HOUSE JUDICIARY STANDING COMMITTEE April 11, 1997 1:13 p.m. MEMBERS PRESENT Representative Joe Green, Chairman Representative Con Bunde, Vice Chairman Representative Brian Porter Representative Norman Rokeberg Representative Jeannette James Representative Eric Croft Representative Ethan Berkowitz MEMBERS ABSENT All members present COMMITTEE CALENDAR CONFIRMATION HEARINGS: Commission on Judicial Conduct Dianne I. Brown - CONFIRMATION ADVANCED Board of Governors, Alaska Bar Association Debra Call - CONFIRMATION ADVANCED Alaska Public Utilities Commission James M. Posey - CONFIRMATION ADVANCED Commission on Judicial Conduct Ethel Stanton - CONFIRMATION ADVANCED HOUSE BILL NO. 207 "An Act relating to employer drug and alcohol testing programs." - MOVED CSHB 207(JUD) OUT OF COMMITTEE HOUSE JOINT RESOLUTION NO. 18 Proposing an amendment to the Constitution of the State of Alaska relating to changing the rate of a tax or license that supports a dedication of its proceeds. - MOVED CSHJR 18(STA) OUT OF COMMITTEE SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 132 "An Act relating to municipal taxation of alcoholic beverages." - MOVED SSHB 132 OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 207 SHORT TITLE: EMPLOYER DRUG TESTING PROGRAM SPONSOR(S): REPRESENTATIVE(S) GREEN, Rokeberg JRN-DATE JRN-PG ACTION 03/21/97 785 (H) READ THE FIRST TIME - REFERRAL(S) 03/21/97 785 (H) LABOR & COMMERCE, JUDICIARY 04/04/97 (H) L&C AT 3:15 PM CAPITOL 17 04/09/97 (H) JUD AT 1:00 PM CAPITOL 120 04/09/97 1039 (H) L&C RPT CS(L&C) 2DP 3NR 1AM 04/09/97 1039 (H) DP: RYAN, ROKEBERG 04/09/97 1039 (H) NR: HUDSON, BRICE, COWDERY 04/09/97 1039 (H) AM: KUBINA 04/09/97 1039 (H) ZERO FISCAL NOTE (LABOR) 04/11/97 (H) JUD AT 1:00 PM CAPITOL 120 BILL: HJR 18 SHORT TITLE: DEDICATED FUNDS: RATE MAY BE CHANGED SPONSOR(S): REPRESENTATIVE(S) IVAN JRN-DATE JRN-PG ACTION 01/29/97 164 (H) READ THE FIRST TIME - REFERRAL(S) 01/29/97 164 (H) STA, HES, JUD, FINANCE 02/04/97 (H) STA AT 8:00 AM CAPITOL 102 02/04/97 (H) MINUTE(STA) 02/06/97 (H) STA AT 8:00 AM CAPITOL 102 02/06/97 (H) MINUTE(STA) 02/11/97 (H) STA AT 8:00 AM CAPITOL 102 02/11/97 (H) MINUTE(STA) 02/12/97 305 (H) STA RPT CS(STA) NT 4DP 1DNP 1NR 02/12/97 305 (H) DP: JAMES, HODGINS, DYSON, IVAN 02/12/97 305 (H) DNP: VEZEY 02/12/97 305 (H) NR: BERKOWITZ 02/12/97 305 (H) FISCAL NOTE (GOV) 02/20/97 (H) HES AT 3:00 PM CAPITOL 106 02/20/97 (H) MINUTE(HES) 02/25/97 (H) HES AT 3:00 PM CAPITOL 106 02/25/97 (H) MINUTE(HES) 02/26/97 480 (H) HES RPT CS(STA) 4DP 2DNP 02/26/97 480 (H) DP: DYSON, GREEN, BUNDE, PORTER 02/26/97 480 (H) DNP: VEZEY, KEMPLEN 02/26/97 480 (H) FISCAL NOTE (GOV) 2/12/97 04/11/97 (H) JUD AT 1:00 PM CAPITOL 120 BILL: HB 132 SHORT TITLE: MUNICIPAL TAXATION OF ALCOHOL SPONSOR(S): REPRESENTATIVE(S) DAVIS, Ivan JRN-DATE JRN-PG ACTION 02/13/97 333 (H) READ THE FIRST TIME - REFERRAL(S) 02/13/97 333 (H) CRA, JUDICIARY, FINANCE 02/21/97 424 (H) SPONSOR SUBSTITUTE INTRODUCED- REFERRALS 02/21/97 424 (H) READ THE FIRST TIME - REFERRAL(S) 02/21/97 424 (H) CRA, JUDICIARY, FINANCE 03/07/97 (H) CRA AT 8:00 AM CAPITOL 124 03/07/97 (H) MINUTE(CRA) 03/07/97 582 (H) CRA RPT 5DP 1AM 03/07/97 582 (H) DP: JOULE, DYSON, RYAN, KOOKESH, IVAN 03/07/97 582 (H) AM: OGAN 03/07/97 583 (H) FISCAL NOTE (REV) 03/07/97 583 (H) ZERO FISCAL NOTE (DCRA) 03/07/97 594 (H) COSPONSOR(S): IVAN 04/02/97 (H) JUD AT 1:00 PM CAPITOL 120 04/02/97 (H) MINUTE(JUD) 04/04/97 (H) JUD AT 1:00 PM CAPITOL 120 04/04/97 (H) MINUTE(JUD) 04/07/97 (H) JUD AT 1:00 PM CAPITOL 120 04/07/97 (H) MINUTE(JUD) 04/11/97 (H) JUD AT 1:00 PM CAPITOL 120 WITNESS REGISTER DIANNE I. BROWN 11484 Discovery Heights Circle Anchorage, Alaska 99515 Telephone: (907) 269-5694 POSITION STATEMENT: Provided comments on her appointment to the Commission on Judicial Conduct JAMES M. POSEY 2311 Canary Court Anchorage, Alaska 99515 (907) 243-6973 POSITION STATEMENT: Provided comments on his appointment to the Alaska Public Utilities Commission ETHEL STANTON P.O. Box 829 Sitka, Alaska 99835 Telephone: (907) 747-8136 POSITION STATEMENT: Provided comments on her appointment to the Commission on Judicial Conduct JEFF LOGAN, Legislative Assistant to Representative Joe Green Capitol Building, Room 118 Juneau, Alaska 99811 Telephone: (907) 465-4931 POSITION STATEMENT: Prime Sponsor HB 207 REPRESENTATIVE IVAN IVAN Alaska State Legislature Capitol Building, Room 418 Juneau, Alaska 99811 Telephone: (907) 465-4942 POSITION STATEMENT: Prime Sponsor HJR 18 JIM BALDWIN, Assistant Attorney General, Civil Division, Office of the Attorney General Department of Law P.O. Box 110300 Juneau, Alaska 99811 Telephone: (907) 465-3600 POSITION STATEMENT: Provided testimony on HJR 18 JIM ELKINS 312 Front Street Ketchikan, Alaska 99901 Telephone: (907) 247-4830 POSITION STATEMENT: Testified in opposition to HJR 18 REPRESENTATIVE GARY DAVIS Alaska State Legislature Capitol Building, Room 513 Juneau, Alaska 99811 Telephone: (907) 465-2593 POSITION STATEMENT: Prime Sponsor SSHB 132 DON GRASSE, Executive Vice President & General Manager K & L Distributors 4771 South Park Bluff Anchorage, Alaska 99516 Telephone: (907) 345-0124 POSITION STATEMENT: Testified in opposition to SSHB 132 PAT POLAND, Director Division of Municipal & Regional Assistance Department of Community & Regional Affairs 333 West 4th Avenue, Suite 220 Anchorage, Alaska 99501 Telephone: (907) 269-4500 POSITION STATEMENT: Testified in support of SSHB 132 DON DAPCEVICH, Executive Director State Advisory Board for Alcoholism and Drug Abuse 1880 Wickersham Avenue Juneau, Alaska 99801 Telephone: (907) 586-2173 POSITION STATEMENT: Testified in support of SSHB 132 GARRY PESKA Alaska State Hospital & Nursing Home Association P.O. Box 240185 Douglas, Alaska 99824 Telephone: (907) 364-2244 POSITION STATEMENT: Testified on SSHB 132 LOREN JONES, Director Division of Alcoholism & Drug Abuse Department of Health & Social Services P.O. Box 110607 Juneau, Alaska 99811 Telephone: (907) 465-2071 POSITION STATEMENT: Testified in support of SSHB 132 KEVIN RITCHIE Alaska Municipal League & Alaska Conference of Mayors 217 Second Street, Number 200 Juneau, Alaska 99801 Telephone: (907) 586-1325 POSITION STATEMENT: Testified in support of SSHB 132 ACTION NARRATIVE TAPE 97-54, SIDE A Number 001 CHAIRMAN JOE GREEN called the House Judiciary Standing Committee to order at 1:13 p.m. Members present at the call to order were Representatives Con Bunde, Brian Porter, Ethan Berkowitz and Chairman Joe Green. Representative Norman Rokeberg arrived at 1:27 p.m., Representative Jeannette James arrived at 1:28 p.m., and Representative Eric Croft arrived at 1:30 p.m. CONFIRMATION HEARINGS CHAIRMAN GREEN announced that members would first consider confirmation of the Governor's appointees to various positions, and would begin with Dianne Brown who had been appointed as a member of the Commission on Judicial Conduct. Ms. Brown would provide comments via teleconference. DIANNE I. BROWN, Alaska State Trooper, advised members she had been in law enforcement for approximately 19-1/2 years. She expressed that she had been appointed to the Commission as a public member. Ms. Brown stated that she knew a lot of the judges around the state and had worked in various communities in the state. Ms. Brown advised members that she was interested in being a part of the Commission on Judicial Conduct. CHAIRMAN GREEN noted that Ms. Brown had been appointed by Governor Cowper in 1990. MS. BROWN agreed, although she served for only a short period of time then. Number 174 REPRESENTATIVE BRIAN PORTER advised members he appreciated the willingness of Ms. Brown to serve on the Commission on Judicial Conduct, and believed that the perspective she would bring to that commission would be outstanding. CHAIRMAN GREEN agreed with the statement of Representative Porter. REPRESENTATIVE CON BUNDE moved to advance Ms. Brown's appointment to the Commission on Judicial Conduct with individual recommendations. There being no objection, appointment of Dianne I. Brown would be forwarded to the full body for confirmation purposes. CHAIRMAN GREEN advised members they would next consider the appointment of James M. Posey to the Alaska Public Utilities Commission. JAMES M. POSEY provided comments via teleconference from Anchorage, Alaska. He advised members he considered his appointment to the Alaska Public Utilities Commission as a graduation from community council business with many years of representing the community, as well as the consumers, on the kinds of issues that sometimes come before the APUC. Mr. Posey advised members he had been appointed to a consumer seat of the commission, and being a consumer of utilities and his travels across the state, he felt he had a good view of what Alaska had in the way of utility services and what might transpire into the next century. Number 350 CHAIRMAN GREEN advised members that he had worked with Mr. Posey for approximately 15 to 20 years, and found him to be a very reputable, law abiding, and a family oriented individual. REPRESENTATIVE BUNDE moved to advance the appointment of James Posey to the Alaska Public Utilities Commission to the full body with individual recommendations. There being no objection, appointment of James Posey to the Alaska Public Utilities Commission would be advanced to the full body for confirmation purposes. CHAIRMAN GREEN advised members they would next hear a statement from Ethel Stanton who had been appointed as a member of the Commission on Judicial Conduct. ETHEL STANTON advised members that she was Alaska Native and had been in business in the state for 51 years. She pointed out that she was a board member of the Shee Atika Board, and was serving her second term on the Board of Trustees for the Sheldon Jackson College. Ms. Stanton advised members she also served on the Sitka Community Advisory Board for Holland America Line and West Tours. MS. STANTON expressed that she had served six years on the Board of Governors for the Alaska Bar Association, and considered her appointment to the Commission on Judicial Conduct as an advancement. REPRESENTATIVE