SJR 4-CONST. AM: STATE TAX; INTIATIVE  3:38:42 PM CHAIR SHOWER announced the consideration of SENATE JOINT RESOLUTION NO. 4, Proposing amendments to the Constitution of the State of Alaska prohibiting the establishment of, or increase to, a state tax without the approval of the voters of the state; and relating to the initiative process. He advised that the bill was last heard on 3/27/19 when public testimony was opened and closed. Written testimony may be submitted to senate.state.affairs@akleg.gov until 6:00 p.m. this evening. He invited Mr. Milks to the witness table to respond to the questions that were raised during the first hearing. 3:39:18 PM BILL MILKS, Assistant Attorney General, Civil Division, Labor and State Affairs Section, Department of Law, Juneau, said the first question asked why any new state tax or increase in an existing state tax would take effect "in a statewide election held more than one hundred twenty days from enactment of the proposed law." He explained that one hundred twenty days aligns with the initiative provision in art XI, sec. 4, of the Constitution of the State of Alaska. 3:40:48 PM SENATOR COGHILL related that he asked for the rationale because he wondered if it was arbitrary. He asked if the fiscal note would be affected. MR. MILKS said he didn't believe so. Mr. MILKS said Senator Coghill also asked if any changes to existing tax exemptions would trigger a vote. The answer is no, changing an existing tax would neither create a new tax nor change a tax rate. He reminded the committee that this legislation is patterned after the Colorado model and the Colorado Supreme Court considered a case about exemptions and held that changing a tax exemption would not trigger a vote. 3:42:13 PM SENATOR MICCICHE joined the committee. SENATOR COGHILL suggested Mr. Milks and the committee look into that a little further because he believes it would be challenged if changing an exemption increases the tax. For example, "if you remove an exemption and their tax payment goes up, is that going to be a rate increase?" MR. MILKS said he appreciates that but the intent is that exemptions are not subject to this legislation and therefore do not trigger a vote. MR. MILKS turned to Senator Coghill's that asked about special assessments referred to in art IV, sec. 11, Constitution of the State of Alaska. He explained that those special assessments are exceptions from a debt prohibition. The intent is that kind of special assessment is not covered by this legislation and therefore would not trigger a vote. SENATOR COGHILL suggested the next committee of referral explore that further and get a better definition because it talks about state or political subdivisions and the pipeline, for example, has an assessment that's been litigated repeatedly. 3:46:32 PM SENATOR KAWASAKI read: "an initiative can't be used to dedicate revenues, make or repeal appropriations". He asked what the cure is for that because it's been used quite often to strike initiatives from the ballot. MR. MILKS pointed out that voters have the initiative power on taxes but not appropriations. He explained that SJR 4 would create an automatic review process by the legislature and the voters of any new [state] tax or change in tax rate. The voters already have the constitutional authority to review a tax passed by the legislature such as the Senate Bill 21 initiative and vice versa through the referendum process, he said. SENATOR KAWASAKI observed that subsection (c) in Section 1 gives the legislature the power to veto whatever an initiative did. MR. MILKS agreed and added that an existing constitutional provision gives the legislature the same authority, but not for two years. SENATOR KAWASAKI commented that this would establish another weird power dynamic between the people and legislature. CHAIR SHOWER emphasized that this would be further vetted in the next committee of referral. SENATOR KAWASAKI asked for an explanation of the genesis of the Colorado law, which is the model for SJR 4. MR. MILKS responded that Colorado adopted a similar provision called the Tabor Amendment. It provides that new state taxes must be reviewed by the voters. 3:51:21 PM SENATOR COGHILL recalled that Tabor was an initiative to amend the Constitution of the State of Colorado. MR. MILKS said he believes that's correct. SENATOR COGHILL asked how many articles are in the Colorado constitution. MR. MILKS said he did not know. SENATOR COGHILL advised that the Colorado constitution is much more complex and the Constitution of the State of Alaska has significant barriers to protect the rights of the people of Alaska that differ from the Colorado constitution. He suggested the administration look at the interplay between the two constitutions because Colorado provides voters much more prescriptive authority. MR. MILKS said he'd look at that but he ultimately believes that the tax restrictions are the same and the Alaska Supreme Court would look at that and the intent of the legislature as this legislation goes through the process. SENATOR COGHILL requested the committee members who are also on the Judiciary Committee ensure that the language is as clear as possible so the intent is not open to interpretation. 