MINUTES SENATE FINANCE COMMITTEE 26 April 1996 2:00 P.M. TAPES SFC-96, #95, Side 1 CALL TO ORDER Senator Rick Halford, Co-chairman, convened the meeting at approximately 2:00 P.M. PRESENT In addition to co-chairman Halford, co-chairman Frank, Senators Phillips, Sharp, Rieger and Zharoff were present when the meeting was convened. Senator Donley did not attend. Also Attending: Senator Georgianna Lincoln; Representative Alan Austerman; Representative Con Bunde; Tomas H. Boutin, Director, Division of Forestry, Department of Natural Resources; Nico Bus, Acting Director, Division of Support Services, Department of Natural Resources; Carol Carroll, Special Assistant to the Commissioner, Department of Natural Resources; Clark Gruening, lobbyist; Elmer Lindstrom, Special Assistant to the Commissioner Department of Health and Social Services; Bob Bartholomew, Director, Income & Excise Audit Division, Department of Revenue; Steven (Neil) Slotnick, Assistant Attorney General, Commercial Section, Civil Division, Department of Law; Jetta Whittaker, Fiscal Analyst, Division of Legislative Finance; and aides to committee members. SUMMARY INFORMATION SENATE BILL NO. 201 "An Act relating to the employment of emergency fire-fighting personnel by the commissioner of natural resources." Senator Lincoln testified on behalf of the bill. Senator Sharp moved work draft CSSB 201(FIN) and it was adopted. Senator Rieger moved CSSB 201(FIN) and without objection it was reported out with individual recommendations and zero fiscal note from Department of Public Safety and $250.0 from Department of Natural Resources. SENATE BILL NO. 180 "An Act authorizing the commissioner of the Department of Natural Resources to negotiate and enter into timber sale contracts that provide for local manufacture of high value-added wood products; and establishing an Alaska Forest Products Research and Marketing Program within the Department of Commerce and Economic Development." Tom Boutin, Department of Natural Resources testified on behalf of the bill. Senator Frank moved the work draft CSSB 180(FIN) and it was adopted. Senator Frank moved CSSB 180(FIN) and without objection it was reported out with individual recommendations and zero fiscal note from the University of Alaska and Department of Community and Regional Affairs and $26.5 from Department of Natural Resources. CS FOR HOUSE BILL NO. 404(STA) "An Act relating to the Board of Chiropractic Examiners; and providing for an effective date." No testimony was offered regarding this bill. Senator Phillips moved CSHB 404(STA) and without objection it was reported out with individual recommendations and $26.8 fiscal note from Department of Commerce & Economic Development. CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 397(FIN) "An Act relating to the fisheries resource landing tax and to the seafood marketing assessment; and providing for an effective date." Representative Alan Austerman and Bob Bartholomew from the Department of Revenue testified and answered questions from members. Steven (Neil) Slotnick from the Department of Law explained why credit portion was made retroactive. Senator Rieger moved CSSSHB 397(FIN) and without objection it was reported out with individual recommendations and zero fiscal note from Department of Revenue and $1,300.0 from Department of Commerce and Economic Development. CS FOR HOUSE BILL NO. 211(FIN) "An Act relating to voter registration and to state election administration." Representative Con Bunde briefly explained the bill. Co- chairman Halford held the bill in committee. CS FOR SENATE BILL NO. 201(FIN) "An Act relating to the employment of emergency fire-fighting personnel by the commissioner of natural resources." Senator Georgianna Lincoln was invited to join the committee. Co-chairman Halford indicated that there was a proposed Finance CS in the file which added language that said the commissioner may not use appropriations from state funds for emergency fire fighting personnel engaged in non- emergency activities under this section. It is non-state funds and adds fire suppression funds language to make sure it does not use fire suppression funds. That apparently was the original intent. Senator Lincoln said the department was available to answer and the sponsor statement was available in members' files. She re-iterated that this does not use state money at all and it was never the intent of the language. There is between $250,000 and $500,000 available to be used to generate employment and promote safety for the many communities around the state. Senator Sharp moved work draft CSSB 201(FIN) and without objection it was adopted. Senator Rieger moved CSSB 201(FIN) and without objection it was reported out with individual recommendations and zero fiscal note from Department of Public Safety and $250.0 from Department of Natural