Legislature(2015 - 2016)HOUSE FINANCE 519

04/15/2016 07:00 PM House FINANCE

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07:30:07 PM Start
07:31:43 PM HB245 || HB249 || HB250
07:32:35 PM Public Testimony: Hb 245, Hb 249, Hb 250
09:04:17 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continuation of 1:30 p.m. Meeting --
Heard & Held
-- Public Testimony Limited to 2 min. each --
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- Written testimony may be submitted to the
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+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
-- Public Testimony Limited to 2 min. each --
Heard & Held
-- Public Testimony Limited to 2 min. each --
HOUSE BILL NO. 245                                                                                                            
     "An  Act   relating  to  the  Alaska   permanent  fund;                                                                    
     relating  to  appropriations   to  the  dividend  fund;                                                                    
     relating  to  income  of  the  Alaska  permanent  fund;                                                                    
     relating to  the earnings reserve account;  relating to                                                                    
     the Alaska  permanent fund dividend;  making conforming                                                                    
     amendments; and providing for an effective date."                                                                          
HOUSE BILL NO. 249                                                                                                            
     "An Act  requiring the electronic  submission of  a tax                                                                    
     return  or  report  with  the  Department  of  Revenue;                                                                    
     relating to  the motor fuel  tax; and providing  for an                                                                    
     effective date."                                                                                                           
HOUSE BILL NO. 250                                                                                                            
     "An  Act   relating  to  the  taxation   of  income  of                                                                    
     individuals; repealing tax  credits applied against the                                                                    
     tax  on individuals  under the  Alaska  Net Income  Tax                                                                    
     Act; and providing for an effective date."                                                                                 
7:31:43 PM                                                                                                                    
^PUBLIC TESTIMONY: HB 245, HB 249, HB 250                                                                                     
7:32:35 PM                                                                                                                    
MATTHEW  ALWARD, SELF,  HOMER (via  teleconference), opposed                                                                    
HB   249.  He   believed  the   state  needed   to  have   a                                                                    
comprehensive  broad-based  solution. Taxing  fisheries  and                                                                    
mining  without dealing  with oil  tax credits,  a Permanent                                                                    
Fund (PF)  solution, and a  broad-based tax would  make very                                                                    
little  difference  in the  budget  gap  but stood  to  harm                                                                    
certain industries.  He had not  seen any  economic analysis                                                                    
on  the   fishing  industry  since  raising   the  fisheries                                                                    
business tax combined  with a motor fuel tax.  He thought it                                                                    
was  important  to  understand  how  the  legislation  would                                                                    
affect the  vitality of the industry  before moving forward.                                                                    
He continued that  when the tax on the  fishing industry was                                                                    
proposed it was stated that  the industry was not paying its                                                                    
way and  that the 1  percent increase would  create balance.                                                                    
Since then,  the Department  of Fish  and Game  (DFG) budget                                                                    
was cut. The department stated  that it would adjust the ex-                                                                    
vessel value of several species  that would bring in over $2                                                                    
million  in additional  revenue.  The  legislature was  also                                                                    
proposing   to  remove   the   Commercial  Fisheries   Entry                                                                    
Commission (CFEC)  fee cap which would  potentially bring in                                                                    
an additional $2 million. He  thought funding government was                                                                    
becoming more  important than management  costs. He  did not                                                                    
believe  it was  the intent  of taxes  on the  renewable and                                                                    
sustainable fishing  industry that  kept Alaskans  and small                                                                    
family businesses  going. He recommended several  changes to                                                                    
the legislation before moving it  out of committee including                                                                    
doing further  economic analysis  before increasing  the tax                                                                    
on canned salmon. He also  thought that raising the floating                                                                    
processor  tax   would  discourage  processors   from  using                                                                    
floaters. In turn, there would  be less processing capacity,                                                                    
less  harvest,   and  less  ex-vessel  value   to  tax.  The                                                                    
developing  fisheries  tax  was  set low  to  encourage  new                                                                    
fisheries  which  benefited  Alaskan residents  and  coastal                                                                    