BUNDE moved to advance the appointment of Ethel Stanton to the Commission on Judicial Conduct to the full body for confirmation purposes. There being no objection, it was so ordered. Number 608 CHAIRMAN GREEN was advised by the teleconference moderator in Anchorage that Debra Call had not yet arrived. REPRESENTATIVE PORTER advised members that he knew Ms. Call personally and would certainly support her appointment to the Board of Governors, Alaska Bar Association. He pointed out that he had worked with Ms. Call when she was staff to the Community Economic Development Corporation, and expressed that she very energetic, straight forward and an honest person. CHAIRMAN GREEN stated that her dossier was certainly impressive and if members did not have questions or concerns with advancing Ms. Call's appointment on, he would entertain a motion to do so. REPRESENTATIVE BUNDE moved to advance the appointment of Debra Call to the Board of Governors, Alaska Bar Association, to the full body for confirmation purposes. There being no objection, it was so ordered. CHAIRMAN GREEN called a brief at-ease at 1:23 p.m., and he reconvened the House Judiciary Committee meeting at 1:26 p.m. HB 207 - EMPLOYER DRUG TESTING PROGRAM Number 707 CHAIRMAN GREEN advised members they would next consider HB 207, "An Act relating to employer drug and alcohol testing programs." He reminded members the bill had previously been discussed by the committee and several members had additional concerns; therefore, the bill had been held over. REPRESENTATIVE BERKOWITZ noted that Chairman Green would be offering an amendment, and he advised members that would answer one of the questions he had on the proposed legislation. He referred to pages 5 and 6, which addressed the collection of samples and testing procedures, and wanted to be certain that there was an understanding that collection and testing be done according to prescribed standards with people who were qualified to take the samples and maintain them. He asked if the bill language had been used in other instances and proven satisfactory. JEFF LOGAN, Legislative Assistant to Representative Joe Green, responded to Representative Berkowitz's question and stated that the language in Sections .630 and .640 that spoke to the collection of samples and testing procedures was used in other states, and stated that it was based on federal language. Mr. Logan pointed out that similar legislation had been in effect in the state of Utah since 1988 and had not been challenged there. MR. LOGAN explained that under Section .640, subsection (c), which talked about the certification of laboratories, that the Substance Abuse and Mental Health Services Administration (SAMSHA) was the highest level of certification in the United States. He stated that he had been assured by a couple of different institutes in Washington D.C., that it was the highest certification in the world for drug testing. Mr. Logan advised members that the College of American Pathologists, American Association of Clinical Chemists was the second highest certification in the United States. MR. LOGAN stated that there were 71 SAMSHA certified labs, and they were the labs that were used for testing purposes in the Department of Transportation. The chain of control of the sample, prior to it reaching the laboratory, had been spelled out as clearly as possible, and he was very comfortable that once the sample was at the lab it would be handled as properly as possible. REPRESENTATIVE BERKOWITZ advised members that his concern was based on his experience representing people who had subjected to drug testing, and the chain of custody was absolutely essential, as well as proper maintenance of the specimen. CHAIRMAN GREEN agreed that that was a very good point, and realized that in some cases there had been a break down. REPRESENTATIVE BERKOWITZ stated with respect to Section 23.10.660, page 7, line 20, that immunity would be waived if there was a breach of confidentiality, and asked for clarity on that. MR. LOGAN advised members that he had spoken with the drafter of the bill on that topic and it was the intent and understanding that immunity would be given if the employer complied with the provisions of the bill. One of the provisions of the bill was that the test results would be a confidential and privileged communication, and could not be disclosed. He advised members that if an employer released or disclosed that information, they would have violated a provision in the bill and would, therefore, not be subject to immunity. Number 1027 REPRESENTATIVE JEANNETTE JAMES asked if that would include any employee of the employer who was involved in the drug testing process. CHAIRMAN GREEN agreed that would be the case. REPRESENTATIVE ERIC CROFT advised members that was his concern, and hoped that would be addressed in the forthcoming proposed amendment. CHAIRMAN GREEN offered Amendment 1. REPRESENTATIVE PORTER moved to adopt Amendment 1, page 2, line 23, following "23.10.699", insert; if the action is based on drug or alcohol testing. There being no objection, Amendment 1, CSHB 207 (JUD) was adopted. REPRESENTATIVE PORTER moved to report CSHB 207(JUD) out of committee, as amended, with individual recommendations and attached zero fiscal note. There being no objection, CSHB 207(JUD) was reported out of committee. HJR 18 - DEDICATED FUNDS: RATE MAY BE CHANGED Number 1143 CHAIRMAN GREEN advised members that because the prime sponsor of HB 132 was not available, they would next consider HJR 18, proposing an amendment to the Constitution of the State of Alaska relating to changing the rate of a tax or license that supports a dedication of its proceeds. CHAIRMAN GREEN called a brief at-ease at 1:35 p.m., and he reconvened the meeting at 1:38 p.m. REPRESENTATIVE IVAN IVAN, Prime Sponsor, HJR 18, advised members that HJR 18 proposed an amendment to Article IX, Section 7 of the State Constitution. He pointed out that the current article allowed for the dedication of funds for a specific purpose, as long as it existed by April 24, 1956. Representative Ivan explained that the proposed resolution would allow a changing of a rate of a tax or license of which the proceeds were dedicated to a special purpose. He advised members that the proposed amendment would be placed before the voters at the next general election if approved by the Legislature. REPRESENTATIVE IVAN advised members that he introduced the legislation because of the difference in opinions presented by the Attorney General's office and Legislative Legal Services regarding the dedication of a tax to a specific purpose. He stated that in order to avoid litigation, especially if the proceeds of a tobacco tax were to be placed into the school fund, or if the legislature changed any other tax rate, or license fee, into which proceeds were to be placed into a dedicated fund, the resolution could be a solution that would resolve that problem. REPRESENTATIVE IVAN pointed out that an amendment had been adopted by the House State Affairs Committee that would make the amendment retroactive to October 1, 1997. He expressed that the retroactive date coincided with the effective date of the tobacco tax as proposed in CSHB 1(STA). REPRESENTATIVE IVAN noted that he realized what was being proposed was a very debatable issue with various opinions expressed; however, he was considering it as being established prior to the framing of the State Constitution of dedicating funds to the school fund, which at that time was needed for school construction and maintenance. He felt Alaska was back in that position and funds were needed in the area of capital construction and maintenance projects. Number 1368 REPRESENTATIVE ROKEBERG asked if the prohibition against dedicated funds was still consistent with the Constitution under the change that would result from the resolution. REPRESENTATIVE IVAN advised members that would be his understanding, but reiterated that the Attorney General's office and Legislative Legal Services had each provided different opinions that there could be a potential problem. REPRESENTATIVE ROKEBERG asked if they could change the use of the proceeds. REPRESENTATIVE IVAN advised members he was not proposing to change the proceeds, but to increase the dedicated tax. Number 1434 JIM BALDWIN, Assistant Attorney General, Civil Division, Office of the Attorney General, Department of Law, advised members the department testified in the House State Affairs Committee because they had some concerns about the timing of the amendment as it applied to the tax bills that were moving through the legislature. He pointed out that if HJR 18 was going to be considered a part of that package, the department felt there should be some thought given to timing. Mr. Baldwin pointed out that was the reason for the effective date and retroactive effect date in Section 2 of the resolution. MR. BALDWIN advised members he would not characterize the Department of Law as being a supporter of HJR 18, although they saw the wisdom of it. He stated that the department did anticipate litigation with the increase in the tobacco tax, if it became law. CHAIRMAN GREEN asked if the department anticipated litigation from a particular group, or the fact that it appeared too high from the general public. MR. BALDWIN clarified that the department anticipated litigation would result because a tax payer might protest the increase in the tax. He explained that the department would handle that case through the normal process of a tax protest, which would then be elevated to the courts, and ultimately to the appellate courts. MR. BALDWIN pointed out that, in the minds of the legislature, the preferred interpretation in the tobacco tax bill was that the rate of a tax could be changed and it was valid under present reading of the constitution. He stated that it had a fall-back provision that said, just in case, to make sure the tax remained imposed, and to take other measures there would be a fall-back tax to the general fund. Mr. Baldwin advised members that the