Resources. SENATE BILL NO. 180 "An Act authorizing the commissioner of the Department of Natural Resources to negotiate and enter into timber sale contracts that provide for local manufacture of high value-added wood products; and establishing an Alaska Forest Products Research and Marketing Program within the Department of Commerce and Economic Development." Co-chairman Halford indicated there was a Finance CS and noted the primary difference was that it changed the Resources CS in that "the commissioner by regulation would set a maximum number of contracts but not less than two" and the number "two" was changed to "not less than three" and it takes some out of the language on area plans. He said he was concerned about when the legislature authorized some things and then a series of plan requirements the fiscal notes were added to with the very thing that was being authorized. Senator Rieger commented on the bill, AS 38.05.115 and AS 38.05.120. Mr. Tom Boutin was invited to join the committee and explained AS 38.05.115 and said that it limited negotiated sales to 500,000 feet and one year. Co-chairman Halford commented on the up-dated forest land use plan and conflict with forest use plan is deleted. He also indicated the number "two" being changed to "three". The language remains permissive but it takes out things that could be fiscal note generators. Mr. Boutin advised the reason there was an up- date of the forest land use plan in the bill is that forest use land plans become stale after about five years. Senator Frank moved work draft CSSB 180(FIN) and it was adopted. Senator Frank moved CSSB 180(FIN) and without objection it was reported out with individual recommendations and zero fiscal note from the University of Alaska and Department of Community and Regional Affairs and $26.5 from Department of Natural Resources. CS FOR HOUSE BILL NO. 404(STA) "An Act relating to the Board of Chiropractic Examiners; and providing for an effective date." No testimony was offered regarding this bill. Senator Phillips moved CSHB 404(ST) and without objection it was reported out with individual recommendations and $26.8 fiscal note from Department of Commerce & Economic Development. CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 397(FIN) "An Act relating to the fisheries resource landing tax and to the seafood marketing assessment; and providing for an effective date." Representative Alan Austerman was invited to join the committee and testified on behalf of the bill. This bill makes the on-shore and the off-shore processors tax to be more identical. The off-shore processors took the state to court over this tax and one of the reasons they gave was because they were different. The court has sent them back to the state of Alaska to handle the matter administratively. Senator Rieger asked the fiscal note to be amended noting the money was to be directed to ASMI. Representative Austerman said the money being discussed was for salmon marketing and this money was collected on a white fish basis. He is not in favour of the intent language because it created some problems between the two fisheries. One problem is that the white fisheries is paying this tax now and if we are going to go in and rob that out to promote salmon then another loophole has been created if and when this goes to court for them to use as justification. The money that is being collected on this white fish is being held in escrow and probably will not be available for a couple of years. It is expected they will take this matter to Court after the administrative processes have been exhausted. The intent language does not answer any kind of immediate problem for the coming money they were trying to get from the federal government to match the ASMI money that was taken out of the budget. Senator Rieger withdrew his amendment to the fiscal note as he did not wish to go against the wish of the prime sponsor. Co-chairman Halford said it appeared there was a loss on the revenue side and then a gain on the ASMI side. Mr. Bob Bartholomew, Department of Revenue was invited to join the committee. Sections 22 and 23 are allowing for the landing tax to credit programs that are available for the on-shore fishery business tax. If the taxpayers had made contributions to either the scholarship fund or to an eligible education institution they would be eligible for the tax credit they do not have now. It is estimated the potential loss on that fiscal note to be $130,000 and it was just to mirror the two tax programs. The tax at risk with the Court challenge is $7 million per year, what is collected in the landing tax. Two credits are available that are retroactive. Co-chairman Halford said it seemed that any kind of a retroactive tax credit is kind of hard to justify as an incentive for performance that otherwise would not occur. Mr. Bartholomew