communities. Raising  the tax  from 1  percent to  4 percent                                                                    
would   discourage  new   development   resulting  in   less                                                                    
potential  future taxable  income. He  encourage members  to                                                                    
consider the  effects of the  bill on  hardworking Alaskans.                                                                    
He thanked the committee.                                                                                                       
7:35:04 PM                                                                                                                    
PADDY  O'DONNELL,  ALASKA  WHITEFISH  TRAWLERS  ASSOCIATION,                                                                    
KODIAK (via  teleconference), spoke against HB  249. Members                                                                    
of the  association fished  out of  Kodiak, Sand  Point, and                                                                    
the Bering  Sea. He spoke  against removing the  minimum and                                                                    
maximum restrictions on the entry  permit card. Most members                                                                    
had  2 to  3  three  hired skippers  on  their vessels.  The                                                                    
change would put  an added burden on the  skippers. It would                                                                    
also make  it more  difficult for  vessel owners  to acquire                                                                    
new  skippers. He  suggested that  the  state should  review                                                                    
increasing  the cost  of registering  a vessel.  He reported                                                                    
that his  vessel registration  was $250  versus $3000  for a                                                                    
permit  card. He  was not  opposed to  taxes but  encouraged                                                                    
committee  members to  involve the  public more  when making                                                                    
decisions.   He  would   prefer  paying   a  higher   vessel                                                                    
registration fee  than a high  permit card fee.  He believed                                                                    
the higher permit card fee  would discourage young fishermen                                                                    
from stepping  into the wheelhouse.  He also  suggested that                                                                    
legislators should  look at requiring  only one  permit card                                                                    
per vessel  to allow  for flexibility  rather than  a permit                                                                    
per person. He thanked the committee.                                                                                           
7:38:32 PM                                                                                                                    
SCOTT HOCKEMA, PACIFIC   STORM    FISHERIES,   KODIAK   (via                                                                    
teleconference),  relayed that  his son  had just  purchased                                                                    
his fishing  permit card.  He spoke of  the poor  fishing in                                                                    
Kodiak  in the  current year.  His  son would  have to  make                                                                    
three  trips  to  pay  for  his  permit  card.  He  did  not                                                                    
understand  why  one  permit card  was  not  sufficient  per                                                                    
vessel.  He   relayed  figures   of  additional   costs.  He                                                                    
indicated that  the additional fees  would not work.  He was                                                                    
unsure  if  length  determined the  permit  fee  amount.  He                                                                    
indicated that  his boat was  about 100 feet long  but there                                                                    
were  58 foot  vessels that  had greater  capacity than  his                                                                    
vessel.  He  was  unclear  about   how  the  fee  scale  was                                                                    
determined.  He  reiterated that  the  fee  of $3000  for  a                                                                    
permit card was entirely too high.                                                                                              
7:41:08 PM                                                                                                                    
JOE    MACINKO,    COMMERCIAL   FISHERMAN,    KODIAK    (via                                                                    
teleconference),  asked   for  consideration  in   the  fees                                                                    
proposed.  He   wanted  equitable   fees.  He   mentioned  a                                                                    
presentation in  Kodiak by Gunnar  Knapp in which  Mr. Knapp                                                                    
stated that  fisheries did not  pay the cost  of management.                                                                    
He supposed  Mr. Knapp's  statement could  be true  for some                                                                    
fisheries  but  he did  not  believe  it  was true  for  the                                                                    
halibut fishery. He  reported that the state did  not have a                                                                    
commercial halibut  biologist. Commercial  halibut fishermen                                                                    
paid the  same tax as  everyone else  paid plus a  3 percent                                                                    
tax to National Marine Fisheries to  take care of all of the                                                                    
related paperwork.  He noted that the  International Halibut                                                                    
Commission  which managed  the  fishery  conducted a  survey                                                                    
fishery amounting  to about a  3 percent tax on  the halibut                                                                    
fisheries each  year. The  amount of  fish they  caught came                                                                    
out of  the following  year's quota.  He thought  there were                                                                    
