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First Session of 30th Alaska State Legislature

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Alaska State Legislature, House District 31
From the Desk of Representative Seaton:

March 27, 2017 Vol. 219


Greetings from Juneau this 70th day of session.  Work towards a fiscal solution continues in earnest throughout the capitol.  The finance committee spent hours last week considering HB 111, which looks to reform our oil and gas tax credit system to limit state liability and increase revenues when prices are higher.  A key part of a stable fiscal plan is ensuring that the state balance sheet is protected against an accumulation of costly credits during low prices or because of bad investments by the oil companies.  Thank you to all the Alaskans who came out Saturday to testify on HB 111.  
 
We also introduced a committee substitute version of HB 115, our comprehensive sustainable fiscal plan, in response to the great testimony and public comments we have received.  Even with a reform of oil credits, new revenues are required if Alaska is going to have a stable and sustainable future.  Alaska needs a way to bridge the peaks and valleys that occur when the budget is too dependent on volatile resource prices.  HB 115 addresses this in two ways, through a careful draw on our investment earnings from the permanent fund and through a moderate income tax.  The bill now guarantees a dividend of at least $1,250 for the next two years and directs $1.69 billion to the general fund.  The biggest change is to the income tax section.  An individual’s state tax liability is now based on adjusted gross income instead of the individual’s federal tax liability. 
 
During testimony, I heard from constituents who were concerned with tying our state income tax revenue to federal tax liability.  Some felt that the federal tax credits and deductions create an inequitable tax system and should not be the basis of ours, and others were concerned with how a change to taxes on the federal level would affect state revenue.  In response, we worked with the Department of Revenue’s tax experts to craft a bill using federal adjusted gross income which will address these concerns but still raise a similar amount of revenue.  The bill includes a $4,000 per person exemption.  The permanent fund dividend is also exempt from the state income tax, which was not an option before.  If implemented, Alaska would still have the 4th lowest income tax in the nation.  We also delayed the effective date to January 1, 2019, to give the administration adequate time to implement the new system.   
 
Tune in to the finance committee this week for discussions on HB 115.  Public testimony will be this Wednesday afternoon and evening.  You can get details on how to participate in the committee section below, or by contacting the Homer or Kenai LIO.
 
Last week I enjoyed visiting with several Kenai Peninsula students who were guest pages on the House Floor.  Hannah Stonorov from Homer was here during her spring break along with her Homer friends Rocco and Sidney Flora, who both live in Juneau during the session with their parents Sarah Banks and Louie Flora.  I’ve attached some photos from their experience as guest pages.
 
Weekly Survey
 
Please take a few minutes and answer two short questions in my weekly survey.  For the results from last week’s survey click here.  The weekly survey link and results will also be available on my webpage AkHouse.org/rep_seaton .

 

Homer McNeil Canyon Elementary student, Hannah Stonorov, tries out the Speakers chair while a guest page on the House Floor last Monday. 

 

House Finance Committee

Mon. - Fri. 1:30-3:30pm
 

HB 57 and HB 59, the operating budget bill and the mental health budget bill, respectively, were voted upon on the House Floor on Monday, March 20.  HB 59 passed the House with a vote of 38 – 2 and has been transmitted to the Senate.  HB 57 was transmitted to the Senate on Friday, March 24, as notice of reconsideration had been given after Monday’s 22-17 vote on passage. 
 
A couple of key provisions in HB 57 failed on the House Floor. The effective date sections failed on a vote of 23-16 as a two-thirds affirmative vote of each body (27 in the House) is required to have an effective date other than 90 days after enactment. (Enactment is usually the day after the Governor signs the legislation.)  Another key vote failed as well.  That failed vote of 22-17 did not activate the Constitutional Budget Reserve (CBR) Fund section.  Any action relating to the CBR requires a three-quarter affirmative vote in both bodies(30 in the House).
 
My expectation is that these sections will ultimately be approved via the final Conference Committee bill. If they aren’t approved, the results would be very harmful.  Here’s why: 

  • Without the specific effective date of June 30 for provisions that are to take effect in the current FY17, or July 1 for the FY18 budget, there would be no state government functions funded for the 90 days after the Governor signs the bill.  For instance, if the Governor signed the budget on May 31, the months of July and August would have no funding because the bill would not be effective until September 1, 2017.  State government would likely be shut down until the portion of the 90-day timeframe that occurred after July 1 ran down.  
 
