noted the release of the
governor's budget would start a series of entertaining and
interesting discussions.
10:17:03 AM
Co-Chair von Imhof observed that the Permanent Fund
Dividend Division was under the purview of DOR. She asked
if the recent trouble with the Permanent Fund Dividend
application going online and offline had been fixed.
Mr. Tangeman replied a software issue caused problems on
the first day of the application period. The system was
vigorously tested before it was brought back up online and
there have been no more issues.
10:18:12 AM
Co-Chair von Imhof said she assumed that the platforms of
Pick.Click.Give. and the new lottery/raffle were included
in the application process. She asked if he had received
any feedback pertaining to the raffle.
Mr. Tangeman stated that both programs were working
smoothly. He noted that he did not have any data on the
number of participants but would provide the information to
the committee later.
10:19:28 AM
Senator Micciche discussed how oil and gas production
audits had been a point of contention. He asked if there
were plans to improve the audit process for taxpayers by
streamlining reporting and the availability of audits in a
timely manner.
Mr. Tangeman stated that the department had completed the
2012 audits and would complete the 2013 audits in the first
quarter of 2019. There was an aggressive schedule to bring
the audits current. He suggested there was history to
understand in this area. He referenced that tax changes
took place in 2008 through 2014. He highlighted that once
the changes were made, they had to be implemented within
the department and tax division by the oil and gas tax
audit team. He said he was impressed with the department's
tax audit group who performed the daunting task.
Mr. Tangeman continued to address Senator Micciche's
question pertaining to audits. He noted the new system had
been used consistently for several years and had functioned
well internally and outwardly for taxpayers. He opined that
the stability of the tax system along with the new tax
revenue management system would help expedite the audit
process. He reiterated that there was a plan in place to
catch up on the audits within the next couple of years. The
goal was to complete an audit from beginning to end in a
three-year time frame.
10:23:26 AM
Senator Shower asked if the Eklutna tribe or a different
entity was involved when he worked on the landfill gas
power project.
Mr. Tangeman stated that it was a separate entity that came
after he left the project.
Senator Shower mentioned the Permanent Fund and the
governor's assertion that money was something the
government could not take or allocate. He asked Mr.
Tangeman what his path forward would look like for a
sustainable revenue plan and how he would use the Permanent
Fund.
Mr. Tangeman explained that he had worked with members of
the Senate Majority as a policy director and had experience
working with the budget model from Legislative Finance. He
discussed the importance of reducing state expenditures for
other revenue streams to respond favorably. He offered his
belief that the current administration would focus on
reducing the cost of government. He asserted that the
state's revenue streams could not sustain the status quo
government, much less the status quo with the escalation
factor. He pondered how a state with this small economy
would react to taxation. He opined that once revenues match
expenditures, the administration would focus on how to fund
certain programs.
10:27:23 AM
Mr. Tangeman offered his personal belief that a structured
draw was critical. He said once expenditures were brought
to a certain level, there would be room for the permanent
fund dividend itself and a revenue stream from the $60
billion fund to assist in funding government. He said it
was inevitable that Alaska would have a tax someday, but it
was possible to delay that many years by taking fiscally
responsible action now.
10:28:52 AM
Senator Wilson discussed increased department fees and
taxes such as the motor fuels tax. He asked if it was the
intent of the administration and DOR to increase revenue
through additional user fees or taxes.
Mr. Tangeman said he thought the administration was open to
having the conversation but not starting with it. He opined
that adding a new revenue component at this point would
only distract from the current budget discussions.
10:30:28 AM
Senator Bishop asked if he was satisfied with the staffing
level of the oil and gas tax audit division.
Mr. Tangeman answered yes. He described the staff as a
stable group that had years of knowledge and experience. He
said he was encouraged that they believe a three-year audit
cycle was attainable in the next few years.
Senator Wielechowski asked if DOR had done any analysis on
how a $1.6 billion budget reduction would impact the
Alaskan economy.
