ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
March 6, 2012
9:02 a.m.
MEMBERS PRESENT
Senator Bill Wielechowski, Chair
Senator Joe Paskvan, Vice Chair
Senator Kevin Meyer
Senator Cathy Giessel
MEMBERS ABSENT
Senator Albert Kookesh
COMMITTEE CALENDAR
SENATE CONCURRENT RESOLUTION NO. 22
Establishing and relating to the Alaska Arctic Policy
Commission.
- MOVED SCR 22 OUT OF COMMITTEE
SENATE BILL NO. 198
"An Act establishing procedures relating to issuance,
suspension, or revocation of certification of police officers by
the police standards council; making certain court service
officers subject to certification by the police standards
council; making confidential certain information that personally
identifies a police officer; relating to requesting or requiring
police officers to submit to lie detector tests; repealing a
provision exempting certain police officers from a prohibition
against requiring certain employees to submit to lie detector
tests; and providing for an effective date."
- MOVED CSSB 198(STA) OUT OF COMMITTEE
SENATE BILL NO. 222
"An Act making a special appropriation to the Department of
Military and Veterans' Affairs to hire a consulting firm to
develop strategies for retention of military installations
affected by the next base realignment and closure announcement;
and providing for an effective date."
- MOVED SB 222 OUT OF COMMITTEE
SENATE BILL NO. 29
"An Act relating to the reporting and analysis of certain
information relating to tax credits, deductions, exclusions,
exemptions, deferrals, and other tax expenditures; and providing
for an effective date."
- HEARD & HELD
SENATE BILL NO. 208
"An Act establishing an Alaska intrastate mutual aid system and
relating to the duties of the Alaska division of homeland
security and emergency management and the duties of the Alaska
State Emergency Response Commission."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SCR 22
SHORT TITLE: ALASKA ARCTIC POLICY COMMISSION
SPONSOR(s): FINANCE BY REQUEST OF AK NORTHERN WATERS TASK FORCE
02/06/12 (S) READ THE FIRST TIME - REFERRALS
02/06/12 (S) STA, FIN
02/23/12 (S) STA AT 9:00 AM FAHRENKAMP 203
02/23/12 (S) Heard & Held
02/23/12 (S) MINUTE(STA)
03/06/12 (S) STA AT 9:00 AM BUTROVICH 205
BILL: SB 198
SHORT TITLE: POLICE OFFICER PROTECTIONS/CERTIFICATION
SPONSOR(s): STATE AFFAIRS
02/17/12 (S) READ THE FIRST TIME - REFERRALS
02/17/12 (S) STA, JUD
03/01/12 (S) STA AT 9:00 AM BUTROVICH 205
03/01/12 (S) Heard & Held
03/01/12 (S) MINUTE(STA)
03/06/12 (S) STA AT 9:00 AM BUTROVICH 205
BILL: SB 222
SHORT TITLE: APPROP: BASE CLOSURE/REALIGNMENT STUDY
SPONSOR(s): STATE AFFAIRS
02/29/12 (S) READ THE FIRST TIME - REFERRALS
02/29/12 (S) STA, FIN
03/06/12 (S) STA AT 9:00 AM BUTROVICH 205
BILL: SB 29
SHORT TITLE: TAX EXPENDITURE REPORT
SPONSOR(s): WIELECHOWSKI
01/19/11 (S) PREFILE RELEASED 1/7/11
01/19/11 (S) READ THE FIRST TIME - REFERRALS
01/19/11 (S) STA, FIN
03/01/12 (S) STA AT 9:00 AM BUTROVICH 205
03/01/12 (S) Scheduled But Not Heard
03/06/12 (S) STA AT 9:00 AM BUTROVICH 205
BILL: SB 208
SHORT TITLE: DISASTER PLANNING AND SERVICES
SPONSOR(s): PASKVAN
02/21/12 (S) READ THE FIRST TIME - REFERRALS
02/21/12 (S) STA, FIN
03/06/12 (S) STA AT 9:00 AM BUTROVICH 205
WITNESS REGISTER
WESTON EILER, Staff
Senator Bert Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SCR 22 on behalf of the sponsor.
THOMAS PRESLEY, Intern
Senator Bill Wielechowski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Related the changes in SB 198 on behalf of
the sponsor.
DAVID SEXTON, Executive Director
Alaska Police Standards Council
Juneau, Alaska
POSITION STATEMENT: Commented on the changes to SB 198.
TERRY VRABEC, Deputy Commissioner
Office of the Commissioner
Department of Public Safety
Juneau, Alaska
POSITION STATEMENT: Answered questions related to SB 198.
