HOUSE BILL NO. 91 "An Act relating to fees for certain persons filing disclosure statements or other reports with the Alaska Public Offices Commission; relating to a tax on legislative lobbyists; and providing for an effective date." 1:34:53 PM REPRESENTATIVE SAM KITO, introduced HB 91. He explained that the Alaska Public Office Commission (APOC) was granted increased receipt authority but not the statutory authority to adjust its fees. The bill provided the statutory authority, a $50 financial disclosure form filing fee per legislative or public official, a $100 fee for candidates, and a fee schedule for lobbyist registrations based on a contracted amount. The fees added up to approximately $280 thousand of additional receipt authority. CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE SAM KITO, read the sectional analysis: Section 1: Amends AS 15.13.054. Administrative registration fee. Adds a new section that requires a candidate, group, or nongroup entity to pay a $100 registration fee. This does not apply judges, constitutional convention delegates, exempt municipal candidates, or nongroup entities with an operating budget of $250 or less. Section 2: Amends AS 15.13.390(a). Civil penalty; late filing of required reports. Includes language referencing the administrative registration fee. Section 3: Amends AS 24.45.041(g) Include language referencing the administrative registration fee and removes the current $250 registration fee and sets a fee of $350 for a contract with a value of less than $30,000; $650 for a contract with a value of between $30,000 and $60,000; and $850 for a contract with a value of over $60,000. Section 4: Amends AS 24.60 to include a new section AS 24.60.238. Administrative registration fee. Requires legislators, public members or the committee, and legislative directors filing financial disclosures to pay an administrative registration fee of $50. Section 5: Amends 24.60.240. Civil penalty for late filing. Allows APOC to assess a civil penalty of not more than $10 a day for failure to pay the administrative registration fee as levied under section 4 of the bill. Section 6: Amends 37.03.146(c). Definition of program receipts and non-general fund receipts. Add fees collected by APOC to the list of program receipts. Section 7: Amends AS 39.50 to include a new section AS 39.50.132 Administrative registration fee. Requires governors and lieutenant governors filing financial disclosures to pay an administrative registration fee of $50. Section 8: Civil penalty; late filing of required reports. Allows APOC to assess a civil penalty of not more than $10 a day for failure to pay the administrative registration fee as levied under section 7 of the bill. Section 10: Establishes a January 1, 2018 effective date. 1:40:43 PM Co-Chair Foster noted that Representative Neuman joined the committee. Co-Chair Foster asked whether the fees were payable online. TOM LUCAS, PARALEGAL II, ADMINISTRATION, ALASKA PUBLIC OFFICES COMMISSION (APOC), responded in the negative and indicated that the reason was due to a lack of funding. Currently, payments were mailed or brought to the commission's office. Co-Chair Foster asked how the collection system worked. Mr. Lucas answered that a provision in the legislation required payment on or before registration. Representative Kawasaki asked what amount of funding APOC needed to operate each year. Mr. Lucas was unable to answer the question due to lost positions caused by the last two fiscal year's budget cuts. He noted that the commission was "struggling to hire a data person." 1:44:08 PM Representative Kito replied that APOC's FY17 budget was $1.05 million. He detailed that $800 million was general funds (GF) and $245 thousand in program receipt authority. However, the current statutory authority for program receipts was limited to $107 thousand. Representative Kawasaki asked in regards to APOCs historical budget, what the highest level of full funding was. Ms. Koeneman replied that in FY 15 the budget was approximately $1.3 million GF resulting in actuals of $1.1 million GF and $119 thousand in program receipts. Representative Kawasaki asked whether the bill impacted "representational" lobbyists. Representative Kito answered in the negative and added that a fee was also not charged to volunteer lobbyists. Representative Kawasaki appreciated the bracketing for lobbyist fees, which he thought was a fairer system. He suggested a smaller fee bracket for lobbyists making a very small fee. He asked whether the fiscal note reflected the fee brackets. Ms. Koeneman was aware that APOC was working on a revised fiscal note. She added that the fiscal note from the Department of Revenue (DOR) FN 2 (REV) was no longer applicable due to the changes in the House State Affairs Committee version. Representative Guttenberg commented that he thought APOC had suffered from budget cuts. He wondered whether APOC differentiated between program receipts and fines. Representative Kito replied that currently the only program receipts available were the lobbying registration fees of $250 and were used for the commission's work. The penalties that were assessed by APOC were deposited into the GF and were not used to support the commission. Representative Guttenberg asked whether the additional fees in the bill were program receipts. Representative Kito responded in the affirmative. Representative Guttenberg asked whether the program receipts resulting from the bill would cover the additional administrative costs or were more available to cover other APOC functions. Representative Kito responded that the legislation allowed for a slightly higher receipt authority in anticipation of the same budget. He indicated that the objective was for APOC to eventually hire another person with policy experience to address lobbying issues. He wanted the commission to ultimately strengthen their mission. 