  • Here is some background related to the CBR provision affected by that vote failure.  After the state has used funds from the CBR, there is an automatic repayment “sweep” of the general fund and general fund sub-funds’ balances that takes place on June 30 per the Alaska Constitution.  This means that at the end of the fiscal year, any leftover funds sitting in the general fund are placed in the CBR, which cannot be easily accessed.  The budget bill contains what is referred to as a “reverse sweep” provision.  The “reverse sweep” returns those swept funds back to the specific sub-funds of the general fund.  Those sub-funds include fund sources used in the budget for tobacco cessation programs, alcohol and substance abuse treatment programs, and the Alaska Marine Highway System, just to mention three of the more than 30 sub-funds, and also includes the Statutory Budget Reserve (SBR) fund.  Sub-fund and SBR balances that would not be returned to the general fund due to this vote failure are estimated to total $500 million ($200 million in sub-funds and SBR balance of approximately $300 million.) 

The “reverse sweep” provision vote most recently failed in 2003.  It caused an immense amount of extra accounting work, slowed or stopped programs for a period of time, and was ultimately passed in the next year’s legislative session with a retroactive effective date.
 
As I mentioned above, I am hopeful that these two hiccups in the budget process will be resolved during future budget negotiations which will result in Conference Committee budget bills.  Now that both budget bills have been transmitted to the Senate, the Senate Finance Committee will likely be finalizing their versions next week.
 
To read the press release and to see highlights of the budget and how it compares to last year’s budget, click here.
 
The majority of last week was spent on oil and gas taxes, HB 111, Oil & Gas Production Tax; Payments; Credits.  The core concepts of the bill are: reducing state liability for credits by severely limiting cash credits to only the area known as Middle Earth (the interior, not Cook Inlet or the North Slope); changing the net operating loss credit to a net operating loss deduction that is carried forward to be used on future taxes; and modifying the current minimum tax and the per barrel credit slightly so that the state begins to capture a little extra revenue at a lower price point than we do now.  Sections of the bill also look to increase the transparency, or the amount of data that is public, in relation to any credits or deductions the state allows. 
 
The Department of Revenue gave a presentation on the history of oil and gas taxes, or how we got to where we are now, and what the various components considered in the bill would do.  Following that, we heard several hours of testimony from the industry.  Rich Ruggiero, the legislature’s oil and gas consultant, presented on Thursday and Friday.  He noted that, when comparing ourselves to other areas of the globe in terms of competitiveness, it is important to note the difference in the types of oil fields.  In a nutshell, Alaska has good rocks that take a long time to drill and then produce for a long time.  We should be comparing ourselves to other places with deep reserves and not to places in the lower 48 which mostly have small and short-lived shale wells.  Mr. Ruggiero also noted that Alaska’s tax system has a lot of levers that are interconnected.  The more levers we try to pull all at once, the more complicated it becomes and the harder to predict.  It may be most effective to focus just on one or two levers.  On Saturday the committee took four hours of public testimony on HB 111.
 
Thursday the committee introduced a new version of HB 115, State Revenue Restructuring Act.  The committee substitute (CS) included the changes made through amendments the committee passed and a new version of the income tax.  The income tax portion of the bill would generate about the same amount of revenue as the originally proposed tax, but it is now based on adjusted gross income instead of federal tax liability.  During testimony last month, we heard from the public and from our testifiers that we may put our revenue at risk by tying it directly to federal tax liability.  In fact, in 1963 the federal tax rates decreased thereby decreasing the Alaska income tax revenue, and this was one of the reasons that Alaska restructured its taxes.  Using adjusted gross income addresses these concerns.  It also ensures that income from long term capital gains is taxed at the same rate as other forms of income, instead of the current lower tax rate the federal tax system gives to capital gains. 
 