KENDRA KLOSTER, Staff
Senator Bill Wielechowski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 222 on behalf of the sponsor.
MCHUGH PIERRE, Deputy Commissioner
Office of the Commissioner
Department of Military & Veterans Affairs
Fort Richardson, Alaska
POSITION STATEMENT: Testified in support of SB 222.
DOUG ISAACSON, Mayor
City of North Pole
North Pole, Alaska
POSITION STATEMENT: Testified in support of SB 222.
SAM GOTTSTEIN, Staff
Senator Bill Wielechowski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 29 on behalf of the sponsor.
MATTHEW GARDNER, Executive Director
Institute on Taxation and Economic Policy
Washington, D.C.
POSITION STATEMENT: Testified in support of SB 29.
MATT WALLACE, Executive Director
Alaska Public Interest Research Group (APIRG)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 29.
JOHANNA BALES, Deputy Directory
Tax Division
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions related to SB 29.
DAVID GIBBS, Director
Department of Emergency Operations
Fairbanks North Star Borough
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SB 208.
JEFF TUCKER, Fire Chief
North Star Volunteer Fire Department and
Member
Alaska Fire Chief's Association
North Pole, Alaska,
POSITION STATEMENT: Testified in support of SB 208.
ACTION NARRATIVE
9:02:44 AM
CHAIR BILL WIELECHOWSKI called the Senate State Affairs Standing
Committee meeting to order at 9:02 a.m. Present at the call to
order were Senators Giessel, Paskvan, Meyer, and Chair
Wielechowski. Senator Kookesh was excused.
SCR 22-ALASKA ARCTIC POLICY COMMISSION
9:03:00 AM
CHAIR WIELECHOWSKI announced that the first order of business
would be SCR 22, which would establish an Alaska Arctic Policy
Commission. On February 23, the committee heard from Senator
Stedman's staff about the need to develop a cogent Arctic policy
in Alaska. The commission would build on the good work done by
the Northern Waters Task Force over the past interim. The bill
has a fiscal note of about $250,000 for FY 13 and FY 14. This
would cover the cost of one staff member for the commission,
travel, printing, and funding for professional service
contracts.
WESTON EILER, staff, Senator Bert Stedman, sponsor of SCR 22,
refreshed the committee on the contents of the resolution on
behalf of the sponsor. He said the resolution was the logical
next step in defining and developing Alaska's Arctic policy.
SENATOR GIESSEL asked for more information about the member
representing an Arctic organization listed on page 3, line 17 of
the resolution.
MR. EILER replied that there are many multi-stakeholder,
international Arctic organizations, such as the Arctic Council
and the Inuit Circumpolar Conference, of which Alaska is a
member or seeking to become a member.
SENATOR GIESSEL requested more information about the fiscal
note. She said she thought $250,000 might be too low for such a
large commission.
MR. EILER offered to provide more information from the
Legislative Affairs Agency regarding the fiscal note, which was
written to include travel and staff coordination.
SENATOR GIESSEL agreed with the expenses, but continued to
question the validity of the fiscal note.
MR. EILER offered to get with Legislative Affairs Agency to
provide more information.
9:07:32 AM
SENATOR MEYER asked if the Arctic commission would replace the
Northern Waters Task Force.
MR. EILER said yes.
CHAIR WIELECHOWSKI noted the resolution had a further referral
to finance.
SENATOR PASKVAN moved to report SCR 22 from committee with
individual recommendations and the accompanying fiscal note.
CHAIR WIELECHOWSKI announced that without objection, SCR 22 was
moved from the Senate State Affairs Standing Committee.
SB 198-POLICE OFFICER PROTECTIONS/CERTIFICATION
9:09:13 AM
CHAIR WIELECHOWSKI noted that SB 198 was before the committee.
The bill changes procedures used by the Alaska Police Standards
Council (APSC) when investigating the conduct of an officer. The
committee heard the bill last week and has since had
conversations with the Department of Public Safety (DPS) and the
Public Safety Employees Association (PSEA). He thanked both
entities for their willingness to address previous concerns. He
said that a new committee substitute (CS) for SB 198 has been
drafted, version D.
SENATOR PASKVAN moved to adopt the CS for SB 198, labeled 27-
LS1306\D, as the working document before the committee.
CHAIR WIELECHOWSKI objected for discussion purposes.
