HOUSE FINANCE COMMITTEE MARCH 30, 1998 2:25 P.M. TAPE HFC 98 - 82, Side 1 TAPE HFC 98 - 82, Side 2 CALL TO ORDER Co-Chair Gene Therriault called the House Finance Committee meeting to order at 2:25 p.m. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Davies Representative Martin Representative Davis Representative Mulder Representative Foster Representative Grussendorf Representative Moses was absent from the meeting. ALSO PRESENT Senator Drue Pearce; Representative Joe Ryan; David Pree, Staff, Representative Ryan; Bob Bartholomew, Deputy Director, Income and Excise Audit Division, Department of Revenue; Diane Mayer, Director, Governmental Coordination, Office of the Governor; Sara Fisher-Good, Staff, Representative Therriault. SUMMARY HB 28 "An Act repealing the Alaska Coastal Management Program and the Alaska Coastal Policy Council, and making conforming amendments because of those repeals." CSHB 28 (FIN) was REPORTED out of Committee with "no recommendation" and with four zero fiscal notes, one by the Department of Administration, one by the Department of Community and Regional Affairs, one by the Department of Environmental Conservation; and one by the Department of Fish and Game, and a fiscal impact note by the Office of the Governor. HB 252 "An Act relating to criminal records; relating to notice about and registration of sex offenders and child kidnappers; and amending Rules 11(c) and 32(c), Alaska Rules of Criminal Procedure." CSHB 252 (FIN) was REPORTED out of Committee with a "do pass" recommendation and with five fiscal impact notes one by the Alaska Court System, two by the Department of Public Safety, one by the Department of Administration and one by the Department of Corrections; and one zero fiscal note by the Department of Law. SB 240 "An Act repealing the tax on punch boards and coin-operated amusement and gaming devices; and providing for an effective date." SB 240(title am)(reengrossed) was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Revenue. HOUSE BILL NO. 252 "An Act relating to criminal records; relating to notice about and registration of sex offenders and child kidnappers; and amending Rules 11(c) and 32(c), Alaska Rules of Criminal Procedure." Co-Chair Therriault provided members with a proposed committee substitute for HB 252, work draft 0-LS0818\Z, 3/12/98 (copy on file). He also provided members with Amendment 1 (copy on file). Amendment 1 reduces to 35 the minimum number of days a defendant convicted of failure to register, as a sex offender or child kidnapper would serve. This is a reduction from 90 days. He explained that the amendment is a response to fiscal concerns. REPRESENTATIVE JOE RYAN stated that the amendment would not affect the legislation's effectiveness and would reduce the fiscal cost. Co-Chair Therriault noted that there would be a reduction of approximately $87 thousand dollars to the Department of Corrections. DAVE PREE, STAFF, REPRESENTATIVE RYAN noted that the fiscal note from the Alaska Public Defenders Agency contains a reference to newspaper publication which is no longer contained in the legislation. Co-Chair Therriault MOVED to ADOPT Amendment 1. Representative Ryan observed that the intent is to register serious sex offenders. Failure to register would carry a minimum sentence of 35 days. He stressed that the current system is not working. Offenders are receiving suspended sentences and still not registering. Co-Chair Therriault pointed out that 35 days in jail would act as a deterrent. Employment could be risked by the jail time. There being NO OBJECTION, Amendment 1 was adopted. Mr. Pree noted that the legislation currently requires the information to be posted on the Internet. Co-Chair Therriault observed that the adoption of Amendment 1 requires a new fiscal note by the Department of Corrections. He added that the Alaska Public Defenders Agency's fiscal note would be updated to reflect the current version of the bill. Representative Foster MOVED to ADOPT, work draft 0-LS0818\Z, 3/12/98 as amended by Amendment 1. There being NO OBJECTION, it was so ordered. Representative Foster MOVED to report CSHB 252 (FIN) out of Committee with the accompanying updated fiscal notes. CSHB 252 (FIN) was REPORTED out of Committee with a "do pass" recommendation and with five fiscal impact notes one by the Alaska Court System, two by the Department of Public Safety, one by the Department of Administration and one by the Department of Corrections; and one zero fiscal note by the Department of Law. HOUSE BILL NO. 28 "An Act repealing the Alaska Coastal Management Program and the Alaska Coastal Policy Council, and making conforming amendments because of those repeals." Co-Chair Therriault noted that the Committee received work draft 0-LS0189\T, 3/26/98 on 3/27/98. Representative Davies questioned why coastal resource districts are prohibited from incorporating by reference state statutes and administrative regulations. Co-Chair Therriault explained that state statutes and regulations change. Districts are supposed to justify their plans independently of state statutes and regulations. When the statutes and regulations are the same, but interpretation differs, the issue becomes who should interpret the statutes and regulations. DIANE MAYER, DIRECTOR, GOVERNMENTAL COORDINATION, OFFICE OF THE GOVERNOR observed that the Coastal Policy Council Review identified this area for amendment as the result of an assessment. The assessment was completed at the end of 1996. They recommended that local coastal district programs not repeat state laws or regulations by reference. Two versions would exist if regulation referenced in a local plan were changed by the agency. The state would have a new version and the local district would have the old version. By definition coastal districts receive deference in interpreting their plans. Since the local district has deference they would define state law. The Council felt that the agency should be given deference on the interpretation of state regulations, unless