measure before them could, perhaps, cast some doubt as to whether the legislature really believed in its primary construction of the constitution. Mr. Baldwin stated that by advancing HJR 18, they could create an argument on the side of those who wanted to attack the tobacco tax. MR. BALDWIN advised members that the administration's perspective, and that of the Attorney General's office, felt that there could be another legal interpretation that would carry the day, and one that had been consistently applied since 1956, that the rate of a tax could not be changed. He stated that in weighing it out, perhaps HJR 18 was the better approach and expressed that the sponsor was being very courageous to come forward and suggest a change to the constitution which would eliminate all debate. Mr. Baldwin advised members it was a hard decision, and he was attempting to react to the point where he might have to defend the tax. He stated that if he had to defend the issue in a court of law, and HJR 18 was not adopted by the legislature, it would be used as evidence that the legislature did not really believe that it could dedicate the proceeds of a tax, adding that they were talking specifically about a tobacco tax in this case. MR. BALDWIN advised members that he was both in favor of the resolution, but somewhat nervous at the same time. Number 1645 CHAIRMAN GREEN asked if there was concern about either the ability to raise taxes, or to dedicate taxes. MR. BALDWIN advised members that immediately after statehood the question arose which was presented to the Attorney General and resulted in a formal opinion. The question was if the rate of a tax could be changed which was what all the tobacco bills were doing. The attorney general looked at the minutes of the Convention, and at that time they were not in writing, but on reel to reel tapes that were retrieved from archives. They listened to the tapes and attempted to piece together what happened. Mr. Baldwin noted that it had been suggested that he made a mistake when he did that, and it was concluded, from listening to one part of the debate that you could not change the rate of the tax. After the minutes were redeemed it appeared there was some discussion on the issue and during debate there were some assurances given by the chairman of the committee that they thought they could do that. MR. BALDWIN advised members that what happened during the interim was that the legislature, and the various administrations, acted consistent with the original advice; they believed that they could not change the rate of a tax and in fact enacted several bills, and particularly one in the area of tobacco tax. He stated that they took the device of creating a whole new section and assessing the tax under that section to make sure it was completely divorced from the original dedication. Mr. Baldwin advised members that there were 30 years of conduct where the state had been under the impression, and acted under that impression, that the rate of a tax could not be changed. He pointed out that there was a method of statutory construction called a long standing contemporaneous construction where you could make something so by just acting consistent with it. That was why the Attorney General's office was concerned about going back and picking out what was said in the Constitutional Convention and resting the eggs in that particular basket, because there had been a long standing, consistent conduct that the rate of tax could not be changed. MR. BALDWIN advised members that the corollary to that was if it clearly was wrong, the courts would not adopt it. Number 1794 CHAIRMAN GREEN stated then that there was a bias because of the 30 years of acting in a consistent manner, even though the intent may have been interpreted wrong. MR. BALDWIN advised members that was correct, and there was also the question of how much weight the Supreme Court would place on the debates. He advised members that they knew, from a lot of decisions over the course of the years, that the courts had looked to the debates and had cited to them when they support the conclusion that they reach. MR. BALDWIN expressed that on other occasions, the court had said those were just two citizens discussing something, and our intelligence exceeds that, and the court would go with what they thought was right. He pointed out that it was the same as the Attorney General's office cite to debates in the legislature all the time. Mr. Baldwin stated that it was certainly strong evidence that a tax rate could not be changed, and particularly because it came from the committee chairman, stronger than what would normally be found when sitting to just general debate and the courts have said they give more weight to what a committee chairman says. CHAIRMAN GREEN asked if it was the opinion of Mr. Baldwin that passing HJR 18 would correct those two real, or perceived ills. MR. BALDWIN felt it would certainly remove any doubt in whether the legislature could change the rate of a tax or not. He noted that it was up to the legislature to determine if that was good public policy or not. Number 1885 REPRESENTATIVE PORTER stated that for the record that may sometime in the future be looked at in the same way that the legislature and administration were reviewing the Constitutional Convention, he thought it was the general feeling of this legislature that the continuing interpretations of the legislatures were in error because of the recently discovered information about what appeared to be the clear intent of the constitutional framers, which was not available at the time the other interpretations were made. Representative Porter stated with that in mind, it was the position of the legislature that it was not necessary to pass HJR 18. Having said that, recognizing the Department of Law did that all the time, if a court should fail to adopt that interpretation, the legislature asserted HJR 18 as the solution to a problem that the legislature did not believe existed. REPRESENTATIVE JAMES advised members that in discussing the issue with the sponsor, it was determined that going to the people for a vote was cheaper than going to court. And if the legislature passed HJR 18 and it was put before the people and they voted yes, that by that time, if the tobacco tax passed, there would be an interim period where the decision would have to be made. Representative James stated that if a tobacco passed on October 1, 1997, what would happen between then and November 1998, if and when HJR 18 went to the people for a vote. She asked if anyone filed suit, would the Department of Law be able to put that suit on hold until the vote was taken in November, or would it likely be settled before November 1998, pointing out that the timing was her question. Representative James advised members that she saw that as a cheaper means to determine the answer to the dilemma they found themselves in. MR. BALDWIN advised members that he first thought the people would jump out right away and get the state into litigation as quickly as they could; however, the department had become very adept over the years of channeling people through the right process. The right process, in this case, would be to make them file for their tax and then protest it, and then take it through the administrative process. Once through the administrative process, it would be appealed to the superior court, so they could be looking at a period of time in excess of possibly two years before the first court would rule on the questions of law. Mr. Baldwin stated that the time between October 1997, and the November election, and then the 90, or 45 days after that when the constitutional amendment took effect, he could see that the litigation could be moving along but not resolved by the time a vote was had on the matter. REPRESENTATIVE JAMES expressed that she was assuming that the case Mr. Baldwin was talking about would be a case against the tax, period. MR. BALDWIN agreed. REPRESENTATIVE JAMES stated that if the case was on the dedication, would not the fact that the legislature was asking for a vote of the people have some bearing on that case. MR. BALDWIN felt that what the court would allege was that the legislature was totally without power to enact a tobacco tax with the increase being dedicated. The courts would say that the legislature lacked power to do that because the Constitution prohibited it and, therefore, they would get to the tax in that fashion. Mr. Baldwin stated that then, he would assume the department could come in and say, look, there was going to be a vote on the issue and the whole thing could be mooted out within a reasonable time, and let's wait and see whether the case is mooted out. Mr. Baldwin advised members that a court might buy that. He pointed out that the courts were reluctant to give what were known as advisory opinions, and if they thought that the people might moot the thing out by a vote on a constitutional amendment, they might regard anything they do as being an advisory opinion, and they would escape having to decide the question. REPRESENTATIVE JAMES stated that in the tobacco tax bill, HB 1, that was currently in the House Rules Committee, there was the backup provision that if it was determined to be unconstitutional, it would just go into the general fund. She asked if that would not be an answer for anyone who should sue under the dedication. It seemed to her that it was a situation of the "cart before the horse", and she thought the state was protected in the bill itself. MR. BALDWIN advised members that he thought that the bill, itself, acted as a disincentive to sue, at least on the dedicated fund issue, in that it did not get them very far unless they were thinking of a larger strategy of returning to the legislature with some other approach, and using the bill as a device to do that. He advised members that the state also had public interest litigant legal fees, where a law firm could bring a law suit against the state, and if it was perceived to be a public interest