HB 233-EDUCATION TAX CREDITS; SUNSET; REPEALS  8:30:41 AM CHAIR DRUMMOND announced that the next order of business would be HOUSE BILL NO. 233, "An Act relating to the insurance tax education credit, the income tax education credit, the oil or gas producer education credit, the property tax education credit, the mining business education credit, the fisheries business education credit, and the fisheries resource landing tax education credit; providing for an effective date by repealing the effective dates of secs. 3, 5, 7, 10, 14, 16, 18, 21, 23, 25, 28, 30, 32, 35, 37, 39, 42, 44, 46, 49, 51, 53, and 55, ch. 92, SLA 2010, sec. 14, ch. 7, FSSLA 2011, secs. 15, 17, 19, 21, 23, and 25, ch. 74, SLA 2012, sec. 49, ch. 14, SLA 2014, secs. 37, 40, 43, and 46, ch. 15, SLA 2014, and secs. 26 and 31, ch. 61, SLA 2014; providing for an effective date by amending the effective date of secs. 1, 2, and 21, ch. 61, SLA 2014; and providing for an effective date." 8:31:06 AM REPRESENTATIVE CHRIS TUCK, Alaska State Legislature, thanked members for hearing the bill today. He stated that HB 233 would extend the education tax credit program from December 31, 2018 to January 1, 2025 and ensure that the credits that exist in statute today will continue to support our education programs and institutions. REPRESENTATIVE TUCK stated that the education tax credit program would allow private businesses to make charitable contributions to support public and private education in Alaska. Private businesses can fund institutions and programs throughout Alaska with direct monetary contributions or provide equipment and supplies. He said the objective was to help the next generation. He related that the fishing, mining, construction and oil and gas industries can contribute to education programs and institutions but can also foster student' interest in career opportunities. He characterized the education tax credit as a direct connection between businesses, our education system and students. 8:32:48 AM REPRESENTATIVE KOPP remarked that he was excited about this bill. He said that he had heard from several industries, including Hecla Mining Company, Greens Creek and oil and gas industries. He agreed that this makes education directly responsive to the needs of the local communities and it promotes a strong Alaska labor: local labor and local hire. He characterized it as a great policy to move forward. He offered his complete support for HB 233. 8:34:07 AM SUSAN FOLEY, President, University of Alaska Foundation, stated she has submitted a letter of support for HB 233. The University of Alaska (UAA) has been one of the highest recipients of contributions of education tax credits. The impact has been significant. She related that many companies in Alaska would like to support education in Alaska. These companies strategically engage in multi-year planning to have impact over a sustained period of a time. They also want their employees to see the results of their contributions. She characterized the six-year extension of this bill as very important because it enables companies to partner with educational institutions and to institute and foster programs. She found the multi-year aspect of HB 233 as allowing companies to be influential. MS. FOLEY stated that the University of Alaska Foundation has received feedback from corporations that the way the education tax credit program was structured creates a major incentive for their donations. The structure allowed corporations to see the direct impact of their donations and receive recognition for their support. This enables them to partner in significant programs that will benefit their future business enterprise. Finally, for an academic institution, the long-term nature of this extension was important because it takes time to start programs, get them running efficiently, recruit students, and bring things to fruition. She acknowledged and appreciated the work legislators make. 8:38:36 AM ROBERT ONDERS, M.D., J.D., M.P.A.; President, Alaska Pacific University (APU), offered his support for HB 233. He characterized this bill as providing a critical connection between industry, education, and students. This bill facilitates community-based research that engages students with industry and the external community, which was an essential component of education at Alaska Pacific University (APU). 8:39:28 AM BRADLEY HARRIS, PhD; Associate Professor of Marine Biology, Alaska Pacific University (APU), offered his support for HB 233. He reiterated the importance of this bill in terms of APU's educational profile. He related his experience as a professor. DR. HARRIS said he has seen industry resources go directly to support student outcomes. He said that the tax credit program was working as designed. It has provided opportunities for students in Alaska to obtain a high-quality education in areas that directly align with needs within Alaska. He stated that this program provided opportunities for world class education and research opportunities and created a "win-win" solution for educational institutions, industry, and students. 8:40:38 AM DR. HARRIS offered to outline four things that highlighted the strategic components of the tax credit program. First, the tax credit program has allowed professors, such as himself, to recruit and support excellent students throughout Alaska and outside Alaska. He said this was particularly important in natural resource fields, which are highly competitive fields. He pointed out that the tax credit program provides tuition and project support, which are critical elements when recruiting students. Second, the program has allowed the university to invest in strategically important research areas, in particular, applied research projects require high levels of engagement from practicing professionals; for example, researchers from federal and state agencies and other universities are drawn to Alaska because of the type of research being performed. Our students benefit from this, he said. These robust and strategic partnerships can be developed with state, federal, industrial, and private partners and ultimately produce new levels of funding. DR. HARRIS said the third thing was that since the university has ongoing projects it can submit proposals, which have experienced a high-rate of success, which results in value-added growth in these programs. Finally, APU has been expanding research and education with partnerships in the nation and worldwide. He related that APU had researchers from Cornell University, the Smithsonian, National Oceanic and Atmospheric Administration, the US Geological Survey, US Fish & Wildlife Service and ADF&G actively working with students to address natural resources issues important to Alaska. He referred to a letter in members' packets that contained a list outlining some very specific outcomes including listing home towns of students and where they are working. He said that list was a small subset of students that were being impacted by the tax credit program in HB 233. He hoped that would illustrate his point that the tax credit program works. He asked members to please support HB 233. 