the district demonstrated unique expertise. Districts argue points relating to state laws or regulations based on their level of professional expertise. Representative Davies stressed that it is useful to adopt statutes by reference in order to keep local requirements current. He stressed that a coastal district may want to have a definition in their plan that is consistent with statute. Ms. Mayer observed that there is one statewide coastal management plan. Districts amend the plan for the uniqueness of their area. Co-Chair Therriault interjected that state statutes and regulations form the base. Local areas are supposed to bring an additional level of scrutiny. Ms. Mayer agreed that local areas bring an additional look of coastal resource uses and values from their perspective. In response to a question by Representative Davies, Ms. Mayer referred to seafood discharges from a seafood processing plant in the Aleutians. The discharge requirements are governed by the state's water quality standard. The Department of Environmental Conservation defines the mixing zone. Coastal districts can enhance protections from the discharge. Standards would have to relate to unique values or uses in the area of the discharge. If state and local plans had the same numbers they would be arguing over interpretation. Ms. Mayer noted that when local districts are at the table they have the ability to discuss what is on the table and bring in their unique view. In response to a question by Representative Davies, Ms. Mayer observed that the Department of Environmental Conservation defines mixing zone standards. A district would have to have specific and acknowledged professional expertise in the subject to address the need to reduce concentrations. A compelling argument could be made based on a traditional use of the area that needs to be protected. If differences were maintained at the regional level it would be brought to the director or commissioner level for a policy call. Representative Davies argued that there might be reasons to adopt a state standard in a local plan. Ms. Mayer pointed out that if the State has a definition or rule that the local district wants to be operative, that it would be operative. The prohibition is against incorporation of state statutes or regulations into their policy. There can be a reference section in the back to reference a state law or regulation, "for purposes of discussion." Ms. Mayer explained that values are defined through public review and approval. She emphasized that the intent is not to make the process less efficient. In response to a question by Co-Chair Therriault, Ms. Mayer clarified that the assessment by the Coastal Policy Council was conducted over a year and a half. Representative Davies MOVED to ADOPT Amendment 1 (copy on file). He explained that the amendment further defines "coastal waters". Amendment 1 would clarify that "coastal water" means a water body in the coastal area, including wetlands and the intertidal area." SARA FISHER-GOOD, STAFF, REPRESENTATIVE THERRIAULT referred to section 4, page 4, subsection (B). Co-Chair Therriault observed that the legislation defines "coastal waters" as "adjacent to tidal shorelines and that contains a measurable quantity or percentage or sea water." He questioned why a consistency determination should be required on a lake that has no outflow. He stressed that the intent is to protect coastal waters. Representative Davies pointed out that birds that nest in salt-water marshes sometimes travel a little inland. Ms. Fisher-Good noted that the definition is a compromise from the original proposal to shrink the coastal zone to the zone of direct influence or interaction. The intent is to allow boundaries to remain, but restrict the coastal district's action relating to activities beyond the coastal boundary. Consistency determinations would only be allowed if the user activity has a direct and significant impact on coastal waters. The intent is to have a strict definition of coastal waters. Ms. Mayer explained that the legislation would allow a definition determination on salt water. She emphasized that districts expanded boundaries to pick up anadromous fish values and demonstrate an effect on the streams. She recalled that the sponsor indicated that he would let the expanded boundaries stand as long as reviews in expanded areas were limited to effects in the streams. The legislation currently restricts consideration to salt waters. She maintained that the fish values, that the program was designed to protect, are missing. She noted that Amendment 1 would pick up the stream channels. Co-Chair Therriault asserted that any activity in the stream areas that require state permits would have public input. State permits are designed to protect the ability of the stream to act as a rearing area for anadromous fish. Ms. Mayer stressed that the coastal management process brings local knowledge and understanding. Districts and their policies are brought to the table by consistency determinations. She stressed that the issue is "letting coastal management work in the area for which we have defined the coastal boundary, to make it work." Co-Chair Therriault noted that coastal districts could still participate in the public process for the issuance of permits. Ms. Mayer stressed that the coastal program envisions that coastal districts would have standing in those project reviews based on the policy in their plan that may apply. She explained that the relationship of local management to state management is analogous to the state having a higher standard than the federal government. Representative Davis spoke in support of the inclusion of anadromous streams. He observed that the legislation makes anadromous streams insignificant. Ms. Mayer noted that Alaska's coastal program is broad. A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Davies OPPOSED: Davis, Foster, Martin, Therriault Co-Chair Hanley and Representatives Kelly, Kohring, Moses and Mulder were absent from the