litigation, they could get full fees, so all incentives had not been removed to litigate the issue. Mr. Baldwin pointed out that he had considered that and did not feel they were home free with the backup. He advised members that the department had been following the bill and those were the sections they had been zeroing in on because that was where the department thought it would ultimately end up, that the state would be in the backup situation. Mr. Baldwin expressed that they could be wrong; legislative legal could be right, and the Department of Law might be wrong. Number 2190 CHAIRMAN GREEN stated that if both bills passed muster, and the tax was in progress while HJR 18 would have to wait a year, would that have and adverse effect, or at least an impact on the decision. MR. BALDWIN advised members that it may be that a court would say the legislature had gone forward to amend the Constitution and they did not really believe, but it was hard to figure out how all that would come to play. He stated that the department kept saying that you could not draw any evidentiary value out of the fact that the legislature did not pass something; however, he had been in many cases where people on the other side had tried to, so there were pluses and minuses to HJR 18. REPRESENTATIVE BUNDE stated that it was his understanding the legislative legal opinion was correct, that the legislature did have the right to change the amount of a tax, and that the past legislatures had made their decisions on incorrect information. Representative Bunde felt this legislature had better information and they were making decisions based on that. REPRESENTATIVE BUNDE stated that he did not want to confuse the process and cause more litigation, and pointed out that Mr. Baldwin stated that the fact that the legislature even looked at the issue might be brought into play in a suit, and asked at what point a bill represented the will of the legislature; after it passed one committee, two committees, one house? Number 2307 MR. BALDWIN stated that generally, the fact that the legislature did not pass something, was not supposed to be considered as evidence of anything. However, often times legislation is viewed as a package, a whole area that was being considered by the legislature at any given time, and people could look for intent, or what ever happened where ever they could find it. He stated that one would look to anything that had to do with tobacco, for example, and this legislature tried to understand the meaning of whatever it was that was passed. Mr. Baldwin advised members that the court had said that it would not be inflexible in its manner of interpreting statutes, that the court rejected what was known as the "plain meaning rule." He explained that the courts look to the history of bills to understand what the legislature's meaning and intention was, and had said it would look anywhere that had credible history of what the legislature meant. Mr. Baldwin did not feel the court would feel restricted to just looking to the hearings on HB 1, or SB 13. He pointed out that the court might feel it could look to what the House Judiciary Committee had said about HJR 18. MR. BALDWIN stated that as to what the law meant, the court would not look much beyond itself, because its held unto itself the ability to interpret and understand what the law meant and what the constitution meant. He noted that during a couple legislatures ago, they had tried to interpret the constitution for the court, and the court served that back very quickly saying, "We'll tell you what the constitution means", and that dealt with the Constitutional Budget Reserve Fund case. Mr. Baldwin expressed that at the end of the day, the court would rely on its own device; would not take the opinion of the Attorney General's office or Legislative Legal. Number 2400 REPRESENTATIVE CROFT stated that it was hard enough to figure out what the legislature meant when they did something, and he would say it would be virtually impossible to figure out what they meant by not doing something. He joined Representative Porter's comments, and stated that it seemed to him that the newly found notes of the Constitutional Convention could not be clearer. He advised members he had never seen a better "smoking gun" on an issue of legislative or constitutional intent. However, it was his feeling, as with Representative Porter, that this legislature thought that was the proper interpretation, and did not mean, by HJR 18, to cast doubt on it, or if the resolution got hung up somewhere along the complicated process, that that would change anyway. He pointed out that things get hung up for a myriad of reasons rarely related to their merits. REPRESENTATIVE BERKOWITZ stated that so future people who would be interpreting what was going on that he also wanted to join with the comments of Representative Porter, clearly, without equivocation. CHAIRMAN GREEN expressed his support of those comments also. Number 2469 CHAIRMAN GREEN invited Jim Elkins of Ketchikan to address the committee via teleconference. TAPE 97-54, SIDE B Number 0000 JIM ELKINS advised members that he was surprised that a republican legislature would come forward and consider levying any kind of consumer tax on the citizens of Alaska. He felt that legislators were elected to make decisions, some of them tough and some of them easy. Mr. Elkins stated that he did not believe legislators were elected to make the voters in the state make tough decisions, which was his personal opinion. MR. ELKINS stated that on April 4, 1997, the Ketchikan Gateway Borough passed Resolution No. 1331, which basically opposed any taxation enactment that was not applied equally to all tax payers in the state of Alaska, and that had been forwarded to the Municipal League and the Ketchikan state representatives. Number 054 REPRESENTATIVE JAMES referred to the resolution mentioned by Mr. Elkins that talked to not applying any taxes that were not equal across the state and asked if he was saying that a tax had to be equal, or the money spent equally across the state through an increase of a tax. MR. ELKINS advised members they were talking about taxing all things equal. REPRESENTATIVE ROKEBERG, for the purpose of clarification, asked if Mr. Elkins was talking about HB 132, or HJR 18. MR. ELKINS stated that he was speaking to the resolution before members which dealt with the tobacco tax and whether it should be put before the voters with regard to the dedication of those funds. He added that he might be wrong about what the resolution stood for; however, he felt it was the responsibility of the legislature to make the decision, up or down, but, personally opposed any kind of a consumer tax. REPRESENTATIVE BUNDE noted that Mr. Elkins had stated that taxes should be applied equally, and asked if that meant that people who did not drive should be required to pay a motor fuel tax. REPRESENTATIVE BUNDE asked if Mr. Elkins was in any way employed by the tobacco industry. MR. ELKINS advised members he was not, and pointed out that he was a non-smoker. REPRESENTATIVE JAMES asked if the only dedicated fund currently in place was the Fish and Game fund. MR. BALDWIN stated that there was a Fisherman's Fund. REPRESENTATIVE JAMES asked if the Public School Trust Fund was a dedicated fund. REPRESENTATIVE BUNDE said it was Fish and Game, and Mr. Baldwin agreed. REPRESENTATIVE JAMES asked what the source of revenue was for those funds. MR. BALDWIN advised members that the Fish and Game fund was a percentage of licenses, and he believed the Fishermen's Fund involved a percentage of crew member licenses. He pointed out that there was kind of a difficulty in definition there, but the school land trust was switched to a fund in 1978, which was a dedicated fund that received half of 1 percent of revenues generated from state lands. Mr. Baldwin advised members that the Second Injury Fund was created by statute that he believed was required by federal law and had to do with workers compensation, and was funded by part of the tax from workers compensation. MR. BALDWIN advised members that there were a lot of funds that could be considered as being dedicated, but were not dedicated in the sense that the constitution was concerned, although there were only one or two pre-statehood dedicated funds. REPRESENTATIVE JAMES asked how many other funds would be affected by HJR 18. MR. BALDWIN believed the Fish and Game Fund was either required by federal law, or pre-statehood and qualified under both criteria. The Fishermen's Fund was a pre-statehood fund, and after that it got pretty few and far between. He advised members that the Public School Trust Fund, which was created in 1978, was land prior to that date, and the department considered that to be one required by federal law. Mr. Baldwin thought there were only two, three at the most, that were pre 1956. REPRESENTATIVE JAMES stated that if HJR 18 passed and the ballot reflected voter approval, it was her understanding that they could change the revenue percentage of the licenses that go into the Fishermen's Fund without destroying the fund. MR. BALDWIN advised members that had been debated over the years and there were opinions regarding that on the books. He stated that the legislature, in the past, had decided not to change the rate of that dedication by relying on the 1959 opinion that believed that could not be done. REPRESENTATIVE JAMES asked Mr. Baldwin if he recalled when the state lost the highway tax, which she assumed was because the state had raised the tax. MR. BALDWIN thought that was what the 1959 opinion was directed towards and the legislature changed that tax in response to that opinion, and decided they would go another route and it all, then, went to the general fund. He believed that was the history of where that 1959 opinion got started and the ultimate result. Number 288 CHAIRMAN GREEN asked if a permit fee or a use fee, for all practical purposes, was a tax, and asked Mr. Baldwin to explain the difference. MR. BALDWIN advised members