THOMAS PRESLEY, intern to Senator Bill Wielechowski, sponsor of
SB 198, related the changes in SB 198. He read from the
following statement:
The CS you see before you is a product of input from
all sides, and addresses issues discussed during the
last hearing on this bill. The language in section 1
has been cleaned up. In the CS, the Alaska Police
Standards Council is not bound to follow a decision of
an arbitration court when deciding to revoke or
suspend a certificate. Testimony from the Executive
Director of APSC stated the need for the council to
maintain independence in decision making with regards
to revocation, and this change allows for that.
Executive Director David Sexton and Anchorage Police
Chief Mark Mew testified to the fact that the Council
has an independent procedure and looks at the conduct
of a police officer. APSC should not be bound by the
decision of an arbitrator who may focus on process
issues. Section 3 now obligates the Alaska Police
Standards Council to "substantially weigh" the
decisions of arbitrations and employment hearings.
This is different because the decision of employment
cases now must only be considered when deciding to
revoke or suspend a certificate.
Section 4 has been removed. This section expanded the
definition of "police officer" to include court
service officers. Senator Giessel asked whether or not
this would have a fiscal impact on training costs.
After discussion with the APSC, the Department of
Public Safety, and the Public Safety Employees
Association, it was found that section 4 would need
more discussion and work. As of now, that section has
been taken out and the issue of including court
service officers in this bill will be taken up in the
Judiciary Committee.
Sections 5 and 6 now make explicit that pre-employment
polygraph testing is permissible under SB 198. In our
last hearing, both Mr. Sexton and Mr. Mew stated the
need for pre-employment polygraph testing. We have
made progress on this bill and addressed many of the
concerns by the Department of Public Safety, the
Alaska Police Standards Council, and Police Chiefs.
SENATOR MEYER asked why court service employees were removed.
MR. PRESLEY said there were unanswered questions about them.
SENATOR MEYER said he thought they should be included.
CHAIR WIELECHOWSKI explained that it was found that there could
be a large fiscal impact when including court system employees
and more information needs to be sought. Senate Judiciary will
take SB 198 up next.
SENATOR GIESSEL asked for Mr. Sexton's opinion of the changes in
the bill.
9:14:01 AM
DAVID SEXTON, Executive Director, Alaska Police Standards
Council (APSC), commented on the changes to SB 198. He opined
that the bill was moving in the right direction. He liked the
idea of having "a tool to suspend." He said he was not clear
about new Section 1. He gave his understanding that it required
APSC to follow the Administrative Procedure Act. He suggested
adding the word "suspend" to Section 2, where it says APSC is
allowed to "revoke and modify." He said he was happy with
Section 3 changes.
He related that APSC was hoping to remove the words "full time"
from the definition of police officer in Section 4. He explained
that currently APSC has no jurisdiction over seasonal, part
time, or reserve officers. Removing "full time" would allow APSC
to have jurisdiction over all officers. He said he appreciated
the clarification of the pre-employment polygraphs and keeping
the tool for post-employment investigative polygraphs. He noted
if that is done, then Sections 7 and 8 could be deleted.
CHAIR WIELECHOWSKI asked which version of the bill he was
looking at.
MR. SEXTON stated he was reading from version B.
CHAIR WIELECHOWSKI noted that version D was before the
committee.
MR. SEXTON continued to say he was fine with the changes in the
disclosure and privacy rules.
SENATOR GIESSEL asked about Section 3. She read, "The council
shall give substantial weight to the significance of a post-
removal or reversal of a disciplinary action." She asked if Mr.
Sexton was concerned about the words "substantial weight"
because she could not find a definition for them.
MR. SEXTON replied that he also could not find a definition, but
assumed it had a common sense meaning. He said did not have a
problem with the intent behind the words. He noted that
"substantial weight" is difficult to measure, as is "clear and
convincing evidence." He thought the spirit behind the wording
was acceptable.
CHAIR WIELECHOWSKI said an attorney suggested that language. He
pointed out that SB 198 would be heard next by the Senate
Judiciary Committee. He thanked Mr. Sexton for his suggestions.
He pointed out that Section 1 clarifies that APSC follows
procedures under the Administrative Procedure Act.
9:20:48 AM
CHAIR WIELECHOWSKI noted two fiscal notes; one zero note from
the Department of Administration and an indeterminate note from
the Department of Public Safety (DPS). He thought the DPS note
would become a zero note as a result of changes made in version
D.
TERRY VRABEC, Deputy Commissioner, Office of the Commissioner,
Department of Public Safety, answered questions related to SB
198.
CHAIR WIELECHOWSKI asked if the DPS fiscal note would now be a
zero fiscal note.