discrepancies.  He requested  that  the  legislature try  to                                                                    
develop some equity in the state's tax.                                                                                         
7:43:19 PM                                                                                                                    
WILLIAM T. HAWLEY,  MINES   TRUST    CO.,   ANCHORAGE   (via                                                                    
teleconference),  spoke   in  opposition   of  HB   249.  He                                                                    
suggested that the proposed tax  increases were not sensible                                                                    
considering  there   were  other   options  that   could  be                                                                    
exercised such as using the  PF, making additional cuts, and                                                                    
implementing  other  broad-based  taxes. He  also  suggested                                                                    
that the idea  of implementing a mining tax  before doing an                                                                    
analysis  to evaluate  the effect  of the  tax sent  a scary                                                                    
message to  potential investors in  the mining  industry. He                                                                    
thought that Alaska  needed to figure out its  cuts prior to                                                                    
increasing taxes. He relayed that  the exemption from mining                                                                    
tax payments  should remain  at 3.5  years. The  idea behind                                                                    
the exemption was to encourage  the development of new mines                                                                    
in   Alaska.  Increased   mining  meant   increased  royalty                                                                    
payments and the overall tax feed into Alaska's revenue.                                                                        
7:45:55 PM                                                                                                                    
DONALD  L. STEVENS,  SELF,  ANCHORAGE (via  teleconference),                                                                    
spoke   against  HB   249.  He   relayed  his   professional                                                                    
experience  as a  geologist.  He thought  a  "yes" vote  was                                                                    
destructive for  an industry  that could  help the  State of                                                                    
Alaska out of its  financial problems. He encouraged members                                                                    
to vote against raising the  mining license tax. He believed                                                                    
that when  the legislature signaled an  anti-mining attitude                                                                    
by  raising   taxes  the  global  mining   business  noticed                                                                    
immediately.  He relayed  that  the  major mining  companies                                                                    
carefully  monitored and  measured  the  political risks  of                                                                    
numerous  jurisdictions  such  as   Alaska.  Alaska  had  an                                                                    
enormous  potential for  the development  of  new mines.  He                                                                    
suggested  that the  reason  there were  not  more mines  in                                                                    
Alaska  was  due  to   the  apparent  anti-mining  sentiment                                                                    
prevalent  with the  political and  business leaders  of the                                                                    
state.  Conversely, when  a jurisdiction  decisively reduced                                                                    
the size  and cost  of government  the industry  noticed. He                                                                    
cited that  one new mine  would produce more revenue  to the                                                                    
state than  raising the  mining license  tax. He  also spoke                                                                    
against  the  idea  of  a   legislative  working  group.  He                                                                    
compared a legislative  working group to driving  a fast car                                                                    
blindly down  the road with no  notice of the lights  at the                                                                    
intersections. He  suggested that  to review the  mining tax                                                                    
structure  after  implementation  did  not  make  sense  and                                                                    
signaled poor government. He encouraged  members to keep the                                                                    
exemption from mining license tax  payments for new mines at                                                                    
3.5 years  or raise it to  4 years. It would  help the state                                                                    
send a pro-mining message. He  asked members to vote against                                                                    
HB 249.                                                                                                                         
7:48:49 PM                                                                                                                    
MICHAEL  JESPERSON,  SELF, ANCHORAGE  (via  teleconference),                                                                    
spoke  against   HB  249.  He  thought   targeting  industry                                                                    
specific taxes  prior to  cutting the  budget was  crazy. He                                                                    
concluded  that targeting  industries drove  them away  from                                                                    
the state.  He suggested that the  legislature had succeeded                                                                    
in unifying  the mining and  fishing industries  against the                                                                    
bill. He  pleaded for  spending cuts  and analysis  prior to                                                                    
implementing  taxes. He  wanted to  feel confident  that the                                                                    
legislature  knew what  was  going  on and  how  to run  the                                                                    
government. He thanked the committee for its time.                                                                              