that the term used in the State Constitution was "state tax or license", but stated that the real answer to Chairman Green's question was that he did not know. REPRESENTATIVE PORTER stated that in light of the new information, why was a new attorney general's opinion not issued that would override the previous one so it would not be an issue. MR. BALDWIN advised members that the department was asked to review the question they were asked, and in preface to his answer, stated that he would have to say that he thought the position taken by the legislature and their attorneys was a good faith legal position, and he would not have any difficulty defending it in court. But the Attorney General's office looked at it, and considering the factors he had mentioned earlier today in his testimony, he felt that the better legal position was that 30 years of consistent conduct on the part of the legislature was pretty strong evidence. Mr. Baldwin stated that it would be hard to stand up in court and say that everything had changed now, that statements made by people during the Constitution Convention had been found that changed everything somehow. Mr. Baldwin expressed that things in the law did not switch around that fast, in the view of the Department of Law, so the Attorney General's office decided to stick with the 1959 decision, and pointed out that stare decisis meant a lot. He expressed to members that the Attorney General's office had advised the governor that the safest course would be for him to create a Sonneman v. Knight vehicle-type fund, which the Senate had described in their hearings recently as "the white picket fence" approach. REPRESENTATIVE PORTER asked if there had never been an inconsistent attorney general's opinion. MR. BALDWIN advised members that he had been around for more than one administration and had found in subsequent administrations that he had sometimes had to digest opinions that he had written in earlier administrations, and asked if that was what Representative Porter was getting at. REPRESENTATIVE PORTER stated that he recognized that stare decisis meant something, but it should not mean something in the face of clear evidence to the contrary; that stare decisis falls just because social mores have fallen over the history of time. Representative Porter stated that what was being debated was a clear mistake of fact. MR. BALDWIN stated that he was not there to get into a debate about who was right, or who was wrong. He reiterated that the position taken by the legislature was one he felt could be defended in good faith and that he thought it had some merit. Mr. Baldwin expressed that he did not want to get into a position where he would say that "you're wrong and we're right", because the court would make that decision and the Department of Law would definitely be involved with defending the case and would be using the best of its abilities to defend the case. CHAIRMAN GREEN stated that when the Department of Law finds evidence contrary to a long standing practice and stay silent, if that was fulfilling the obligation of the office to not bring that evidence forward. MR. BALDWIN advised members he believed the Attorney General's office had to provide the best opinion as to how they thought the law should be interpreted. He expressed to members that to say the information had "just" been discovered was not truly accurate because members could find history included in Attorney General opinions going back a number of years that they had been aware that the history existed in the minutes. Mr. Baldwin pointed out that the writers of those opinions said they felt the original interpretation still had merit, and he stated that he felt it had been with eyes open that the department adhered to the earlier opinion. Mr. Baldwin stated that he did not believe they had breached any ethical obligations to the legislature or the governor, but just called it the way they had seen it. CHAIRMAN GREEN asked if the prior opinions had acknowledged the new information of the Constitutional Convention. MR. BALDWIN advised members he would provide the opinion; however, basically, it just acknowledged that there was discussion to the contrary during the convention. He felt members were well aware that discussion at the State Constitutional Convention was a lot like what occurs in the legislature; i.e, debate on the floor where any number of opinions were expressed by people who may, or may not have a good understanding. Mr. Baldwin stated that now, to seize upon some evidence that you find favorable was one of the factors to consider when interpreting a statute, or the constitution, and the Attorney General's office was saying that all the other things needed to be considered as well, like the long standing contemporaneous construction, the words of the constitution, and what the people thought. He advised members there were several things that a person has to look at when you construe the Constitution, and he thought it was a little dangerous to say; "Well, in the minutes of the Constitution this was said and we liked what was said, and that should carry the day", was not the case. Mr. Baldwin explained that when the court looks at it, they would look at the wording of the Constitution, the dictionary to see how people would understand those words, and look at what the people were told at the time the Constitution was construed, and then they apply common sense to all of those things and arrive at an interpretation of it. Mr. Baldwin stated that to look at just the minutes of the Constitutional Convention was not looking at the whole picture for how to construe it. MR. BALDWIN stated that taking all that together, the construction could be the other way and he did not want to sit there and create evidence against the state's case. He stated that if the tax was enacted, he wanted to point out to the committee all the legal considerations that were there and that they understood them fully, and hoped members did not have bad feelings about the Attorney General's office, because he was there to defend what they had done and he believed they had done it right. Mr. Baldwin expressed that they just wanted to bring another objective view point about how the constitution might well be interpreted. Number 655 REPRESENTATIVE BERKOWITZ wanted to make sure that the committee would not ascribe too much importance to attorney general opinions because, with all deference to the Attorney General's office, they did not carry much precedential weight in the courts. He stated that in essence, they were maybe one small notch above the legal conclusions reached by a private law firm in its own brief, and while they might help guide the state's conduct, the judiciary did not spend much time viewing them for their merits. REPRESENTATIVE PORTER stated that the only difference was, which he was sure that Representative Berkowitz was aware, that, unfortunately, an A.G.'s opinion was law until it was overturned by a court and was looked at as law until that happened, so what they were debating could be fixed quicker. Number 693 REPRESENTATIVE ROKEBERG brought to the committee's attention the fact that during his study of the bill relating to the statehood compact, that there was an Attorney General's Opinion Number Six that the attorney general denied even existed, so there were some strange permutations that revolve around attorney general opinions. REPRESENTATIVE CROFT pointed out that included in members bill files was a list of seven dedicated funds that had been submitted by Representative Ivan. He stated that whatever happened with HJR 18, there was some possibility that those funds would be in the same boat, either because the lands, in some cases, or subject was pre-statehood or the enactment of the fund was pre-statehood. MR. BALDWIN had the list in front of him and stated that the list that was provided to the House State Affairs Committee was a little bit longer, and he felt the list had been pared down some. Mr. Baldwin advised members that the U of A Trust Fund was the university's land and came from the management of the lands, was required by federal law and was also pre-statehood. Mr. Baldwin advised members that he was not familiar with the FICA Administration Fund and had not considered it to be a dedicated fund, although had thought of it as a trust fund where revenues were earmarked that come into it. The Fish and Game Fund was pre- statehood and required by federal law. Mr. Baldwin advised members that the School Fund was funded by tobacco tax revenues and the Sick and Disabled Fishermen's Fund was a pre-statehood fund. Mr. Baldwin advised members that he was a little uncertain about the Second Injury Fund as it may be just statutory, but if it was good at all, it was probably required by federal law. Mr. Baldwin advised members that the Public School Trust Fund was a strange fund that was changed in 1978 that was land before and now a dedicated trust fund. MR. BALDWIN stated that of all of those, he thought the Sick and Disabled Fishermen's Fund was probably the one pre-statehood that would be like HJR 18, with 60 percent of crew licenses funding it. Mr. Baldwin reiterated that the FICA Administration Fund was the only one he could not be sure on; however, the rest of them did not seem to fit the category. Number 818 REPRESENTATIVE CROFT stated that those were either dedicated or not, appropriately, as a grandfather from pre-statehood, and to the extent that the list represented a good list of grandfathered dedicated funds, that the same logic of changing the rate would apply to the 60 percent of crew licenses, to half of 1 percent of state land management, and asked if his summation was correct. MR. BALDWIN stated that Representative Croft was correct, except that the half of 1 percent to the Public School Land Trust was established after statehood, reiterating that it was a strange one. He believed that the funds preceding statehood would be the Fishermen's Fund and maybe the Second Injury Fund. REPRESENTATIVE ROKEBERG