Under the new adjusted gross income tax, residents and non-residents will calculate their income tax based on where they fall in the brackets.  This is very similar to the existing federal tax brackets and would capture the same progressive element as using the federal tax liability.  However, because we are creating our own tax rates instead of using the federal ones, we have the opportunity to exempt the permanent fund dividend from the state income tax.  We have also provided a per person exemption for each taxpayer and their dependents.  You can estimate where you might fall in the tax chart here.  [Please note that in the bill itself, there is an error in the bottom bracket; it should say $20,600 instead of $22,600.  The charts here use that updated number of $20,600.]
 
This week we will get into the details of this new CS.  HB 115 will be on the schedule Monday through Thursday.  On Tuesday the Department of Revenue will be available to speak to the fiscal impact and to answer questions.  Wednesday we will hold several hours of public testimony (see the schedule below for details) and on Thursday we will continue discussion of how the tax works.  For more information on HB 115 you can visit my webpage.  The $663 million of new revenue this tax will raise combined with a stable draw from the earnings reserve will put the state on a sustainable fiscal plan and will preserve a portion of our savings for future generations.
 
On Tuesday we will also be holding a first hearing on SB 26, Appropriation Limit & Permanent Fund Dividend; Earnings.  This is the Senate’s version of a structured draw from the earnings reserve account.  Although there are some similarities between HB 115 and SB 26, namely that they draw the same amount from the earnings reserve, I am concerned SB 26 is not a complete fiscal plan.  Without new revenues such as an income tax, SB 26 leaves almost a half a billion-dollar deficit in each year.  This means that we will continue to spend down the savings, leaving future Alaskans with no sustainable draw and there would likely be significant budget cuts which would extend the state’s recession.  SB 26 would provide a dividend of around $1000, compared to HB 115’s $1250.  The bill also contains a ‘spending cap’.  We have tried spending caps before- in fact, there is one in the constitution already- and they are difficult to make work in the way you want.  I look forward to discussions how these bills are similar and where the key differences are.
 
Thursday will be the first hearing on HB 137, State Council on the Arts; Public Corporation.  On Friday we will bring HB 31 back up, Sexual Assault Examination Kits, HB 49, Extend Board of Direct-Entry Midwives, and HB 141, Alaska Workforce Investment Board; Funds.
 

 


House Finance’s Schedule for the Week of March 20, 2017:
Mon. – Fri. 1:30 – 3:30pm unless otherwise noted

Monday, March 27, 2017  1:30 PM
HB 115 - INCOME TAX; PFD CREDIT; PERM FUND INCOME
Bills Previously Heard or Scheduled
 
Tuesday, March 28, 2017  9:00 AM
SB  26-APPROP LIMIT & PER FUND: DIVIDEND;EARNINGS
HB 115 - INCOME TAX; PFD CREDIT; PERM FUND INCOME
Bills Previously Heard or Scheduled
 
Tuesday, March 28, 2017  1:30 PM
HB 115 - INCOME TAX; PFD CREDIT; PERM FUND INCOME
Bills Previously Heard or Scheduled                         
 
Wednesday, March 29, 2017 1:00 - 4:30 PM
HB 115 - INCOME TAX; PFD CREDIT; PERM FUND INCOME
*Public Testimony                                        
1:00 - 4:30 pm Anchorage, Fairbanks, Juneau, Off Nets
                                                                                         
Wednesday, March 29, 2017 5:30 - 8:00 PM
HB 115 - INCOME TAX; PFD CREDIT; PERM FUND INCOME
*Public Testimony
5:30 - 8:00 pm All Other LIOs, Off Nets
Bills Previously Heard or Scheduled
 
*-Public testimony limited to 2 minutes each.
-Please arrive or call 30 minutes prior to the end of the allotted time period or testimony will close early.
-If you are a member of a group with the same message, in the interest of time, please select a spokesperson to testify for the entire group.
- All Off-Net callers are required to hang up immediately after testifying in order to keep as many lines open as possible for other callers.  Testifiers can continue to access the meeting online through www.akleg.gov , click on Alaska State Legislature and then choose the “Live Now” button.” The hearing may be televised on Gavel to Gavel, please check listings.
-Please try to arrive at your LIO 15 minutes early to expedite the sign-in process.
-If you are unable to participate at your LIO, please call the Juneau LIO for an OffNet number to provide your testimony over the phone: 907-465-4648.
-Written public testimony may be sent to the committee to housefinance@akleg.gov.
For more information, contact Amber in the Homer LIO 235-7878 or Mary in the Kenai LIO 283-2030.
 