7:50:20 PM                                                                                                                    
KAREN MATTHIAS,  COUNCIL OF ALASKA PRODUCERS,  JUNEAU, spoke                                                                    
against HB 249. Members of  the council were businesses that                                                                    
had had  to make tough  decisions over the previous  4 years                                                                    
of declining mineral prices. She  listed a number of actions                                                                    
taken  including  cutting  budgets, freezing  salaries,  and                                                                    
cutting benefits.  She relayed  that the  industry supported                                                                    
strategic  reductions,  the  use  of the  PF  earnings,  and                                                                    
broad-based  revenue  measures  to  deal  with  the  state's                                                                    
fiscal  problems. She  expressed that  the goal  of Alaska's                                                                    
mineral  tax policy  should  be a  balance  of a  reasonable                                                                    
share for  the state  and a  competitive rate  for industry.                                                                    
The  mining  industry  provided   thousands  of  good  jobs,                                                                    
procurement   and    contract   opportunities    for   local                                                                    
businesses, and  state and  local government  revenue. There                                                                    
were  only 5  large operating  metal mines.  It    was  very                                                                    
expensive and  took a long  time to develop mines  in Alaska                                                                    
in part because  of a lack of  infrastructure. She suggested                                                                    
that the state  could help the industry  by providing fiscal                                                                    
stability.  HB 249  increased the  mining  tax rate  without                                                                    
substantive analysis of its  impact and decreased investment                                                                    
incentives.   She   reported   that  the   Alaska   Minerals                                                                    
Commission  had  recommended  that the  legislature  address                                                                    
municipalities  specifically targeting  the mining  industry                                                                    
for special severance  taxes. She read a  statement from the                                                                    
commission from  2005 that talked about  the mining industry                                                                    
expecting to pay  its share of municipal  governments in the                                                                    
form of a  broad-based tax. She read  another statement made                                                                    
by  the commission  in 2013  that addressed  severance taxes                                                                    
shifting  control of  development  decisions  away from  the                                                                    
state. The  council encouraged  the House  Finance Committee                                                                    
to  amend the  legislation to  protect state  sovereignty by                                                                    
making the  legislature the  responsible body  for decisions                                                                    
about special mining taxes. She  suggested that an amendment                                                                    
should eliminate the  ability for a municipality  to levy or                                                                    
collect  a  targeted  tax  on metal  mines,  and  it  should                                                                    
implement revenue  sharing of the Alaska  mining license tax                                                                    
with the municipalities  that host metal mines.  She posed a                                                                    
number of questions legislators  should consider when voting                                                                    
on  the  legislation.  She thanked  the  committee  for  the                                                                    
opportunity to testify.                                                                                                         
7:55:23 PM                                                                                                                    
AT EASE                                                                                                                         
8:04:48 PM                                                                                                                    
8:05:11 PM                                                                                                                    
DEANTHA  CROCKETT,  ALASKA   MINERS  ASSOCIATION,  adamantly                                                                    
opposed an increase  in the mining tax in HB  249. She spoke                                                                    
to  a   lack  of  review   of  the  fiscal  impact   of  the                                                                    
legislation.  She read  a statement  from the  Alaska Miners                                                                    
Association   (AMA)  Board   of  Directors.   The  statement                                                                    
recommended  implementing a  comprehensive long-term  fiscal                                                                    
plan  that  included  budget  reductions,   the  use  of  PF                                                                    
earnings, a reduction in the  Permanent Fund Dividend (PFD),                                                                    
and new  revenue from broad-based  taxes. She  conveyed that                                                                    
the combination  of a motor fuel  tax, a fishing tax,  and a                                                                    
mining  tax  was  not a  broad-based  solution.  The  Alaska                                                                    
Miners  Association  opposed  a  legislative  working  group                                                                    
after the imposition of an  additional tax because it sent a                                                                    