thought the Second Injury Fund was a pooling of monies from workers comp, like a re-insurance funded pool; however, it did exist before statehood. REPRESENTATIVE PORTER moved to report CS HJR 18(STA) out of committee with individual recommendations and attached fiscal notes. There being no objection, CS HJR 18(STA) was reported out of committee. SSHB 132 - MUNICIPAL TAXATION OF ALCOHOL Number 922 CHAIRMAN GREEN advised members they would next consider SSHB 132, "An Act relating to municipal taxation of alcoholic beverages." REPRESENTATIVE GARY DAVIS, Prime Sponsor, SSHB 132, advised members the bill would eliminate the restriction on municipalities as to what degree they could tax alcohol. He pointed out that the rationale for the proposed legislation was to allow municipalities to generate additional new revenues, if they saw fit, for the purpose to address mandates that had been created either by state law or federal law, as well as problems created by society. REPRESENTATIVE DAVIS expressed that the last time he addressed the committee on the bill he made a commitment to certain members that he would address the concern over what exactly the revenues would be used for. He advised members that it was the intent that any revenues derived from additional alcohol taxes be utilized for alcohol related services. Representative Davis stated that to the degree that was able to be accomplished, he felt went to some degree, to the debate members just addressed; how do dedicated funds relate to municipalities and their ordinances, statutes, bylaws, articles of incorporation, charters, or however municipalities were established. REPRESENTATIVE DAVIS advised members that some of the information in members bill packets was not definitive in how it addressed the question, noting that apparently there had been opinions on either side of the issue that the Constitution of Alaska could be interpreted that the restriction on dedicated funds to the state would also relate to municipalities. REPRESENTATIVE DAVIS advised members that he had provided an amendment for the committee's consideration that related to the question, the concern and the intent regarding whether municipalities should increase their alcohol tax, reduce the tax, or utilize their existing alcohol tax for alcohol related services. He stated that the amendment strengthened the intent of the bill, that it did not mandate that it be done, although it mandated that the ballot reflect the intent of the bill. REPRESENTATIVE DAVIS believed that the content of the bill was fairly straight forward and that the amendment might complicate things, but he would certainly accept the committee's recommendation. Number 1206 CHAIRMAN GREEN stated that if the bill should be enacted and a municipality were to invoke an increase in tax on alcohol and it was subsequently held that funds could not be dedicated if that would negate the vote of the municipality. REPRESENTATIVE DAVIS advised members he could not answer that question explicitly; however, felt that HB 132 would not address that, that it would have to be completely within the municipality's hands. He thought that through some discussion, and information that had been provided by Mr. Kevin Ritchie addressed a situation whereby that happened in Juneau. Representative Davis noted that it was up to the municipality to craft the wording on a ballot so that, hopefully, the voters would know what they were voting on. REPRESENTATIVE PORTER declared a point of order and asked what was before the committee. CHAIRMAN GREEN stated that members were considering SSHB 132 and that Representative Davis had explained a proposed amendment that addressed members concerns from a previous hearing. REPRESENTATIVE CROFT moved to adopt SSHB 132. There being no objection, SSHB 132 was adopted. REPRESENTATIVE JAMES moved to adopt Amendment 1, titled E.2 Ford, 3/28/97, page 1, following line 15, insert a new bill section to read; *Sec. 2. AS 04.21.010 is amended by adding a new subsection to read: (e) If a municipality imposes a tax on alcoholic beverages under (c) of this section and the tax imposed on alcoholic beverages is higher than the tax imposed on other sales, the municipality shall comply with the provisions of this subsection. A municipality, when holding an election to impose a tax on alcoholic beverage as described under this subsection, shall include a statement on the election ballot indicating that it is the intent of the governing body that revenues, if any, will be appropriated by the municipality for alcohol related services provided by the municipality. Renumber the following bill sections accordingly. Representatives Porter and Rokeberg objected. REPRESENTATIVE DAVIS advised members that he had spoken to Representative Porter and understood his objection to the proposed amendment. He thought there had been concern about the constitutionality of the amendment; however, he felt it was crafted in a manner that it addressed the problem of wanting to see stronger intent within the bill language. The intent was that any additional taxes would be spent on alcohol related services. REPRESENTATIVE PORTER pointed out that there were two or three levels of consideration within the bill, and often times what occurs was interpreted as how a member thought about the tax. He asked that members not interpret what he was about to say about how he personally felt about the tax. Representative Porter advised members that his objection to the amendment was purely on the philosophical position that he had stated to the committee before, that one could look at the statute as somewhat protectionist in the first place, and now, with the amendment, it was saying if you want to violate a protectionist statute, the legislature was going to direct how the money would be spent. He did not believe it was the job of the legislature to tell cities what to do with a resource of theirs. Representative Porter advised members he would hope the cities would spend those funds as intended by the bill, but philosophically he did not want to sit there and say, "thou shalt do this". Number 1502 REPRESENTATIVE ROKEBERG stated that he had provided two sample ballots to the committee aide to distribute to the members, which were in the municipality of Anchorage election in 1994 and 1995. He directed members attention to the language of the ballot in the 1994 sample, that stated: "The intent of this section is to levy a special alcohol sales tax on alcoholic beverages and, to the maximum extent allowed by law, to use the revenues derived to expand health, education, recreation and public safety within the Municipality of Anchorage." Representative Rokeberg felt there were some legal actions taken on that language. REPRESENTATIVE ROKEBERG stated that the following year, the same ballot was again before the voters; however, did not speak to that type of dedication. He pointed out that he supported the view expressed by Representative Porter, and that he was very much opposed to dedicated funds, philosophically. Representative Rokeberg felt that amendment 1 was another subterfuge that the legislature endeavored to use time after time to do that. He advised members he was concerned with and would not support the amendment. Representative Rokeberg also believed there was some case law that would shoot it down. Number 1584 REPRESENTATIVE CROFT advised members that it seemed to him that the amendment was constitutional and there was nothing wrong with the legislature making its intent clear, although there might be something philosophically improper with the amendment. He appreciated that example ballot distributed by Representative Rokeberg as to how the ballot might look. Representative Croft advised members that he did not know whether the statement on a proposition, "to be used for alcohol related services", was binding on a municipal government, or not. He believed that was a constitutional dedicated fund complicated by the difference of a municipality and a state. REPRESENTATIVE CROFT pointed out that placing language on a ballot had some political, if not constitutional or legal affect. He advised members that if the legislature stated that alcohol tax rates would be increased 1 percent above the normal sales tax rate and those funds would be used for alcohol services, and it got used for trips to Washington, D.C., he thought he would know what was going to happen. If there was no outcry about it, he thought that was the business of the municipality, its elected officials and the next re-election. Representative Croft was not as concerned about the pure constitutionality end of it. He reiterated that the amendment was constitutional; however, whether it was binding after the proposition was done he did not know, but he was comfortable leaving that up to the public process at the municipal level. REPRESENTATIVE JAMES expressed her agreement with both Representatives Porter and Rokeberg on the issue. She stated that hearing a request from the municipalities who wished to increase the tax on alcohol was something they wanted to do that existing laws did not allow for. Representative James advised members that there was a case in the Fairbanks area where they were only able to increase the rate on alcohol because the bed tax had been increased. She did not believe a municipality would be bound to expend the funds for alcohol related services, and if the legislation included intent language and the municipality did not spend those funds as indicated in the bill, would it result in the legislature having to amend the law to state that they could not increase the tax on alcohol unless they used the funds as specified in a new bill. Representative James pointed out that it was only intent language, not a mandate, and believed it was the same intent of the municipalities to spend the funds as intended by the bill. Representative James advised members that although she did not have a problem with dedicated funds, she did have a problem with designated funds because they did not go to