1:50:24 PM Vice-Chair Gara asked what proportion of the fess were generated from lobbying and what proportion from other fees. Representative Kito was uncertain of the exact percentages but relayed that a much higher portion was received from lobbying and a much smaller portion from candidate and financial disclosure fees. Ms. Koeneman shared that an updated fiscal note from APOC was not available. However, she confirmed that the previous fiscal note reported that APOC expected to receive $15 thousand from candidates, $18 thousand from groups, $3 thousand from entities, $67.6 thousand from public officials, and $3 thousand from legislators totaling $106,600. The figure did not included the $120 thousand from lobbying. Vice-Chair Gara had received complaints from school board members and "public officials from smaller governmental entities" that they had to comply with the same reporting requirements as legislators. He queried whether the entities were subject to the fees. Ms. Koeneman responded in the affirmative. She offered that she completed a historical review of the genesis of APOC. The commission was established via a citizens' initiative in 1974 and was upheld by a court decision, which determined that the citizens had the right to know whether a conflict of interest existed with any elected official, "no matter how great or small" the position. Vice-Chair Gara asked whether the financial disclosures included information regarding sources of income and investments. Ms. Koeneman responded in the affirmative. Vice-Chair Gara commented that the reporting requirement became more stringent after the 2006 legislative corruption issue. He did not agree with charging school board members for financial disclosure reporting. Representative Kito responded that the fees were a legislative policy call. He elaborated that some of the financial disclosures were reviewed and reported on and he wanted the reporting supported by fees. Currently, the Division of Elections charged a $30 registration fee for its administrative costs. Campaigns and candidates were currently not charged an APOC fee. 1:54:54 PM Representative Neuman asked whether APOC was planning to hire additional personnel in the future. Mr. Lucas answered that APOC was currently seeking an individual to fill an IT position. Representative Neuman asked whether the position was funded but unfilled. Mr. Lucas replied in the affirmative. Representative Neuman referred to FN 2 (REV) and noted that DOR would have to alter its tax management system to accommodate the fee collection and wondered how it would integrate into the department's existing tax collection system. He wondered whether HB 91 created additional administrative costs for the department. Representative Kito recounted that the State Affairs Committee discovered complications with implementing a tax instead of a fee. In response, the committee substitute removed the tax component, which eliminated the need for DOR's fiscal note and a forthcoming updated APOC fiscal note would reflect the change from a tax to a fee. Representative Neuman asked whether the APOC fee collection could be integrated into DOR's tax system. Representative Kito relayed that another issue identified with a tax was the inability to designate the revenue to APOC. He preferred to leave the tax component out of the bill due to the difficulties of administering a dedicated tax and ensuring APOC's receipt authority from the fee revenue. 1:59:25 PM Co-Chair Seaton had a question on page 1, line 11 of the bill and read the following: …a candidate shall pay an administrative fee of $100 to the commission when the candidate files the name and address of the candidate's campaign treasurer under AS 15.13.060(c). Co-Chair Seaton assumed that the fee was in addition to the fee charged by the Division of Elections. Representative Kito responded in the affirmative. Co-Chair Seaton asked whether the fee applied if the candidate was acting as her own campaign treasurer. Ms. Koeneman responded that all candidates were required to register with APOC and pay the fee regardless if a candidate was acting as their own treasurer. Co-Chair Seaton wondered whether the provision was written adequately to ensure that a candidate acting as his own treasurer was required to pay the fee. Ms. Koeneman responded that AS 15.13.060 (a) required the candidate or group to designate a campaign treasurer. Co-Chair Seaton referred to page 3, Section 4 and read the following: A person required to report under this chapter shall pay an administrative registration fee of $50 to the Alaska Public Offices Commission each year in which a report is due. Co-Chair Seaton queried whether the fee included the candidate. He cited page 3, line 26 [27 through 29] as follows: … a public official or former public official required to file a report under AS 39.50.020 shall pay the commission an annual administrative registration fee of $50 each year in which a report is due. Co-Chair Seaton wanted to ensure that candidates and public officials were both covered under the bill. Representative Kito answered that the bill contained two separate provisions: candidates were required to register and pay the $100 fee and public officials were required to file a financial disclosure form costing $50. Co-Chair Seaton asked whether the $50 fee in section 4 was an additional fee. Representative Kito responded in the negative. The section addressed a different group of filers other than candidates or elected officials. 