MR. VRABEC referred to a discussion of the cost to train CSO's
and make them certified police officers. He said that CSO's
receive training now, but not at the same level as a police
officer. Under the legislation, they would have to go to the
Police Academy and it would cost about $11,500 to train each CSO
for 18 weeks. That training could be modified or could be spread
across fiscal years. A related cost would be for overtime shifts
at court houses when CSO's were attending the academy.
CHAIR WIELECHOWSKI asked what it would cost to train 59 CSO's.
MR. VRABEC said $650,000.
CHAIR WIELECHOWSKI asked if the DPS fiscal note was now a zero
fiscal note.
MR. VRABEC thought so.
CHAIR WIELECHOWSKI thanked Mr. Vrabec. He said that legal issues
could be worked out in Judiciary
SENATOR PASKVAN moved to report the CS for SB 198, version D,
from committee with individual recommendations and the
accompanying fiscal notes.
CHAIR WIELECHOWSKI announced that without objection, CSSB
198(STA) moved from the Senate State Affairs Standing Committee.
SB 222-APPROP: BASE CLOSURE/REALIGNMENT STUDY
9:25:41 AM
CHAIR WIELECHOWSKI announced that SB 222 was before the
committee. The bill proposes to appropriate $300,000 to hire a
consulting firm to develop strategies to protect military
installations in Alaska from possible closure as the federal
government begins its Base Realignment and Closure (BRAC)
process. The closure of any Alaskan base should concern both
state and federal officials as Alaska plays a vital role in the
nation's security.
KENDRA KLOSTER, staff to Senator Bill Wielechowski, sponsor of
SB 222, introduced the bill. She related that SB 222 is an
appropriation from the general fund to the Department of
Military and Veteran's Affairs (DMVA). The bill will allow the
state to hire a consulting firm from Washington, D.C. to address
recent budget cuts of $487 billion over ten years, which were
announced by Defense Secretary Panetta. The firm will also
examine pending BRAC closures in 2013 and 2015.
MS. KLOSTER referred to articles in members' packets regarding
what other states are doing about the cuts.
CHAIR WIELECHOWSKI noted the bill came about because of meetings
with DMVA and Senator Murkowski. He called the legislation
critical for Alaska's economy, as well as for the nation's
security. He noted the funding is in the Supplemental
Appropriations bill currently in the Senate.
9:28:48 AM
MCHUGH PIERRE, Deputy Commissioner, Office of the Commissioner,
Department of Military & Veterans Affairs (DMVA), testified in
support of SB 222. He voiced appreciation for the legislation
because it was of critical importance to Alaska. Other states
are taking significant action on infrastructure issues for the
military. He pointed out that the first step is to see what the
Department of Defense considers as Alaska's needs and determine
how to partner with other entities. He gave an example of a need
at Eielson Air Force Base to refurbish the power plant and
privatize energy.
CHAIR WIELECHOWSKI requested information about the Base
Realignment and Closure (BRAC) process, both past and current.
MR. PIERRE spoke of the number one priority of BRAC, a formula
model used to determine the cost of base relocation (COBRA),
which identifies key mechanisms for "racking and stacking"
various base operations. He stressed that Alaska must make sure
it is not in the top five of the list. The goal is to use pieces
from the COBRA model to rate each installation and offset risky
issues before BRAC begins. Two BRAC's have been proposed, one
for 2013 and one for 2015. Congress has to take action for them
to happen. He did not believe Congress would take action to
create one in 2013, but will for 2015.
CHAIR WIELECHOWSKI noted DMVA hired a consultant for the Eielson
BRAC in the past.
MR. PIERRE recalled that in 2005, DMVA hired the Lundquist Group
from Washington, D.C. for $2 million. They worked closely with
the Fairbanks North Star Borough and the Fairbanks Economic
Development Corporation in order to display to the BRAC
Commission the military strategic importance case for Eielson.
That effort will have to be repeated for the upcoming BRAC. He
noted that there was only one installation in the 1993 BRAC that
was saved due to the economic impact on the community and that
was Whidbey Island in Washington. It was the only installation
saved because of the "economic impact" argument. He concurred
with Chair Wielechowski that for the 2015 BRAC the focus should
be on "military strategic importance."
9:33:33 AM
DOUG ISAACSON, Mayor, City of North Pole, testified in support
of SB 222. He related that Eielson was vital to the Northern
Edge exercise last year as well as to Red Flag. He stressed the
strategic importance of Eielson and the need for a consultant
for the BRAC process. He spoke of the devastation to Fairbanks
North Star Borough if jobs at Eielson are lost. He described a
picture of what would happen to North Pole as a result of BRAC.