Thursday, March 30, 2017  1:30 PM
HB 115 - INCOME TAX; PFD CREDIT; PERM FUND INCOME
HB 137-ST. COUNCIL ON THE ARTS: PUBLIC CORP.
Bills Previously Heard or Scheduled
 
Friday, March 31, 2017  1:30 PM
HB 31 - SEXUAL ASSAULT EXAMINATION KITS
HB 49 - EXTEND BOARD OF DIRECT-ENTRY MIDWIVES
HB 141 - AK WORKFORCE INVESTMENT BOARD; FUNDS
Bills Previously Heard or Scheduled
 

 

Rocco Flora, Homer Fireweed Academy student, works as a guest page on the House Floor last Monday.     

FY18 Budget & District 31 
 
My staff has prepared a summary of the FY18 House operating budget that passed the House Floor on 3/24/17 (which is similar to the summary shared in last week’s newsletter.)  The summary highlights those programs and services that people from District 31 have called to check on with my office.  If you need more information or are not seeing a program that you are interested in, please contact Amber in the Homer LIO 235-7878, Mary in the Kenai LIO 283-2030 or Jenny in my office 465-2689 to assist you. 
 
I anticipate Senate Finance will be offering amendments to their version of the operating budget this week and reveal their cut to K-12 Education and Pupil Transportation.  They have proposed a 1-5% cut.  A 5% BSA cut equates to approximately $75 million statewide.  Click here for a chart listing the impacts to each school district.  My staff has prepared a summary of the Senate Finance FY18 operating budget to date, after close out of their subcommittees.  If you need more information or are not seeing a program that you are interested in, please contact the numbers noted above for more information. 
 
Sidney Flora, Homer Fireweed Academy student, works as a guest page on the House Floor last Monday.     
 

Legislative Budget & Audit Committee

Meets as needed throughout the year.

No meeting was held last week nor scheduled for this week.

Other Committees
For more information on what is happening in other committees, please go to the Committee Chair’s newsletters which are linked here and also  located on the  Alaska House Majority Coalition webpage:  AkHouse.org.

Rep. Paul Seaton

Thanks for signing up for my newsletter and engaging in the public process. I try every week to keep you abreast of issues and bills discussed at the committee level, where YOU have an opportunity to participate.




 

Public Testimony Opportunities
In addition to those already noted above.
Contact the Homer or Kenai LIOs noted below for more information.

Monday: 03/27
3:30 pm Senate Resources
Confirmation of Governor’s Appointees
  • Board of Game: Stosh Hoffman
  • AK Gasline Development Corp.: Hugh Short, David Wight, Warren Christian
SB92: Vessels: Registration/Titles; Derelicts
 
Tuesday: 03/28
10 am House Fisheries
Governor’s Appointees to
Board of Fish: John Jenson, Reed Morisky, Fritz Johnson
 
1:30 pm Senate Labor & Commerce
SB38: Pharmacy Benefits Managers
 
3 pm House Health and Social Services
HB54: Voluntary Termination of Life
 
5:30 pm Senate Education
SB96: AK Education Transformation Act
 
Wednesday: 03/29
1pm House Judiciary
HB43: New Drugs for the Terminally Ill
 
1pm House Resources
HB155: AK Mental Health Trust Land Exchange
 
1:00 pm and 5:30 pm House Finance
HB115: Income Tax; Changes to the Perm. Fund
 
Thursday: 03/30
8 am Senate Education
SB78: Perm. Fund Dividend Contributions/Lottery
 
Friday: 03/31
1pm House Resources
HB129: Fish & Game: Offenses; Licenses; Penalties
 
1:30 pm Senate Health and Social Services
SB72: Discrimination: Gender ID; Sexual Orientation
 
3:15 pm House Labor & Commerce
SB14: Transportation Network Companies (ex.Uber)
 
Saturday: 04/01
No meetings scheduled at this time
 
Public testimony (when scheduled) can be given in person at your LIO or call (907) 465-4648 prior to the meeting for a phone option.  Written Comments are best addressed to the chair of the committee where the bill is being heard.  If you are interested in a public testimony meeting that is not listed above please call the Kenai LIO 283-2030 or Homer LIO 235-7878.  For a full list of all upcoming meetings, please visit the Alaska State Legislature’s webpage at akleg.gov
Last week the House passed a fully funded budget to the Senate.  I'm proud of the work we did to protect and support vital services such as education, public safety, and health.
 