2:03:32 PM Representative Wilson asked whether the fees collected were deposited into a specific designated fund. Representative Kito replied that the fees were designated program receipts which enabled APOC to receive and expend the funds. Ms. Koeneman interjected that the fees were deposited into fund code 1005 program receipts. Representative Wilson wondered whether program receipts were able to be spent as needed without legislative appropriation. Representative Kito explained that the legislature authorized the receipt and expenditure for program receipts via the fund source code on a line item in the appropriation bill. Representative Wilson asked whether the sponsor intended to back out undesignated general funds (UGF) and replace them with the additional fees or the fees were in addition to UGF. Ms. Koeneman replied that the intent was to offset a portion of APOC UGF. She furthered that the amount depended on the level of funding appropriated by the legislature. Ms. Koeneman detailed that any amount collected in fees that were above the level of funding APOC needed to function could replace UGF with program receipts. 2:06:24 PM Representative Kito added that the legislature appropriated GF and an amount for program receipt authority. The legislation enabled APOC to increase its ability to collect the higher amount of program receipts in order to meet its budget obligations. Representative Wilson provided a hypothetical scenario where APOC collected a higher amount in fees than the amount authorized by the legislature. She deduced that APOC could not expend the amount above what was authorized. Representative Kito answered that APOC could expend the additional fee revenue through a request for authorization approved by the Legislative Budget and Audit Committee. Representative Wilson asked what the fee schedule was for state and municipal candidates. Representative Kito indicated that the bill contained separate provisions for state and municipal candidates. The state candidates were required to pay a $30 fee for the Division of Elections and an additional $100 fee for APOC. Candidates were not required to file a financial disclosure form; only elected officials were mandated to file the $50 fee for financial disclosures. He noted that aside from the APOC and Division of Elections fee, a municipal candidate was required to file an APOC financial disclosure form that carried the $50 filing fee in some municipalities where the disclosure was mandated by law. 2:09:15 PM Representative Grenn thought APOC provided a low income exemption for the candidates filing fee and asked whether the bill covered the exemption. Ms. Koeneman answered in the affirmative and elucidated that the legislation did not remove or alter the exemption. Representative Pruitt asked about the fiscal notes and whether they were current. Ms. Koeneman relayed that a revised APOC fiscal note was forthcoming and the DOR fiscal note would be zeroed out. Representative Pruitt spoke to the difficulties for some public officials especially for certain boards and commissions that had a difficult time finding members. He asked about the sponsor's thoughts on every public official paying the $100 fee. Representative Kito corrected that the applicable fee would be the $50 financial disclosure fee. He acknowledged that although the legislature was trying to protect the public from "undue outside interests," on "low level boards" financial disclosures and conflicts of interest "might not be as pertinent." He reported that the issue was discussed in the previous committee and they were unable to determine a way to equitably identify what public officials could be waived from the filing fees. The process to separate out certain public officials became "unbelievably cumbersome." Representative Pruitt asked whether the fee would hinder the ability of boards and commissions to find members. Representative Kito believed that the requirement for financial disclosure was more of an obstacle than the fee. He opined that once the individual committed to the requirement for financial disclosure the $50 fee was a negligible determinate. Representative Pruitt relayed that APOC was not able to collect fees online. He wondered how the inability to pay APOC fees online would affect potential filers. Representative Kito was concerned with the issue and wanted to address the issue with APOC. He felt online filing was preferred. 2:14:32 PM Representative Pruitt questioned the potential for all people to be able to run for office with a fee of $100. He wondered what impact the fee would have on people's ability to run for office. Representative Kito thought Representative Pruitt brought up a fair point and revealed that the issue was discussed in a previous committee. He explained that a candidate who planned to raise less than $5 thousand were exempted from the APOC fees. He believed that the APOC fees were nominal, once a candidate reached the $5 thousand threshold and was still raising more campaign funds. Representative Pruitt asked whether the APOC fees could be paid with campaign funds. Representative Kito responded in the affirmative and added that the fees were "an eligible campaign expense." Representative Pruitt inquired about the lobbyist's fees and the number of lobbyists in each of the listed fee brackets in the bill. He asked how many lobbyists in the lower brackets were required to pay the APOC fees. Representative Kito answered that the fee was based on the "client value" or contract amount. He explained that if the lobbyist had 10 clients the contracts might vary from $10 thousand to $60 thousand or more. The fees had been split up in order to minimize the costs for clients paying a lower lobbying contract as opposed to the clients paying the higher lobbying contracts. He indicated that changing the fees were in recognition that clients who could pay more for a lobbying contract could pay a higher registration fee for its lobbyist. 