terrible  message of  uncertainty to  mining investors.  She                                                                    
addressed  the  industry's  concern about  the  new  changes                                                                    
prohibiting the  mining exploration  tax credit to  be taken                                                                    
against royalty payments. It would  add no financial gain to                                                                    
the State of  Alaska. It was important to  the placer miners                                                                    
to be able  to recover their investments  in the short-term.                                                                    
She stated that  it was imperative to remember  that one new                                                                    
mine  in  operation  would result  in  significantly  higher                                                                    
revenues to the state than  the proposed increase. She asked                                                                    
for a "No" vote on HB 249.                                                                                                      
8:09:24 PM                                                                                                                    
NORMAN LENON, F/V NUKA  ISLAND, KODIAK (via teleconference),                                                                    
spoke against  the proposed tax  in HB 249. He  relayed that                                                                    
any increased costs  would cut into his bottom  line. He was                                                                    
the captain  and owner of  his vessel. He explained  that he                                                                    
was bringing his  sons up in the fishery. They  wanted to be                                                                    
captains but  he thought the  legislation might  deter them.                                                                    
He  believed that  the legislation  would hurt  residents of                                                                    
Alaska.  He  urged members  to  oppose  HB 249.  He  thanked                                                                    
committee members for their time.                                                                                               
8:11:20 PM                                                                                                                    
JEFF   BENTZ,   SUNDANCE    MINING   GROUP,   WASILLA   (via                                                                    
teleconference), opposed  HB 249. He was  a lifelong Alaskan                                                                    
and represented  a mining company.  He thought the  bill was                                                                    
very  detrimental  to  the mining  industry  in  Alaska.  He                                                                    
thought it  was truly unfair  to attack the  other remaining                                                                    
industries  because   of  a   major  revenue   source  [oil]                                                                    
declining  for  Alaska. He  opined  that  until all  of  the                                                                    
expenses  were cut  at the  state government  level and  the                                                                    
expense side of  the budget was carefully looked  at, it was                                                                    
unfair to tax industry. He  relayed that the State of Alaska                                                                    
was all about  jobs. His company was  invested in increasing                                                                    
the  number  of jobs  for  Alaskans.  He reported  that  the                                                                    
mining  industry   had  been  under   radical  environmental                                                                    
pressures. He discouraged support of the legislation.                                                                           
8:13:49 PM                                                                                                                    
CHRIS WOODLEY, GROUNDFISH      FORUM,      SEATTLE      (via                                                                    
teleconference),  spoke against  HB  249.  He provided  some                                                                    
information  about the  Groundfish Forum.  He reported  that                                                                    
his  organization opposed  the proposed  increased fees.  He                                                                    
claimed that  it would  have an impact  on the  valuation of                                                                    
key  Bering   Sea  species   which  would   quadruple  their                                                                    
taxation. He also  spoke against the proposed  increase of a                                                                    
landing tax.  He suggested  that such  increases made  for a                                                                    
hostile  business environment  for commercial  fishermen. He                                                                    
urged members not to support HB 249.                                                                                            
8:16:00 PM                                                                                                                    
DAVE HANSON, SELF,  ANCHORAGE (via teleconference), strongly                                                                    
opposed the  oil production tax  credit program.  He relayed                                                                    
that he  had been  involved in both  the fishing  and mining                                                                    
industries. He  spoke in favor  of HB 249 given  the state's                                                                    
financial   crisis.  He   thought  the   gasoline  tax   was                                                                    
reasonable. Alaska  had one of  the lowest gas taxes  in the                                                                    
nation at  8 cents per  gallon. He suggested  increasing the                                                                    
fuel tax  to 24 cents which  was the average gas  tax in the                                                                    
nation. He  also recommended a  different set of  prices for                                                                    
certain types of  commercial users. He relayed  that in some                                                                    
states gasoline  tax was 49  cents per gallon.  He commented                                                                    
that  the  tax was  easy  to  implement and  more  palatable                                                                    