said if an individual has already made the contributions in those previous tax years they would get a credit. Part of all the provisions of this bill are retroactive to try to say these are complimentary taxes to each other. Co-chairman Halford said if it was a legal thing that has to be done for defensive purposes for other reasons that can be understood. However, any time one sees a tax credit incentive that is retroactive there is another reason rather than encouraging the action retroactively. Mr. Bartholomew said the hope was that there had not been eligible contributions to those organizations. If there has not been there will be no fiscal impact. At this point, however, they have looked at what would be reasonable compared to what has happened in other tax programs. $130,000 is at the top end. Senator Sharp wanted to know if there were any credit applications on file at this time. Mr. Bartholomew said the taxpayers have filed their tax returns and they have paid taxes. Since the credits were not available it is not sure if they would have applied. Steven (Neil) Slotnick, Department of Law was invited to join the committee. He explained why the credit portion was retroactive in the area the credit did not exist before. This seemed to be an easy cure for any potential discrimination. If contributions were made individuals will be able to receive a tax credit same as the fisheries business taxpayers will be able to. Co-chairman Halford stressed that he was only questioning the retroactivity provision and not the equality provision. Mr. Slotnick said he could not guarantee that but possibly there would be a legal argument that the retroactivity does not cure the potential discrimination because there was no incentive before. Co-chairman Halford said the only reason for a tax credit is to get something done that otherwise would not get done. Senator Sharp moved to amend section 29, page 9, line 8 after the word "act" inserting "except section 22" as retroactive. Co-chairman Halford said if the maximum exposure was only $130,000 and if it is clearly advantageous in a legal case in which we stand to lose $7 million he wanted to know that in being retroactive we were really getting our money's worth. Senator Sharp wanted to know how it was legally advantageous to make a contribution tax exemption retroactive. Mr. Slotnick explained why it was advantageous in that they had been taken to Court and presently has been moved back to an administrative hearing. The matter has been taken retroactively from the first day of the tax. The tax was paid under protest. Senator Sharp asked if it was part of the Court case the fact the individual did not get a contribution credit? Mr. Slotnick indicated that it was. Representative Austerman said the reason the matter was taken to Court was because it was discriminatory and was not the same as the on-shore processors were paying or that they were allowed to contribute. That is why the matter is here now and being retroactive is a question that must be decided. Senator Sharp withdrew his motion from further consideration. Senator Zharoff said he would be surprised if any contributions had been made. There is a deadline that must be met to identify any contributions that might have been made. He further said that when the bill was previously before the committee he had wanted to include at the time a tax credit to entice the off-shore processors to develop on- shore. It would create economic stability and jobs in the communities. Senator Rieger moved CSSSHB 397(FIN) and without objection it was reported out with individual recommendations and zero fiscal note from Department of Revenue and $1,300.0 from Department of Commerce and Economic Development. CS FOR HOUSE BILL NO. 211(FIN) "An Act relating to voter registration and to state election administration." Representative Con Bunde was invited to join the committee and explained the bill. Now individuals may register by fax and it removes a requirement that one must sign an oath and brings us into compliance with the National Voter Registration Act. It improves the procedures for absentee and question ballots. It removes deceased voters and convicted felons on a more timely basis. It makes sure the review board will be impartial by not allowing state employees to serve on it and broadens who can serve on the district counting boards, clarifies the ballot tabulation security and will reflect the increased cost of providing voters with printed election materials. There is now available a master registration list that keeps everyone on the list for two general elections and makes them available to candidates and it will encourage people to get out and vote and update their registration. Co-chairman Halford held the bill in committee. ADJOURNMENT The meeting recessed at 2:30 P.M. to a call of the chair.