He called the legislation a necessary first step.
CHAIR WIELECHOWSKI requested a motion to move the bill from
committee.
SENATOR PASKVAN moved to report SB 222, version M, from
committee with individual recommendations and the attached
fiscal note.
CHAIR WIELECHOWSKI announced that without objection, SB 222
moved from the Senate State Affairs Standing Committee.
SB 29-TAX EXPENDITURE REPORT
9:38:02 AM
CHAIR WIELECHOWSKI announced the consideration of SB 29, a bill
which seeks to focus greater public and legislative attention on
"independent state expenditures," which the bill defines as tax
credits, deferrals, waivers, exclusions, and deductions. These
forms of indirect spending constitute a high percent of state
spending, yet they receive relatively little attention in the
annual state budgeting process and are rarely evaluated to
determine whether they are meeting the goals for which they were
initially enacted. The public also knows little about these
expenditures, despite the fact that the state actually writes
checks to reimburse companies for some types of tax credits.
SENATOR PASKVAN moved to adopt the CS for SB 29, labeled 27-
LS0305\I, as the working document before the committee.
CHAIR WIELECHOWSKI objected for discussion purposes.
SAM GOTTSTEIN, staff to Senator Bill Wielechowski, sponsor of SB
29, introduced the bill. He said that SB 29 deals with tax
expenditures which are defined on page 4, lines 13 and 17. He
termed tax expenditures "tax credits." The intent of the bill is
to have information provided to the legislature and public in
order to have a better understanding of where the state's money
goes and whether money given for tax credits achieves its
legislative purpose. According to the Center for American
Progress, tax expenditures make up about 25 percent of federal
government spending. In Alaska, according to the Department of
Revenue (DOR), there were $863 million in tax credits in 2011
for the oil and gas industry. Alaska spends more on tax credits
annually than the budget of DOR, DNR, DEC, LAW, Court System,
and the Legislature combined. That amount is about 15 percent of
Alaska's annual expenditures.
He reported that only 9 states do not publish this type of
disclosure information and Alaska is one of them. The majority
of Alaska's tax credits have no disclosure. Oil and gas credits
do not disclose the value of each credit, where it was applied,
how many jobs it creates, or how much goes to wages. On the
other hand, the Alaska Film Office has tax credit information on
line.
He concluded that the intent of the legislation is to get
information about all tax credits out to the public. He said the
sponsor's intent is to find the right balance between getting
information and creating too much of a burden on DOR to find out
the information.
MR. GOTTSTEIN addressed the changes in the bill by section:
Section 1 makes the short title of SB 29 the "Alaska
Tax Break Transparency Act."
Section 2 requires legislative intent language for any
future tax expenditures in order to make it easier for
DOR to figure out if a particular tax credit is
achieving its legislative intent.
Sections 3-5 are changed to more clearly refer to the
Fall Revenue Sourcebook.
Section 6 is the "meat and potatoes" of the bill. The
first subsection deals with what would be published
annually for each tax credit. It would have statutory
authority and deal with the annual sum, how many
taxpayers there were, what the estimate of tax credits
for the following year would be, and the estimate of
the public cost. In subsection (c) in Section 6, the
goal is to have a one-time analysis of each tax credit
over $1 million to determine whether the statute
authorizing the tax expenditure has achieved its
purpose. Page 4, lines 3-9, describes how that
happens. If it is a new tax expenditure, the analysis
will be done either seven years after implementation,
or one year before the sunset of the tax expenditure.
If it is an existing tax expenditure, there is a five-
year window after the effective date to complete the
analysis. Also in Section 6 is a requirement for an
electronic copy of the report.
Section 7 is the effective date of July 1, 2015. This
date was chosen because DOR is working on creating an
automated system, which was paid for from a $34.7
million appropriation from the legislature last year.
9:45:09 AM
MATTHEW GARDNER, Executive Director, Institute on Taxation and
Economic Policy (ITEP), Washington, D.C., testified in support
of SB 29. He related that ITEP is a non-profit organization that
focuses on federal and state tax policy issues with an emphasis
on the goals of sustainability, transparency, and fairness in
tax laws. He said that SB 29 would take an important first step
toward achieving those goals by requiring regular scrutiny of
Alaska tax expenditures that currently reduce Alaska tax
revenue.