the people for a vote. Representative James pointed out that the committee would be considering another bill, which she would not mention, that was on the same issue which she was violently opposed to. She advised members that she would support SSHB 132 because she knew the municipalities wanted it, and they could not do anything without the help of the legislature. Number 1862 REPRESENTATIVE DAVIS expressed that he could appreciate the policy concern and explained that the amendment proposed to address a concern brought forward by a committee member, and was not necessary for the intent of the bill, the intent of the makers or the intent of the sponsor. CHAIRMAN GREEN asked if the objections were maintained. Representative Porter maintained his objection, so a roll call vote was taken: In favor: Representative Croft. Opposed: Representatives Bunde, Porter, Rokeberg, James, Berkowitz and Chairman Green. Amendment 1, SSHB 132, failed adoption by a vote of 6 to 1. CHAIRMAN GREEN now accepted testimony via teleconference from Anchorage, and invited Don Grasse to address the committee. Number 2003 DON GRASSE, Executive Vice President, & General Manager of K & L Distributors, advised members they were a distributor of wine, beer and spirits. He noted that he was also the president of the Alaska Wine and Spirits Wholesalers Association. Mr. Grasse advised members that the association he represented opposed SSHB 132 because they felt that beverage alcohol products were already highly taxed, at both the federal and state level, and the proposed legislation would open up a third level of taxation for those products. Mr. Grasse pointed out that they felt that Alaskans were already taxed higher on alcohol than most other states, being the fifth highest state in the country taxed on spirits, and the 10th highest state in the country with the taxation on beer and the 15th highest state in the country with taxation on wine. MR. GRASSE advised members that the high cost of freight charges to Alaska, combined with the higher alcohol taxes, required Alaskans to pay more for alcoholic beverages than most other states in the country. He stated that the residents of Anchorage had been faced with an 8 percent alcohol tax increase in 1994 and 1995, and Alaskans voted that proposition down twice in a row in back to back elections. MR. GRASSE explained that sales of alcoholic beverages had not been healthy in the state since the 1990 federal excise tax increase. Beer sales and spirit sales had decreased over the past 4 to 6 year period, and they felt that the increase in taxes would further the sales decline, which would have an impact on businesses such as K & L, Alaska Distributors, as well as small bars, restaurants and stores that sell alcohol. He pointed out that passage of SSHB 132 would impact people's employment status. Mr. Grasse noted that while those jobs were not high profile like oil industry jobs, they were service positions that were the backbone of many of the communities in the state. MR. GRASSE advised members K & L also believed the bill singled out an industry and discriminated against it by putting the alcohol industry at a competitive disadvantage to other service and beverage industries. TAPE 97-55, SIDE A Number 000 REPRESENTATIVE ROKEBERG noted the mention of municipality elections by Mr. Grasse, and asked if he was speaking to the 1994 - 1995 elections. MR. GRASSE stated that was correct. REPRESENTATIVE ROKEBERG pointed out that the voters of the municipality of Anchorage turned down any increase in taxes at that time, and asked if that was correct. MR. GRASSE responded in the affirmative. REPRESENTATIVE ROKEBERG asked if Mr. Grasse recalled if any litigation had resulted, or if he knew anything else that he could pass on to the committee. MR. GRASSE advised members that he believed with the first election there was some potential litigation on whether those taxes could be dedicated or not. He did not believe the judge made a ruling because of the impending results of the vote, and when the issue failed, it killed the decision. REPRESENTATIVE ROKEBERG stated that that was why the ballot proposition did not include a provision as to where, or how the money was to be spent. MR. GRASSE stated that was correct. REPRESENTATIVE ROKEBERG asked Mr. Grasse if he had any idea how many people were employed in the beverage dispensary and restaurant business in the state of Alaska. MR. GRASSE stated that for Anchorage, alone, approximately 5000 people were employed in that area, so he would estimate statewide, it would be closer to 7500 to 10,000 positions. REPRESENTATIVE ROKEBERG stated that the fact that there would be an increase in taxation on any type of alcohol, spirits or wine, could have a major impact on the commerce and economy in the state of Alaska. MR. GRASSE advised members that was the opinion of K & L Distributors. REPRESENTATIVE ROKEBERG stated that notwithstanding the fact that people may have different opinions on the issue, there would be a definite economic impact of any increased taxation on alcoholic beverages. MR. GRASSE response was, "absolutely." CHAIRMAN GREEN invited Pat Poland to provide comments on SSHB 132. Number 189 PAT POLAND, Director, Municipal and Regional Assistance Division, Department of Community and Regional Affairs, advised members that the department was in support of the proposed legislation. He stated that they believed that it would provide municipalities an additional tool to deal with the issue of raising revenues for the purpose of delivering local services, and the fact that voter approval is required for any sales tax, that the bill contained adequate safeguards to preclude the abuse of taxation power. REPRESENTATIVE BUNDE asked if Mr. Poland felt the proposed legislation would mandate the municipality to raise alcohol taxes if the bill were enacted. MR. POLAND advised members that it would not, that it was the opinion of the department that it clearly gave the municipality the option of increasing the tax. REPRESENTATIVE BUNDE pointed out that the municipality of Anchorage had attempted to raise their alcohol tax many times and had failed each time, and asked Mr. Poland if he would agree with that. MR. POLAND advised members that would be a correct statement. JIM ELKINS, representing the Ketchikan Charr [Ph], advised members that over approximately 25 years while he had represented the Ketchikan Charr and State Charr as a lobbyist, and personally in Juneau, to his recollection it was never the intent of anyone in the original drafters of Title 4 to segregate the right to levy taxes on liquor to anybody, other than the state of Alaska except through a general sales tax. Mr. Elkins pointed out that he had been active in the re-write committee that re-wrote the bill back in the 1980s, and the provision was dropped and excluded municipalities. Mr. Elkins advised members that when Senator Eliason realized that provision had been dropped, it was again brought up the following year and put back in. Mr. Elkins stated that there were four communities in the state who had jumped on the band wagon, and they provided a six month window for other municipalities to come on board, which none did. MR. ELKINS stated that if the legislature began to subrogate their right to levy an excise tax on alcohol on the citizens of the state, as well as a tobacco tax, they would be giving up a power that should be exclusively a power of the legislature. He urged that members consider keeping that power where it belonged. MR. ELKINS reiterated that the Ketchikan Gateway Borough passed a resolution that stated that all taxes ought to be levied equally across the board, and not just on any special industry or to any group of people. REPRESENTATIVE CROFT advised members that Juneau had grandfathered in, and asked what other three communities had grandfathered in. MR. ELKINS stated that it was Craig, Juneau, and he could not remember the other two right off hand, but was fairly sure four communities had grandfathered in. Number 515 REPRESENTATIVE JAMES stated that if the bill did not pass, municipalities presently had the ability to tax alcohol providing they taxed everyone. MR. ELKINS stated that any municipality could levy a general sales tax on everything solely within the municipality. REPRESENTATIVE JAMES stated that the only reason they would want the legislation was because they wanted to tax alcohol only, or they wanted the alcohol tax to be higher than the other taxes. MR. ELKINS stated that would be true. REPRESENTATIVE ROKEBERG asked that Mr. Elkins revert to the period he was talking about when the statute was re-written and the grandfathering occurred. He noted that Mr. Elkins had indicated that he thought one of the main rationales was the preservation of the power of the state of Alaska to tax alcoholic beverages, and asked if he might expand on that. MR. ELKINS advised members that he was asked to travel to Juneau during the Hammond Administration to represent the industry and the re-write of Title 4. In the old Title, it had been pointed out more than once, that the state of Alaska reserve the right to tax certain things exclusive to the state, of which one was oil and one was alcohol. Mr. Elkins advised members they went through the whole process and when it came out of the print shop it passed the House and Senate and then realized it was not included, so Senator Eliason from Sitka was the first to notice that. He then brought it back before the body the next session and brought the amendment forward that restated that language. Number 665 REPRESENTATIVE BUNDE asked if Mr. Elkins was opposed to the legislation because he felt it would impact the alcohol dispensing industry and reduce the use of alcohol. MR. ELKINS advised members that he believed the state should hold the power to tax, and municipalities should not have the ability to levy any kind of special excise tax on liquor or any other substance. He pointed out that on behalf the Alaska Charr, during the last legislative session, they