vote. The MOTION FAILED (2-4). Ms. Fisher-Good reviewed the fiscal note by the Office of the Governor, Governmental Coordination. The fiscal note requests $345 thousand dollars. It includes $5 thousand dollars for program implementation; $10 thousand dollars for required regulations; $100 thousand dollars for boundary amendments; and $230 thousand dollars to remove reference to statutes or regulations by reference. The Department of Law's fiscal note is for $33.4 thousand dollars. She recommended that the Department of Law's fiscal note be zero. The Department of Law receives a universal service agreement through the Division of Governmental Coordination. She maintained that local districts should be able to incorporate changes with their existing grants. She observed that $93 thousand dollars in additional federal dollars would be available as a Governor's budget amendment for the Division of Governmental Coordination. She recommended that the Division's fiscal note be reduced to $58.4 thousand dollars. This would incorporate the Department of Law's fiscal note. The Division would have the flexibility to distribute the funding to other agencies. (Tape Change, HFC 98 - 82, Side 2) Ms. Fisher-Good maintained that the $93 thousand dollar budget amendment along with $10 thousand dollars included in the fiscal note would be sufficient to cover boundary amendments. Representative Martin MOVED to report CSHB 28 (FIN) out of Committee with the accompanying amended fiscal notes. Representative Grussendorf OBJECTED. Representative Grussendorf expressed concern that the legislation is not supported by any of the affected municipalities. He questioned why the program is being amended. He emphasized that communities in his district support the program in its current version. Co-Chair Therriault stressed that passage of the legislation maintains a functional program. He asserted that the program is not being gutted. He stressed that the right of municipalities to participate is maintained. Representative Davis acknowledged improvements to the legislation. He noted his intent to work toward further improvement. Co-Chair Therriault assured him that he would continue to work with the Division and members to address concerns. A roll call vote was taken on the motion to move CSHB 28 (FIN) from Committee. IN FAVOR: Davis, Foster, Kelly, Martin, Mulder, Therriault OPPOSED: Moses, Grussendorf, Davies Co-Chair Hanley and Representative Kohring were absent from the vote. The MOTION PASSED (6-3). CSHB 28 (FIN) was REPORTED out of Committee with "no recommendation" and with four zero fiscal notes, one by the Department of Administration, one by the Department of Community and Regional Affairs, one by the Department of Environmental Conservation; and one by the Department of Fish and Game, and a fiscal impact note by the Office of the Governor. SENATE BILL NO. 240 "An Act repealing the tax on punchboards and coin- operated amusement and gaming devices; and providing for an effective date." SENATOR DRUE PEARCE spoke in support of SB 240. She observed that SB 240 is an Act repealing coin operated devices and the Punchboards Tax Program. The program began in 1941 as a tax on amusement machines such as billiard tables, jukebox machines and pinball games. The purpose of the program was to raise revenues and track the number of amusement games. Repeal of the program would lessen the burden on 250 businesses in the state and free up 400 hours of Department of Revenue staff time for higher priority work. The amount of revenue lost from repealing the program would be offset by money collected from increasing compliance of larger tax programs. Senator Pearce observed that, currently, 250 businesses annually file a return and pay the appropriate amount of tax. The current annual tax rate is $48 per device. The rate has remained virtually unchanged since 1947. The current program collects $90,000, shares $32,000 back to local governments and costs $15,000 to operate. Thus the net general fund revenue is $43,000. Department of Revenue officials have discussed the program repeal with several local government officials and the Alaska Municipal League. All concurred that they could not afford to administer the program locally for the small amount of revenue received. She emphasized that repealing the program makes good business sense and public policy. The Department of Revenue presented the matter. Representative Davies asked if consideration was given to increasing the tax. Senator Pearce emphasized that the program is expensive to administer. She did not think that the original intent to track the number of games and raise revenues was being served by the program. In response to comments by Representative Grussendorf, Senator Pearce pointed out that there would be a net general fund loss of $43 thousand dollars. The Department of Revenue would save 400 staff hours. The additional staff time can be spent finding other tax payers who are not complying with larger tax programs that bring in more money. She anticipated that there would be a net gain from the legislation. BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT DIVISION, DEPARTMENT OF REVENUE clarified that the legislation is at the request of the Department. He observed that the Department has 17 tax programs. The Department prioritized each program based on the amount of money collected and the cost of the program. The Coin Operated Devices Tax Program was at the bottom of the list. The recommendation to eliminate the program was made in response to budget reductions. He asserted that the Department would be able to do a better job with remaining programs. Representative Davis spoke in support of the legislation. Representative Martin MOVED to report SB 240(title am)(reengrossed) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. SB 240(title am)(reengrossed) was REPORTED out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Revenue. ADJOURNMENT The meeting adjourned at 3:30 p.m. House Finance Committee 9 3/30/98