Following Bills & Committees

Access bills and committee schedules through the Legislature’s BASIS home page.  Get automatic alerts when a bill is scheduled for hearing or public testimony by signing up for “Track Bills in BTMF”.  Most committee hearings are broadcast on Gavel-to-Gavel at www.360north or through the Live Now tab on the BASIS home page. 
 
NEW!  "Chat with Legislative Information Staff
Monday-Friday between 8:30am and 4pm you will find a new chat interface in the lower right corner of AKLeg.gov. The LIO staff can help answer questions about finding things on the website, answer questions relating to tracking legislation and help you get in touch with your legislator. Let us know how we can help you!
 
Legislative Information Offices (LIO)Our Homer and Kenai LIOs are a great resource for tracking bills and participating in hearings.
 
Homer: Amber Corey 235-7878, 270 West Pioneer Avenue
Kenai: Mary Bea Byrne 283-2030, 145 Main St Loop, Suite 217
 
POMs Email is the preferred method of communication for our office.  POMS is currently operational but may experience a delay in reaching our office.  If needed, contact your local LIO office who can email us your comments.
Last week House Finance heard public testimony on HB 111 Oil & Gas Production Taxes and Credits.
 
Bits & Pieces
 

Apply for your PFD

Don’t forget to apply for your PFD. The deadline is March 31st, 2017.

 

Public Testimony at DEED meeting in Juneau

The State Board of Education and Early Development will meet on March 27-29 in Juneau. The board will take public comment on agenda and non-agenda items starting at approximately 1:15 p.m., March 27. Comment at this oral hearing is limited to three minutes per person and five minutes per group. Public comment can be made for this meeting, during this time only, by calling 1-844-586-9085 if you are outside of Juneau. For participation from Juneau, call 586-9085.

 

AARP Financial Security Workshop

There is an AARP financial security workshop taking place in Homer on April 7th and 8th at the Best Western Bidarka Inn. Please contact Daryl Royce in Anchorage at 907-762-3303, toll free at 1-866-227-7447, or via email at droyce@aarp.org.
 

Contact Us

If you would like to speak to me regarding a specific issue, it is helpful to first get in touch with the member of my staff handling related issues. 

Homer: May-December
270 W. Pioneer Ave., Homer AK 99603
907-235-2921 or 1-800-665-2689; Fax: 907-235-4008

Juneau: January-April
State Capitol – 120 4th St., Juneau, AK 99801
New location: Room 505
907-465-2689 or 1-800-665-2689; fax: 907-465-3472

Kenai: 907-283-9170 (will transfer automatically to Homer or Juneau)

Rep. Paul Seaton Rep.Paul.Seaton@akleg.gov
website:  http://akhouse.org/rep_seaton/

Jenny Martin Jenny.Martin@akleg.gov
Constituent issues and questions, General Capital & Operating Budget information,CAPSIS requests, Personal Legislation

Taneeka Hansen Taneeka.Hansen@akleg.gov
Legislation & Sustainable Fiscal Plans in House Finance, Personal Legislation
 
Joan Brown Joan.Brown@akleg.gov
Operating Budget, Finance Subcommittees
 
Arnold Liebelt Arnold.Liebelt@akleg.gov
Operating Budget, Finance Subcommittees

Tom Spitzfaden  Tom.Spitzfaden@akleg.gov
Intern
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Rep. Seaton's Session Contact Information:
 

Mailing Address:
State Capitol - 120 4th Street,
Juneau, Alaska 99801
Phone: (907) 465-2689
Toll-free: 1-800-665-2689
Fax: (907) 465-3472
email: Rep.Paul.Seaton@akleg.gov

http://akhouse.org/rep_seaton/
 

 
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