came forward and attempted to get the state to consider raising some sort of alcohol tax and were not able to get much support by the legislature. REPRESENTATIVE BUNDE expressed that the committee had just received testimony from a gentleman in Anchorage who stated that there were thousands of people employed in the Charr industry, and to allow a municipality to raise a tax would probably reduce the volume of business and negatively impact people employed in the industry. He asked if Mr. Elkins would agree with that. MR. ELKINS stated that he believed that would be the case, and referred to how sales had decreased since the federal excise tax was raised. He pointed out that he had less employees now than he did prior to that tax, and advised members that he was second generation in the business and could not believe the difference between today's consumption and the consumption during his father's day. REPRESENTATIVE BUNDE agreed that raising taxes did reduce use. MR. ELKINS advised members he had lobbied in Juneau for the two drink limit, for additional training courses for bartenders and also for lobbied in support of eliminating happy hours, as well as lobbied in support of DWI's. He believed that taxes had something to do with less consumption; however, individual responsibility had the most to do with it. REPRESENTATIVE BUNDE agreed with that statement. REPRESENTATIVE ROKEBERG asked if Mr. Elkins felt a 10 cent tax would have only a marginal affect on a person's decision to drink or not. MR. ELKINS advised members that alcoholics would drink regardless of the price, and where they drink and how they drink, if additional taxes were imposed. He felt bar sales might decrease and liquor store sales increase, and added that people who abuse alcohol were generally liquor store customers. CHAIRMAN GREEN noted that the meeting was running late, and there were yet four people to testify in Juneau. REPRESENTATIVE ROKEBERG advised members it was necessary for him to leave, and expressed that he had additional concerns with the bill. CHAIRMAN GREEN advised members he would hold the bill over for further comments. DON DAPCEVICH, Executive Director, State Advisory Board on Alcoholism and Drug Abuse, advised members the Board favored passage of the proposed legislation. He pointed out that it had the potential to help municipalities deal with the costs associated with the administration of their criminal justice system, hospitals and treatment facilities, and also would provide the opportunity to make their own self determinants on how much they want to put into that effort, and how much they want to spend. MR. DAPCEVICH reminded members that the treatment and prevention efforts had been quite successful if the amount of drinking in the state had reduced, as indicated by the testimony of the previous speaker. REPRESENTATIVE ROKEBERG asked Mr. Dapcevich what he felt the proposed legislation would accomplish; if it would provide for more revenues for the municipalities or was it more of a focus in the diminishment of consumption because of a higher cost. He believed it was a relatively marginal cost increase to a consumer. MR. DAPCEVICH did not think the cost issue would have a great affect, because the marginal increase was very small. He stated that if the cost were substantially increased, it would have some affect on the use of alcohol. Mr. Dapcevich stated, however, that every time the cost of alcohol was raised, even marginally, there had been some affect in consumption. He believed the last large increase in alcohol taxes occurred in 1980 which resulted in a significant drop in use of alcohol for a period of years after the increase. Mr. Dapcevich thought the affect was directly proportional to the margin or percentage of increase. GARRY PESKA, Alaska State Hospital and Nursing Home Association, advised members they were in support of the proposed legislation. He stated that while members had concerns about the health care aspect of the bill and the impact that alcohol abuse had on the health of Alaskans, their specific focus was on uncompensated costs that hospitals incur when public inebriates are picked up by the local police department and taken to the hospital. Mr. Peska advised members that state law require that those people receive a medical screening, and if they were incapacitated, they also need to receive additional medical treatment and no one pays for those costs. Mr. Peska advised members that most hospitals in the state of Alaska were owned by the municipalities, and the Association believed SSHB 132 would give a municipality the opportunity to help fund some of those costs for the facilities. LOREN JONES, Director, Division of Alcoholism and Drug Abuse, Department of Health and Social Services, advised members the department was in support of SSHB 132. He pointed out that it did provide a tool to municipalities for many reasons, of which most had already been testified to. Mr. Jones advised members he was also around when the law was changed, and reiterated that if passed, the legislation would restore something that was in statute previously, where municipalities could, separately and differentially tax alcohol. Mr. Jones pointed out that when that changed, the state had always left sales tax up to local communities, and SSHB 132 would allow the municipality to tax alcohol differentially. He believed that by doing so, it would provide the municipalities the opportunity to use those revenues as they chose. Number 1253 REPRESENTATIVE ROKEBERG asked Mr. Jones what was more important to his department, the reduction in consumption of alcohol, or the amount of revenues that might be generated through an additional tax on alcohol. MR. JONES advised members the department's interest was to decrease consumption of alcoholic beverages because they felt it did improve a person's health and would also assist in reducing the number of alcohol related problems as the population was consuming less. Mr. Jones pointed out that it was a known fact that it would never get to the point of zero consumption, and that there would always be problems, and the potential revenues available to a community that would vote to raise the tax would be beneficial even absent the change in consumption. MR. JONES stated that if taxes were raised on a particular product by three cents, no one would want to pay $3.33, so the drink may sell for $3.50, and there could be additional revenues for the business person as well. Number 1336 KEVIN RITCHIE, Alaska Municipal League (AML), and the Alaska Conference of Mayors advised members that SSHB 132 was considered a legislative priority for both the AML and Alaska Conference of Mayors. He pointed out that they consisted of 135 members and it was a unanimous decision to approve the objective. MR. RITCHIE stated with the question, "are you approving a tax", that that was obviously not the case. He noted that the bill spoke to an additional tax being imposed only with the approval of the majority of the voters of a community. Mr. Ritchie stated that the bill did provide a tool to create revenue. He stated that the employment impacts that had been discussed were only in the alcohol industry, and he pointed out that there was a whole lot of other employment built around the alcohol industry such as treating the effects of alcohol. Mr. Ritchie expressed that all of those jobs were in local and state government, and the problem presently was that they were not being compensated except from general funds and general taxes. MR. RITCHIE advised members that it was a significant local issue, and as property taxes increased in general, municipalities and municipal voters needed more tools to allocate that cost burden. Number 1430 CHAIRMAN GREEN advised members that would close public testimony on SSHB 132, and would now be before the committee for deliberations. REPRESENTATIVE PORTER asked if it was the Chairman's intent to move the bill. CHAIRMAN GREEN noted that Representative Rokeberg had requested the bill be held over for the purpose of additional comments. REPRESENTATIVE JAMES advised members that she had mixed feelings on the proposed legislation. She saw the legislation as an opportunity for a municipality to tax, if they so chose, and it also allowed the people of a municipality to vote for or against an increase. Representative James stated the smaller communities may receive more revenues from the source provided in the bill than they did from other sources, which might be to their advantage. She pointed out that she did not favor imposing more taxes on the people of the state; however, she felt if other people were, they should have the opportunity to vote on it. REPRESENTATIVE PORTER agreed with the remarks of Representative James, and asked that the committee move on the bill. CHAIRMAN GREEN felt it was only fair to express that Representative Rokeberg was very opposed to the bill. Having said that, if it was the will of the committee, Chairman Green would accept a motion to report SSHB 132 out of committee. REPRESENTATIVE BUNDE pointed out that he would not vote for the bill if it was mandatory, but because it was permissive, and as he attempted to point out through testimony received from Anchorage, the tax increase would only occur by a majority vote of the people. He did express that he was not excited about municipal revenue sharing. Representative Bunde advised members that the sooner the cost of government was at the local level, the quicker people would be able to decide what were appropriate levels of services. With that, Representative Bunde stated that he would vote for SSHB 132 to offer an option to the municipalities for additional revenue sources. REPRESENTATIVE BERKOWITZ moved to report SSHB 132 out of committee with individual recommendations and attached fiscal notes. There being no objection, SSHB 132 was reported out of committee. ADJOURNMENT Number 1615 There being nothing further to come before the House Judiciary Committee, Chairman Green adjourned the meeting at 3:20 p.m.