because  of  the vast  variation  in  the  price of  gas  in                                                                    
Alaska. People were  already used to the  fluctuation in the                                                                    
price of gas.  He also supported the increases  to taxes and                                                                    
fees  for  fishing.  He  indicated   that  the  majority  of                                                                    
fishermen were not  from Alaska but from other  parts of the                                                                    
country. He  supported the bill increasing  taxes on fishing                                                                    
especially  the  section  that  specified  charging  a  non-                                                                    
resident  surcharge. He  opined that  the mining  industry's                                                                    
future  had more  to do  with the  price of  and demand  for                                                                    
minerals  worldwide  rather  than   taxes.  He  thanked  the                                                                    
8:20:17 PM                                                                                                                    
DAVID HARRIS,  CAPTAIN, F/V ARCTIC MARINER,  WASHINGTON (via                                                                    
teleconference), testified  against HB 249. He  spoke to the                                                                    
rate hike and  relayed that it would be equal  to 10 percent                                                                    
of his income. He stated that  it was difficult to find good                                                                    
crew members and  the increase would make  it more difficult                                                                    
to attract workers. He thanked the committee for its time.                                                                      
8:22:12 PM                                                                                                                    
MARK PALMER, PRESIDENT, OCEAN  BEAUTY SEAFOODS, SEATTLE (via                                                                    
teleconference),  testified  in  opposition of  HB  249.  He                                                                    
opposed the  increase in production  tax for  canned salmon.                                                                    
He  relayed  that Ocean  Beauty  Seafoods  had 6  processing                                                                    
plants in  Alaska and  employed approximately  2000 seasonal                                                                    
employees  as well  as  full time  employees  in Kodiak.  He                                                                    
relayed that in  2013 and 2015 the company had  had 2 of its                                                                    
largest pink salmon production years.  He spoke to the large                                                                    
salmon  runs  in  Bristol   Bay.  Typically,  canned  salmon                                                                    
inventory  was sold  immediately. However,  the company  had                                                                    
carried  its inventory  for 2  years which  helped stabilize                                                                    
the  market.  He spoke  about  the  importance of  a  stable                                                                    
canned salmon  market. He also mentioned  additional revenue                                                                    
sources  within the  industry.  He  continued that  interest                                                                    
rates  had  increased and  would  continue  to increase  and                                                                    
storage rates were high. He did  not think it made any sense                                                                    
to compound  the troubles  in the  market by  increasing the                                                                    
tax on  canned salmon. The  frozen markets were  very fluid.                                                                    
The company had  the ability to push products in  and out of                                                                    
the markets.  However, canned salmon  had 4  retail markets.                                                                    
Those  markets  had  to  be as  stable  and  predictable  as                                                                    
possible.  Therefore,   the  company  had  to   finance  the                                                                    
inventories. He  commented that there were  other sources of                                                                    
revenue  in  the  seafood industry  including  the  offshore                                                                    
processing that  had not really  paid the full value  of the                                                                    
revenue that  had been generated  from some of  the offshore                                                                    
fisheries.  The  other  source  of  revenue  would  be  from                                                                    
companies that  produced products  and paid  their fishermen                                                                    
based  off  of  a  profit  share rather  than  a  fish  tax.                                                                    
Fishermen  were  paid  based  on the  amount  of  fish  they                                                                    
harvested. Everyone else in the  industry paid a landing tax                                                                    
and fishermen  were paid  bonuses at the  end of  the season                                                                    
based  on  production. He  mentioned  one  company that  was                                                                    
paying  as  a  cooperative.   He  suggested  that  prior  to                                                                    
targeting  canned  salmon  the   state  should  ensure  that                                                                    
everyone  was paying  a fair  share.  He did  not think  the                                                                    
global market  could handle the  additional tax.  He thanked                                                                    
the  committee  for its  time  and  for the  opportunity  to                                                                    
8:26:39 PM                                                                                                                    
SIRI   DAMMARELL,  SELF,   LAKE  STEVENS,   WASHINGTON  (via                                                                    