He explained that the basic insight behind tax expenditures is
that a law that cuts taxes for a specific individual or business
is no different, for budget purposes, from a law that directly
spends money on that business or person. The problem is that,
while the legislative budget process imposes regular and strict
scrutiny of spending that is done directly by government, in the
absence of a tax expenditure report, little or no scrutiny is
given to spending that is done through a tax cut. He emphasized
that tax breaks are government spending and should be
scrutinized the same way as appropriations.
He noted that 45 states now require a tax expenditure report.
Five states have enacted new legislation similar to SB 29. SB 29
goes the extra mile to evaluate tax breaks because it requires
information on the equity and efficiency effects of the tax
expenditure. Requiring an evaluation of the effectiveness of tax
breaks requires a lot of work. Some states, such as Washington
and Oregon, are doing very well with the reporting process,
because they dedicate resources up front. Other states, such as
New Jersey, have taken the first step of legally requiring an
evaluation of the effectiveness of tax breaks, but have not
followed through by funding them. SB 29 would make
implementation easier than some states because it requires the
evaluations to be staggered, which reduces costs and provides
adequate time to complete each evaluation.
MR. GARDNER suggested that SB 29 could go further in one area.
It could decouple from federal tax breaks. Oregon is an example
of a state that provides that tax expenditure reports not be
limited to tax breaks created by state law. It also includes
federally created tax breaks. SB 29 should require that new
legislation creating or expanding a tax break must include a
statement identifying the rationale behind the tax break.
9:50:56 AM
MATT WALLACE, Executive Director, Alaska Public Interest
Research Group (APIRG), testified in support of SB 29 because it
would achieve transparency, accountability, and effectiveness in
Alaska's budget and policy making. He related two reasons why
this legislation is important. First, it promotes better policy
making and provides information about whether it is worth it to
provide or increase tax credits. Secondly, it makes sure the
information about tax credits is available and transparent.
JOHANNA BALES, Deputy Directory, Tax Division, Department of
Revenue (DOR), answered questions related to SB 29. She agreed
with the intent of the legislation to provide transparency and
information about tax expenditures, but noted the large expense
to do so. She referred to Mr. Gardner's comment about getting
information from the Film Credit Program on-line, but pointed
out that it would not provide the type of information this bill
is looking for. She said she was aware that LB&A was doing a
performance audit of the Film Credit Program and had assigned
seven auditors to the project, which is expected to take
approximately six months and use a significant amount of
resources to obtain the information. She concluded that the
legislation would be a highly expensive endeavor for the state.
CHAIR WIELECHOWSKI noted that DOR was requesting 16 new full-
time positions, including 8 full-time tax technicians to
manually compile the aggregate tax expenditures, as well as 4
full-time auditors. He recalled several years ago when he filed
a bill for an on-line checkbook, which was done for no cost. He
pointed out that 45 other states are doing performance audits.
He opined that the legislation was a good investment, but he
hoped it could be done for less than has been proposed.
SENATOR PASKVAN asked if Ms. Bales agreed with the coordination
with the tax management system that the legislature put in the
budget a year ago.
MS. BALES said yes. Once that system is up and running, the
ability to compile the information would simply be a report. At
that point in time, tax technicians would no longer be needed to
compile data. With the implementation date of July 1, 2015, the
implementation would not be fully realized until after a
contractor has been identified, or around 2017. In order to meet
the requirements of SB 29, manual compilation of data would have
to be done.
SENATOR PASKVAN referred to oil production tax credits of $1
billion per year, and asked what would be a reasonable cost in
order to get a better understanding of where that money is
going.
MS. BALES did not have an opinion, but said it was something to
think about when undertaking a performance audit. She reiterated
that it would be expensive.
SENATOR PASKVAN asked if the DOR fiscal note was less than 1
percent of the oil tax credits.
MS. BALES said yes.
9:59:36 AM
SENATOR GIESSEL asked if Ms. Bales believed the bill would
clarify where the Film Tax Credits would go. She said she
thought that the film industry did not pay taxes and their tax
credits were bartered to other companies.
MS. BALES requested more information.
SENATOR GIESSEL explained that the state gives the film industry
a credit and those credits are sold to other companies. She
asked how a performance audit would show that.
MS. BALES explained that the report would show the number of
taxpayers that are claiming the film credit. A performance audit
would show the benefit to Alaska from a credit to the film
industry. She noted that there are 16 Alaska-specific credits,
12 of which meet the $1 million threshold, so there would need
to be 12 performance audits.
SENATOR GIESSEL restated her concern. She described a scenario
where the film industry credit was sold to another company and
asked how that credit would show up in a performance audit.