2:19:29 PM Representative Pruitt thanked Representative Kito for the clarification. He asked for the definition of "Representational Lobbyist." Representative Kito explained that a representational lobbyist was a lobbyist who lobbied on behalf of an organization without receiving any payment for services, including per diem and lodging. Representative Pruitt wondered how the APOC fees applied to lobbyists who received a salary from and worked for the organization she represented. Representative Kito communicated that the employee lobbyist had to report how much of their salary was attributed to lobbying and the fee was calculated on the amount. Representative Pruitt asked whether the language in HB 91 covered the employee salary situation and what the amount the fees were based on. Ms. Koeneman related that currently the lobbyist reported their entire salary but the bill required that the lobbyist would have to determine how much of the lobbyists salary was related to lobbying services. The registration fee was based on the amount of salary related to lobbying. Representative Pruitt restated his concern about the term "Lobbying Contract" covering the situation described. Representative Kito stated he would confirm with Legislative Legal Services that the language matched the intent of the provision. 2:23:21 PM Representative Kawasaki queried whether a lobbyist with two $10 thousand contracts would pay the $350 registration fee for each $10 thousand contract. Representative Kito responded in the affirmative. Representative Kawasaki wondered whether a lobbyist would ask for a contract fee of $59,999 in order to save $200 for the higher fee. Representative Kito deduced that the fee would be up to negotiations between the client and lobbyist. Representative Kawasaki remembered that members of the planning commission in the Fairbanks North Star Borough were required to fill out a financial disclosure. He asked whether the intent of the sponsor was for municipal planning commission members to pay the $100 registration fee. Representative Kito relayed that they would not pay the $100 registration fee required of candidates but would pay the $50 fee for the financial disclosure form. He added that the previous committee discussed the burden for public officials serving voluntarily but could not find a fair way to exempt them. The members determined that the $50 fee was nominal and that actually filling out the financial disclosure was "a higher hurdle." Representative Kawasaki assumed that lobbyists were not supportive of the bill. Representative Kito replied that he heard "very little opposition" but was aware of some who were opposed to the bill. Ms. Koeneman interjected that some lobbyists acknowledged the state's financial situation and were "willing to pay their fair share" to keep APOC in operation. Representative Wilson cited page 3, lines 1 through 5 of the bill relating to the fee schedule. She provided a hypothetical scenario where the client divided the contract into two $30 thousand contracts and offered the second one at a later date in order to save money in fees. She wondered whether the language applied to the scenario since the bill provision was by contract and not client. Representative Kito responded that the scenario was possible under the bill. He did not anticipate the scenario in actual practice. Representative Wilson opined that the scenario was likely to occur due to cost savings. Vice-Chair Gara thought that APOC required lobbyists to report their annual income from lobbying. He asked whether an alternative fee schedule could be based on lobbyists' yearly income to quell the concern over split contracts. Representative Kito relayed that the original bill based fees on yearly compensation therefore; the fees were considered a tax. He delineated that a tax became problematic for reasons previously discussed. Revenue collection based on compensation might be realized in the future through inception of a statewide income tax. 2:29:26 PM Vice-Chair Gara was "struggling with charging someone" for financial disclosures. Representative Kito reminded the committee that someone running an exempt campaign - $5000 or less - was excused from paying a registration fee. The sponsor felt that the fee was nominal in support of APOC's function. Vice-Chair Gara asked whether all of the Political Action Committees (PACS) were required to pay. Representative Kito responded that anyone required to register would pay the same fees. Vice-Chair Gara wanted to see additional fees towards PACs or other groups that contributed "soft money." He stated that 65 percent of all soft money was spent for negative campaign adds. Representative Kito thought a "carve out" for certain groups created "constitutional equitability issues." 2:31:35 PM Co-Chair Foster OPENED Public Testimony. Co-Chair Foster CLOSED Public Testimony. Co-Chair Foster reported that amendments were due by 5:00 p.m. on Wednesday, April 19, 2017. HB 91 was HEARD and HELD in committee for further consideration.