teleconference), opposed HB 249.  She succinctly stated that                                                                    
her  family business  would be  negatively  impacted by  the                                                                    
increase in permit fees. She thanked the committee.                                                                             
8:27:44 PM                                                                                                                    
TIM  MUSGROVE,  RESOURCE   DEVELOPMENT  COUNCIL  AND  ALASKA                                                                    
MINERS ASSOCIATION,  SOLDOTNA (via  teleconference), opposed                                                                    
HB  249 because  it was  not a  broad-based tax.  He opposed                                                                    
raising the  mining license tax  7 percent to 8  percent. He                                                                    
also  opposed  the  legislative  working  group  along  with                                                                    
opposing new changes prohibiting  exploration tax credits to                                                                    
be  taken   against  royalties.  He  recommended   that  the                                                                    
exemption from  mining license tax  payments for  new mining                                                                    
remain at 3.5  years. It would demonstrate  stability to new                                                                    
companies  interested  in  coming to  Alaska.  He  mentioned                                                                    
shutdowns in the oil industry  such as Caelus Energy. He did                                                                    
not  want to  see shutdowns  to operating  mines. He  listed                                                                    
several Alaska mines. He thought  it was great to see mining                                                                    
and  fishing  industries  united  in  opposing  HB  249.  He                                                                    
suggested cutting the  budget more and in  the right places.                                                                    
He strongly opposed  the motor fuel tax as  well. He thanked                                                                    
members for their time.                                                                                                         
8:29:09 PM                                                                                                                    
MARK   HORNE,   SUNDANCE    MINING   GROUP,   WASILLA   (via                                                                    
teleconference), strongly  opposed HB 249. He  reported that                                                                    
the  Sundance Mining  Group was  weeks away  from permitting                                                                    
approval  of  an  underground  hard  rock  gold  project  in                                                                    
Southeast Alaska.  It was a  small company that,  because of                                                                    
the incentive  of the exploration  tax credit  taken against                                                                    
the royalty and mining license  tax, decided to proceed with                                                                    
permitting of  a new  mine. The mine  would provide  25 high                                                                    
paying jobs in a depressed  region. He reported that without                                                                    
the state's incentives he was  unsure that the company would                                                                    
have  moved forward  with the  project. Investors  favored a                                                                    
3.5 year  exploration credit exemption.  He opined  that the                                                                    
clear message HB 249 sent  was that new mine development was                                                                    
not welcome in  Alaska. He suggested that  if the incentives                                                                    
went  away  the project  could  cease  because of  potential                                                                    
risks. He  emphasized that the  3.5 year  exploration credit                                                                    
exemption was  what was bringing  mines into  production. He                                                                    
strongly  opposed  any increase  in  a  mining license  tax,                                                                    
changes  to  the  exploration   credit,  and  a  legislative                                                                    
working group. He thanked the committee.                                                                                        
8:32:17 PM                                                                                                                    
PAUL METZ,  SELF, FAIRBANKS  (via teleconference),  spoke in                                                                    
opposition to HB 249 as drafted.                                                                                                
8:33:08 PM                                                                                                                    
LORNA  SHAW,  POGO  MINE,  FAIRBANKS  (via  teleconference),                                                                    
testified  against HB  249. She  provided information  about                                                                    
the mine and relayed that  it spent significant money in the                                                                    
state's  economy. The  bill  did not  work  for Alaska.  The                                                                    
state  needed  to  look  at  reducing  spending,  using  the                                                                    
Permanent  Fund, and  implementing  a  broad-based tax.  She                                                                    
asked members to oppose the legislation.                                                                                        
8:34:40 PM                                                                                                                    
CODY  HOCKEMA, PACIFIC  STORM, KODIAK  (via teleconference),                                                                    
was a  deckhand on  the Kodiak  trawler, F/V  Pacific Storm.                                                                    
His life's  dream was  to become captain  of the  vessel. He                                                                    
had  just  purchased his  2016  delivery  permit for  $3000,                                                                    
which  was more  than  he would  make on  his  next trip  as                                                                    