MS. BALES thought it would be shown in two ways in the audit. It
would show up as a credit given to the company that purchased it
and how it affected the film industry.
SENATOR GIESSEL referred to charts on page 106 of the Fall 2011
Revenue Source Book and asked if they summarize the credits for
that tax year.
MS. BALES said that was correct.
10:04:08 AM
CHAIR WIELECHOWSKI noted the original fiscal note for SB 29 was
for $1.7 million and asked for 16 new full time positions. In
the past few days, substantial changes were made to the bill in
an attempt to keep expenses down, and the effective date was set
at July 1, 2015, to give the Tax Division time to get their new
automated tax system operational. That is the system the
legislature appropriated $34.7 million for last year. The intent
of that was to avoid most manual compilation and to rely on a
much less expensive and much more efficient automated system.
He explained that the revenue period for tax expenditures was
changed from annually to 7 years following enactment for new
expenditures, and within 5 years from 2015 for existing tax
expenditures. The definition of tax expenditures was refined in
order to exempt those that add up to less than $1 million
annually and any federal tax expenditures Alaska has
incorporated into its tax code. He concluded that the fiscal
note is now more modest and reasonable. He requested Ms. Bales'
estimation of costs for version I of the bill.
MS. BALES predicted there would be a reduction in the amount for
compilation; however, the performance audits costs may have been
underestimated. Even though federal deductions are not included,
she predicted performance audits would be more expensive because
of the need to include lease expenditures and capital costs in
the oil tax credit program. She pointed out that there are 22
tax programs with their own exemptions, deferrals, and
deductions that go beyond federal corporate income tax
deductions that the department "piggybacks on." Doing
performance audits on those tax programs, within a five-year
timeframe, would be expense. Also, she noted there was little
guidance regarding standards for performance audits in the bill.
She used the film production tax credit as an example and
questioned what standards would be used to audit it. Even with
the changes to the bill, significant resources would be needed.
CHAIR WIELECHOWSKI said he would continue to work with DOR on
the fiscal note.
10:08:46 AM
SENATOR PASKVAN discussed costs that apply to an audit. He
understood that DOR already has an internal duty to conduct
audits and he hoped that DOR was not including those costs in
the fiscal note.
MS. BALES explained that DOR does financial tax audits. The bill
would also require performance audits, which DOR does not do.
Performance audits require a more subjective process and DOR
would need more direction as to how to proceed.
SENATOR PASKVAN inquired about the automated system that is
going out to bid. He opined that the internal audit aspect of
the tax credit systems would be more easily understood.
MS. BALES said that was the expectation.
SENATOR PASKVAN asked if determining whether a credit is meeting
the intent was a legitimate function of government.
MS. BALES said yes, but the legislation is outside the scope of
DOR's mission, which is to collect taxes. Currently, performance
audits are done by LB&A and have specific guidelines and
standards.
SENATOR PASKVAN requested clarification on whether the Tax
Division has the authority to conduct performance audits, or
whether another department should take on this work.
MS. BALES said she has spoken with Chair Wielechowski about that
issue. She said she was not saying performance audits should not
be done by DOR. She voiced concern that the guidelines for
performance audits are not included in the bill. Performance
audits are done by LB&A and contain performance standards.
SENATOR PASKVAN asked if Ms. Bales would be willing to transfer
data to LB&A.
MS. BALES said that is already done.
SENATOR MEYER suggested this legislation could be considered for
LB&A.
CHAIR WIELECHOWSKI agreed to work further on this issue. He set
SB 29 aside.
SB 208-DISASTER PLANNING AND SERVICES
10:17:06 AM
CHAIR WIELECHOWSKI announced that SB 208 was before the
committee. SB 208 creates a framework to facilitate intrastate
coordination during a declared state of emergency. It is based
on model legislation developed by the National Emergency
Management Association (NEMA) and the Federal Emergency
Management Agency (FEMA), along with other parties. It would
allow the state to create a comprehensive, integrated system of
mutual aid at various levels of government to ensure an
efficient and effective response to disasters.
SENATOR PASKVAN moved to adopt the CS for SB 208, labeled 27-
LS0611\B, as the working document.
CHAIR WIELECHOWSKI objected for discussion purposes.
SENATOR PASKVAN, sponsor of SB 208, introduced the bill. He read
from the following sponsor statement:
In 2004 the National Emergency Management Association
(NEMA), in conjunction with the Federal Emergency
Management Agency (FEMA) and a host of emergency
response organizations, began developing and promoting
model legislation for an intrastate mutual aid system.