3:55:01 PM SENATOR REINBOLD asked him to clarify his comment about the barriers in the Alaska constitution to protect the rights of the people. SENATOR COGHILL said the barriers he was referring to in the Alaska constitution are unique among all the states. He referenced [Article VIII] that treats fish, game, and land management differently than Colorado or any other state. He explained that he used the term "barriers" because the legislature is barred from writing laws that don't respect the rights of the people. SENATOR KAWASAKI reiterated his earlier question about the genesis of the legislation. "Is this something that the Department of Law boiled down from the state constitution or is this something that was boiled down from the Colorado constitution to fit the state Constitution?" MR. MILKS replied the policy comes from the Colorado legislation that deals with state tax but the legislation was drafted based on the Alaska Constitution. For example, the one hundred twenty day provision is based on the timeframes in the Alaska constitution. CHAIR SHOWER asked for clarification that SJR 4 is modeled on the concept of that provision in the Colorado constitution, but it is not an exact copy. MR. MILK confirmed that the concepts are the same but SJR 4 was drafted to fit the Alaska constitution. 3:59:28 PM SENATOR KAWASAKI noted that in Colorado the second iteration of the Tabor Amendment dealt with the contracting of state debt. He asked if the Dunleavy Administration considered that as well. MR. MILKS replied, "A tax amendment was the Administration's choice here, not a wholesale following other states approach to all fiscal issues." SENATOR KAWASAKI asked if there was consideration given to also limiting the state's ability to collect fees. MR. MILKS replied SJR 4 was drafted to amend art. IX, sec. 1, which deals with taxes. It is not intended to include fees. CHAIR SHOWER cautioned against asking the presenter to give the Governor's opinion. SENATOR KAWASAKI asked if the request for this proposal from the Administration to the Department of Law included a request to look at fees and state debt. MR. MILKS replied the communications between attorneys at the Department of Law and the Governor are confidential. 4:02:28 PM SENATOR KAWASAKI asked if any special advisors were consulted to discuss the proposed constitutional amendment and how it would match state law. MR. MILKS replied the Department of Law advised the Governor's Office and drafted a constitutional amendment. The Administration made the policy decisions. He added, "I'm a lawyer for the Administration." SENATOR KAWASAKI said he was trying to find out if the nonprofit organization, Americans for Prosperity, had any influence over the constitutional amendment proposed in SJR 4. The organization is based in Colorado and has advocated for the Tabor Amendment in other states. MR. MILKS replied he worked on SJR 4 as a Department of Law attorney and he believes that the Administration's representatives have explained that this is one of three proposed constitutional amendments that reflect the policy of the Administration. CHAIR SHOWER said these questions should go to the Governor or his representatives. 4:04:38 PM SUZANNE CUNNINGHAM, Legislative Director, Office of the Governor, Anchorage, stated that no outside organization was involved in creating or drafting this policy. "It was a concept he was interested in that he was aware of and we started working with the Department of Law and how to draft a constitutional amendment to the Alaska state constitution." SENATOR REINBOLD asked Senator Kawasaki his intent for asking the question. CHAIR SHOWER stopped the line of questioning. He solicited a motion for the first of the two amendments he wanted the committee to consider. 4:06:17 PM SENATOR COGHILL motioned to adopt Amendment 1, work order 31- GS1070\A.1, Nauman, 3/28/19. AMENDMENT 1 OFFERED IN THE SENATE BY SENATOR SHOWER TO: SJR 4 Page 1, line 13, following "effective": Insert "on the later of" Page 1, line 14, following "governor": Insert "or an effective date provided for by concurrence of two-thirds of the membership of each house" CHAIR SHOWER explained that both amendments clarify language to ensure the intent is clear. He asked Mr. Milks to comment on the process and what the clarification does. 4:07:04 PM MR. MILKS explained that Amendment 1 clarifies the effective date of a law enacted by the legislature and approved by the voters. It also provides flexibility for the legislature to set a different effective date. SENATOR KAWASAKI questioned the reason for requiring concurrence of two-thirds of the membership of each house. MR. MILKS replied that aligns with the effective date in the Constitution of the State of Alaska. 