HB 146-SCHOOL TAX; PFD PAYMENT FOR SCHOOL TAX  8:38:58 AM CHAIR DRUMMOND announced that the final order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 146, "An Act imposing a school tax on certain income of residents, part-year residents, and nonresidents; relating to a payment against the school tax from the permanent fund dividend disbursement; and providing for an effective date." 8:39:23 AM CHAIR DRUMMOND opened public testimony. 8:39:39 AM ALLEN MCCARTY, Spokesperson, Citizens Alliance Protecting School Lands, informed the committee Citizens Alliance Protecting School Lands is a statewide organization formed to protect school lands and school funds. He said the proposed bill would attack the 5 percent per year trust fund. Mr. McCarty expressed his understanding that the school fund is a trust, and is not state money, but is school money. Each year the earnings from the trust are deposited into the general fund. The earnings have reduced from $24 million per year to $10 million per year due to poor investments by the Department of Revenue (DOR). He cautioned that at the end of the bill the language of the bill would attack the trust fund and in 26 years the fund that has been building since 1915 will be totally gone. 8:41:51 AM OWEN PHILLIPS, Staff, Representative Matt Claman, Alaska State Legislature, said he is unware of a 5 percent decrease [in the school fund]. He further clarified that the bill would garner approximately $500 million through taxes that would be designated to "the school fund and then, as I understand it, the leftover would just stay in undesignated funds and be allocated elsewhere." CHAIR DRUMMOND asked whether the school tax funds would be "somehow distinguished." MR. PHILLIPS said DOR would have authority to adopt regulations for management of the funds. 8:43:39 AM CHAIR DRUMMOND, after ascertaining no one further wished to testify, closed public testimony. She remarked: This bill, SSHB 146, has a lot of working parts. I believe that with our current fiscal reality, we need to keep our options open. I feel there are some things in this bill that need to be clarified, but I think I want to let [the House Finance Committee] do that. I don't want to hold this bill up here, so we can give them time to fully vet this bill in that committee. ... I know I would like to see a more progressive tax scale, but I am not sure how that would look. I'm not sure how I feel about taxing children who only receive a PFD as income, even though they would benefit from this tax. But those issues, to me, are less about education policy and more about finance, so I would like to move this bill out today with the understanding that in its current form, I would not necessarily vote for this bill on the House floor. REPRESENTATIVE PARISH opined the bill levies a tax on every Alaskan and urged for a mechanism to draw revenue from nonresidents and working adults earning income from other sources. He agreed the education committee is not the best committee to address the [financial aspects] of the bill. REPRESENTATIVE TALERICO directed attention to the bill on page 2, lines 4-13, which read: (b) For a taxpayer whose adjusted gross income is (1) less than $20,000, the tax is $100 a year; (2) $20,000 or more, but less than $40,000, the tax is $250 a year; (3) $40,000 or more, but less than $50,000, the tax is $500 a year; (4) $50,000 or more, but less than $75,000, the tax is $750 a year; (5) $75,000 or more, but less than $100,000, the tax is $1,000 a year; (6) $100,000 or more, but less than $150,000, the tax is $2,500 a year; (7) $150,000 or more, but less than $200,000, the tax is $5,000 a year; (8) $200,000 or more, but less than $250,000, the tax is $6,500 a year; (9) $250,000 or more, the tax is $8,500 a year. REPRESENTATIVE TALERICO related the rates for adjusted gross income are much higher than the previous school tax; also, aspects of the maximum income limit, the steps between income limits, and part-time income are questionable. He pointed out the bill assesses a tax on year-around Alaska residents who live below the poverty level. Representative Talerico said he could not support the bill. 8:48:21 AM REPRESENTATIVE SPOHNHOLZ stated support for the overall intent of the bill, which is to find a way to fund public education based on one's income. She said progressivity in a revenue plan is appropriate at both ends of the income scale, however, she expressed her concerns about the structure of the bill and its disproportionate impact on lower-income taxpayers, with maximum tax [relief for] higher-income taxpayers. Representative Spohnholz said she would reluctantly support moving the bill from committee. 8:51:27 AM REPRESENTATIVE PARISH moved to report SSHB 146 out of committee with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE TALERICO objected. 8:51:47 AM A roll call vote was taken. Representatives Parish, Fansler, Spohnholz, and Drummond voted in favor of SSHB 146. Representatives Kopp and Talerico voted against it. Therefore, SSHB 146 was reported out of the House Education Standing Committee by a vote of 4-2.