The Alaska Fire Chiefs Association, Fairbanks North
Star Borough, and Alaska Municipal League worked with
the State of Alaska's Division of Emergency Management
over the past year to transform NEMA's model
legislation into a form that would be most beneficial
to the specific needs of Alaska. Senate Bill 208,
relating to disaster planning and services, is the
result of this cooperation. It is on behalf of these
aforementioned groups that I am bringing this
legislation forward for your consideration.
The Alaska Intrastate Mutual Aid System, established
by SB 208, is essential in that it will provide a
statewide framework for mutual assistance among the
participating political subdivisions in the prevention
of, response to, and recovery from any disaster that
results in a formal declaration of local disaster
emergency. "Political subdivision" means (A) a
municipality; (B) an unincorporated village; or (C)
another unit of local government according to AS
26.23.907.
Through SB 208, the Division of Homeland Security and
Emergency Management will be tasked with playing an
integral part in developing and implementing
guidelines and procedures for the Alaska Intrastate
Mutual Aid System. The Alaska State Emergency
Response Commission, created under the Alaska Disaster
Act, will facilitate the preparation and
implementation of and provide review and make
recommendations about the mutual aid system.
The provisions of the Alaska Intrastate Mutual Aid
System were developed with the goal of supplementing
existing regional or local agreements by establishing
a comprehensive, integrated system of mutual aid at a
statewide level that will ensure an efficient and
effective response to all hazards and disasters.
Though mutual aid agreements between two neighboring
political subdivisions is somewhat common, aid
agreements may not necessarily exist between
subdivisions that do not have a history of sharing
emergency assistance. However, this system would not
prevent participating entities from entering into
supplementary agreements with other political
subdivisions or impact existing or future agreements.
An instance in recent history that demonstrates the
need for an intrastate mutual aid system was the 2009
flooding in Eagle and other villages along the Yukon
River. The Fairbanks North Star Borough did not have
an existing mutual aid agreement with Eagle, which
resulted in barriers to providing timely aid due to
concerns about workers' compensation, liability, and
reimbursement for aid. SB 208 would act as a safety
net in similar situations where aid is needed but no
mutual aid agreement currently exists.
Through SB 208, the Alaska Mutual Aid System would
automatically include all political subdivisions. A
political subdivision may elect to withdraw by
enacting a resolution through its governing body. The
system further allows that a participating entity will
have sole discretion to withhold or withdraw requested
assistance to provide reasonable protection and
services within its own territorial limits. Other
details in the Alaska Mutual Aid System include
guidelines for requesting aid; what assistance a
participating member may request; qualifications and
employment of, and workers' compensation for,
emergency responders; reimbursement procedures for aid
provided by participating political subdivisions; and
definitions.
The dedicated employees and volunteers who serve in
emergency services recognize that emergencies
transcend political jurisdictional boundaries. They,
and the local agencies they serve, understand that
intergovernmental coordination is essential for the
protection of lives and property and for best use of
available assets. By providing the structure for a
statewide mutual aid system, the requesting and
responding entities could be assured of an efficient
and effective response to hazards and disasters.
10:24:58 AM
CHAIR WIELECHOWSKI opened public testimony
DAVID GIBBS, Director, Department of Emergency Operations,
Fairbanks North Star Borough, testified in support of SB 208. He
said he believes that no single Alaskan community has the
capacity to handle all catastrophic events that might occur
within their boundaries. He gave examples of disasters that
would necessitate the flow of resources and assistance from
communities throughout Alaska. He gave another example of when,
in 2009, there was flooding on the Yukon River and cooperation
between communities was vital and complicated. The provisions in
the bill do not replace mutual aid already in place. He agreed
that the system created in SB 208 would help to facilitate the
ability of Alaskan communities to help each other during their
time of greatest need.
10:28:22 AM
JEFF TUCKER, Fire Chief, North Star Volunteer Fire Department,
Member, Alaska Fire Chief's Association (AFCA), testified in
support of SB 208. He said AFCA has been involved for the last
two years in helping to develop a mutual aid system for Alaska
and was the recipient of a grant allowing them to track
resources in the event that a statewide system is established.
Alaska is currently one of only four states without such as
system. He said the bill provides a needed framework to
establish a mutual aid system and addresses key issues,
including liability and compensation, currently not addressed in
statute.
CHAIR WIELECHOWSKI held SB 208 in committee.
10:30:59 AM
There being no further business to come before the committee,
Chair Wielechowski adjourned the Senate State Affairs Standing
Committee at 10:30 a.m.