4:09:55 PM SENATOR MICCICHE asked if the legislature should be able to extend the effective date of ninety days after the certification of the election to accommodate situations where the vote was on an initiative and it took longer than ninety days to execute the tax. MR. MILKS said the ninety day provision is also in subsection (c) and it aligns with the way an initiative works now. SENATOR MICCICHE clarified that he was asking about extending the ninety-day window to enact a very complicated tax law that the voters approved by initiative. His understanding is it would likely take longer than ninety days to enact an income tax or a sales tax. 4:12:12 PM CORI MILLS, Assistant Attorney General, Civil Division, Department of Law, Juneau, said the proposed resolution could be amended to provide a process to extend that timeline, but the legislature could also pass a bill to extend the effective date as it considers approval of an initiative enacted by the voters. SENATOR MICCICHE asked if the same would apply for a bill passed by the legislature. He clarified that he was supportive of the amendment, he was just looking at how it would work both ways. MR. MILLS said the difference is one of timing. Something the legislature passes is placed on the next statewide ballot and goes into effect ninety days after that if it's approved. Anything the voters approve in an election can't be approved by the legislature until the next session. SENATOR MICCICHE expressed satisfaction with the answer. 4:14:51 PM SENATOR REINBOLD highlighted that initiating new or increased taxes is not an issue in her district. SENATOR MICCICHE clarified that the intention here is to responsibly evaluate all the potential effects of the proposed law. 4:15:34 PM CHAIR SHOWER removed his objection. Finding no further objection or discussion, he stated that Amendment 1 passes. 4:16:10 PM SENATOR COGHILL motioned to adopt Amendment 2, work order 31- GS1070\A.2, Nauman, 3/28/19. AMENDMENT 2 OFFERED IN THE SENATE BY SENATOR SHOWER TO: SJR 4 Page 1, line 7: Delete "Any" Insert "Notwithstanding Section 18 of Article II, a" Delete "Sections 14 - 18" Insert "Sections 14 - 17" Page 1, line 10: Delete "proposed" Page 1, line 11: Delete "proposed" Page 1, line 15: Delete "proposed" CHAIR SHOWER objected for discussion purposes and asked Mr. Milks to discuss the clarification. MR. MILKS explained that Amendment 2 clarifies that any law to amend art. II, secs. 14-17 of the constitution is only effective on a vote of the people. He described the amendment as further clarification of a contingency provision. "The legislature is passing a law, but the law is contingent on a future act and that future act is the vote of the people." SENATOR MICCICHE asked why it was important to remove the term "proposed." MR. MILKS replied notwithstanding the effective date clause, a law enacted under art. II, secs 14 and 17, is no longer proposed law. It is a law with the contingency provision, a vote of the people. SENATOR MICCICHE asked, "Can a law become law without passage?" MR. MILKS replied there are contingency provisions in some of the bills the legislature passes. This further clarifies that this is a two-part process. The legislature enacts a law and it is contingent it its effectiveness. SENATOR COGHILL directed attention to art. XII, sec. 11, that deals with law-making powers. These powers generally refer to the legislature but it also refers to the people through initiative. He said it's interesting that the legislature could pass a law that couldn't be ratified and it would therefore become ineffective. He opined that it's not necessarily a proposed law, it's a law that needs to be ratified. He admitted he was looking for a loophole but he didn't find one. 4:20:51 PM CHAIR SHOWER removed his objection. Finding no further discussion or objection, he stated that Amendment 2 passes. CHAIR SHOWER asked for final discussion on SJR 4, as amended. 4:21:22 PM SENATOR COGHILL expressed concern about the definition of "tax" and the sliding scale within the tax codes. He said he will look for clarity on this issue as the legislation moves forward. He said he'll offer the motion to move the resolution from committee but he has reservations. CHAIR SHOWER suggested he provide a list of questions he'd like to have vetted in the Judiciary Committee. SENATOR MICCICHE said he, too, will support moving the resolution along, but his worry is that his conservative district will be giving up power to less conservative districts that would be more likely to support a tax they view as necessary but his district does not support. He opined that when more control is given to the voters, detailed discussions like the one today may be lost in the process. CHAIR SHOWER found no further discussion and solicited a motion. 4:24:31 PM SENATOR COGHILL moved to report SJR 4, work draft 31-GS1070|A as amended, from committee with individual recommendations and attached fiscal note(s) and authorization for Legislative Legal Services to make any appropriate technical and conforming changes. 4:24:57 PM CHAIR SHOWER found no objection and CSSJR 4(STA) moved from the Senate State Affairs Standing Committee.