Mr. Tangeman answered that DOR had been tasked with looking
at itself, as had other departments. In general, it was
about the size of government, not just the unrestricted
general fund (UGF). He said he anticipated that DOR would
be before both bodies to discuss the options for a reduced
budget from a behavioral aspect.
Mr. Tangeman discussed the tax models that are housed at
the DOR and explained that they yield numbers but not the
behaviors that result from different taxing decisions. For
example, will people leave the state if an income tax is
implemented. He said DOR would be prepared to discuss those
behaviors in the forthcoming session.
10:34:12 AM
Senator Olson noted that he alluded to an income tax
someday and asked if there was any discussion pertaining to
restructuring the petroleum-related taxes as a possible
increased revenue source for the state.
Mr. Tangeman clarified that he was referring to any sort of
tax. He said it would be na?ve to think there would never
be an income tax or sales tax in Alaska, but not for some
time. He asserted that the administration was not
interested in adjusting the oil and gas taxes because they
were stable and competitive.
10:35:25 AM
Senator Micciche told Mr. Tangeman he had not been as clear
as he could have been when discussing the tension between
new revenue sources like taxes and how it discourages
government from cutting the budget to its lowest point. He
agreed that it was important to scrutinize the budget
further before evaluating new revenues. Noting that there
could be $1.6 billion in reductions, he asked if DOR had
evaluated what would have to happen to pay the bills if the
legislature proposed a smaller reduction.
Mr. Tangeman explained how the $1.6 billion reduction was
produced. He said the FY 20 forecast was $64 per barrel,
which would generate $2.2 billion in undesignated general
funds (UGF). The other portion would be a percentage of
market value (POMV) calculation from Senate Bill 26 that
forecast to generate $2.9 billion, of which $1.9 billion
would go to a full statutory dividend calculation. The
total would be $3.2 billion. He explained that the $1.6
billion reduction is the difference between $3.2 billion
and the previous administration's $4.8 billion budget.
10:37:43 AM
Mr. Tangeman clarified that DOR was not solving the $1.6
billion problem with a single revenue source. He had been
tasked with helping on just the DOR budget and finding what
other revenue sources were available. The rest of the
discussion was exclusively at OMB and the options to
address anything above $3.2 billion. He noted that the CBR
at $1.7 billion was still a revenue stream but the
Statutory Budget Reserve was basically gone, so there were
few options.
10:38:56 AM
Senator Wielechowski asked if the administration believed
the AKLNG project was viable and should be financed.
Mr. Tangeman replied that the administration was interested
in commercializing gas and lowering the cost of gas and
energy for Alaskans. He said he saw this happening through
a larger commercial project under an AKLNG structure. He
highlighted that the governor was very concerned about how
the previous administration put 100 percent of the risk on
the state. He referenced the significance of the cost and
the magnitude of the AKLNG project.
Mr. Tangeman offered his belief that the partners took a
step back from the project, not because they didn't want
any part of it, but because they wanted to slow the
spending process and observe where the price of oil would
be in a few years. He thought this led to a great
opportunity for a serious discussion as to whether this
project was economically viable. He said he would like to
have the partners weigh in to give their expertise on how
to move forward with this project.
10:42:24 AM
Co-Chair Stedman thanked Mr. Tangeman for his testimony.
Co-Chair Stedman MOVED to FORWARD the appointment of Bruce
Tangeman in accordance with AS 39.05.080, to a joint
legislative session for consideration as commissioner of
the Department of Revenue.
Co-Chair Stedman stated that this action did not reflect an
intent by any of the members to vote for or against the
confirmation of the individual during any further sessions.
Co-Chair Stedman discussed the schedule for the following
day.
ADJOURNMENT
10:44:01 AM
The meeting was adjourned at 10:44 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| STA Commissioner DOA Quick #1.pdf |
SSTA 1/22/2019 9:00:00 AM |
COMM QUICK RESUME |
| SSTA week of 1.22.19.pdf |
SSTA 1/22/2019 9:00:00 AM |
1.22.19 AGENDA |