8:43:22 AM MIKE SATRE, Manager, Government and Community Relations, Hecla Greens Creek Mine; Board Member; Council of Alaska Producers, stated that his wife has also spent 20 years working in the Juneau School District. The work this committee does directly affects his family and he appreciated members' service. MR. SATRE offered general comments on tax policy. The legislature holds many discussions on tax policy. We know that we can tax things to curtail activities that are not beneficial to our communities or the legislature can provide incentives by rolling back taxes. He characterized the education tax credit as a means to encourage industry to invest in Alaska's educational system, both at the secondary level and with our universities by forming partnerships. This benefits companies but also the regions companies operate in to build community and capacity. He offered his belief that one of the private sector's challenges was recruitment and retention of an Alaskan work force. As Alaska works to grow its economy, that challenge will become even greater. This has been something that Hecla Greens Creek mine has recognized, that attracting Alaskan workers provides a stable work force since they stay longer and contribute to their community. MR. SATRE said he also recognized that posting a job opening would not necessarily provide the highly skilled, highly-educated work force Greens Creek mine needs. The industry does not have the capacity to provide all the training necessary; however, the universities do. In 2011, Hecla Greens Creek looked to partner with the University of Alaska [Southeast] (UAS) to develop a program called "Pathways to Mining Careers." This program starts with a college course that high school juniors and seniors take that provides a broad survey of hundreds of career opportunities in the mining industry. This program provides students with an educational foundation for choices they may make when choosing their professions. Once they take that course, Hecla Greens Creek tries to direct interested students into a two-year diesel mechanic degree program at the Career and Technical Education program at UAS. He emphasized that the diesel mechanic represented one of the mine's greatest needs. He characterized the diesel mechanic program as a high-tech profession that requires specialized training. Hecla Greens Creek provides scholarships for students, an internship, and ultimately hopes students will choose them as an employer. Between 2011-2016 over 200 students have taken the entry level course, with 13-14 students completing the two-year degree program. Further, many of these students have chosen to work for Greens Creek mine, live in Juneau, and provide for their families. 8:46:55 AM MR. SATRE offered that his company has also endowed scholarships at the University of Alaska Fairbanks and geology scholarships at the University of Alaska Anchorage, and Hecla Greens Creek works with secondary schools in the region to develop interest. He urged members to support this bill and pass it on to the next committee of referral. He acknowledged that the program would sunset at the end of the year, making it very difficult to bring this valuable tax credit into existence. He appreciated Representative Tuck introducing this bill. 8:47:35 AM CHAIR DRUMMOND asked whether the partnership with UAS begins with junior and seniors in high school and was not limited to post- secondary training. MR. SATRE responded that current students were more aware of educational tracks and professions much earlier, so the company felt it was important to start its program to benefit high school students to give them an opportunity to follow a pathway that will benefit them. CHAIR DRUMMOND commented there was a theory that states that students in second or third grade know what they want to do as adults. She closed invited testimony. 8:49:37 AM REPRESENTATIVE PARISH asked for further clarification on the types of business that uses the tax education credit. 8:50:16 AM BRANDON SPANOS, Deputy Director, Tax Division, Department of Revenue (DOR), responded that in 2016, 37 companies used the education tax credit, varying from oil and gas and mining to banking and retail sector. He said that any corporate income tax payer with qualifying donations could use the education tax credit. REPRESENTATIVE PARISH was hoping to learn about the average size of the companies using the education tax credit program. MR. SPANOS said that most companies were large multi-state or multi-national companies. REPRESENTATIVE PARISH asked if he had any idea about the smallest company. MR. SPANOS deferred to Mr. Stickle. 8:52:02 AM DAN STICKEL, Chief Economist, Tax Division, Department of Revenue (DOR), stated that the primary business are large businesses. He pointed out that these companies must be large enough to have a significant corporate income tax liability to apply these types of credits. The primary beneficiaries would be large resource- oriented companies. 8:52:27 AM REPRESENTATIVE KOPP offered his belief that these would be the same companies producing the same employees that make this community work; ones that fund everything. CHAIR DRUMMOND reiterated these companies must be large enough to have a significant corporate income tax liability in order to make contributions like this. MR. STICKEL agreed. 8:52:58 AM REPRESENTATIVE PARISH expressed an interest in exploring ways for the smaller companies to participate, as well. He was unsure of the threshold but said that currently the sweet spot for donations seemed to be $300,000. He would like to see that lowered. He stated that the amount of the credit was 50 percent of contributions of not more than $100,000; 100 percent up to $300,000 of contributions; and 50 percent of the amount of contributions that exceed $300,000 [as per AS 43.20.014 (12)(b)]. He recalled the cap was $5 million. He related his understanding this could discourage companies that could not reach the $300,000 "sweet spot" from participating. He said he thought that some smaller businesses in the state would be interested in participating in a program that promotes education in the state for excellent causes. 8:54:41 AM CHAIR DRUMMOND acknowledged that the names of the companies was confidential information. She said that if those companies wanted to identify themselves, nothing would prevent them from doing so; for example, Hecla Greens Creek or the other companies that visited her office and revealed themselves as participants who helped create jobs and training in Alaska. MR. SATRE agreed that was correct. 8:55:16 AM CHAIR DRUMMOND encouraged companies to identify themselves if they so choose. 8:55:33 AM CHAIR DRUMMOND announced that HB 233 would be held over.