captain. He spoke to his  work as a commercial fisherman and                                                                    
conveyed  the  burden he  carried  in  paying the  increased                                                                    
permit price. He stated that  there had been a perfect storm                                                                    
of hits  towards the fishing industry  with season closures,                                                                    
low prices,  and adolescent fish. Fishermen  were simply not                                                                    
making enough  to cover  current permit  costs let  alone an                                                                    
increase.  He  currently  paid  the  highest  taxes  out  of                                                                    
anyone. He  lived paycheck-to-paycheck  and took out  a loan                                                                    
to  get  his  current  captain's  license.  He  opined  that                                                                    
government  fees  were  a ridiculous  reason  to  prevent  a                                                                    
deckhand from advancing to the position of captain.                                                                             
8:36:36 PM                                                                                                                    
COLE  HOCKEMA, PACIFIC  STORM, KODIAK  (via teleconference),                                                                    
shared  that  he  was  a deckhand  on  the  fishing  vessel,                                                                    
Pacific  Storm, in  Kodiak. He  opposed HB  249. Due  to the                                                                    
high cost  of a captain's license  it would not be  worth it                                                                    
financially for  him to  become a skipper.  The cost  of the                                                                    
license  was  stopping  him   from  furthering  his  fishing                                                                    
career. Raising the  cost would make it  even more difficult                                                                    
for  new captains  in the  future. He  urged members  not to                                                                    
support the bill.                                                                                                               
8:37:35 PM                                                                                                                    
TIM MOORE,  SELF, HOMER (via teleconference),  spoke against                                                                    
HB  249.  He understood  the  state's  fiscal situation  and                                                                    
realized  that the  legislature was  faced with  a difficult                                                                    
job. As a fisherman he  was concerned that broad-based taxes                                                                    
would not be  approved but that certain  industries would be                                                                    
singled out.  The fishing industry was  currently faced with                                                                    
low fish  prices and its  profitability was in  question. He                                                                    
shared that fishermen in Prince  William Sound were ready to                                                                    
respond to the  DFG budget. The Department of  Fish and Game                                                                    
was starting  to plan for  test fish authority,  which would                                                                    
add another tax to the  salmon industry in certain areas. He                                                                    
thanked the committee.                                                                                                          
8:39:48 PM                                                                                                                    
249.  He  stated that  it  was  truly unfortunate  that  the                                                                    
notice of  the hearing stated  that HB 249 was  a compromise                                                                    
bill. He  indicated that no  negotiations with  industry had                                                                    
taken  place.  He  thought  the only  thing  that  had  been                                                                    
compromised   was  industry's   faith  in   the  legislative                                                                    
process. There had  been no analysis that  had indicated how                                                                    
the bill  might impact the  mining industry. He  stated that                                                                    
there   was  a   significant  lack   of  knowledge   by  the                                                                    
legislature  on  mining  taxes.  The  current  tax  increase                                                                    
proposal had  nothing to do with  developing a comprehensive                                                                    
tax  policy   but  an  exercise  in   political  cover.  The                                                                    
methodology  for the  selection of  taxes seemed  flawed. He                                                                    
stated that Alaska  had a world-class silver  and zinc mine.                                                                    
Implementing  a tax  increase would  hurt the  mine and  the                                                                    
industry. He  shared that he  had taken students out  to the                                                                    
mine earlier in the day and  had worried about the tax bill.                                                                    
He  asked the  committee  to  hold the  bill.  He asked  the                                                                    
committee  to address  the policy  points  addressed by  the                                                                    
Council   of  Alaska   Producers  and   the  Alaska   Miners                                                                    
Association   including   the   prohibition   on   municipal                                                                    
severance  taxes  to  ensure  financial  certainty  for  the                                                                    
mining industry.                                                                                                                
8:43:17 PM                                                                                                                    
FRANK BERGSTROM, SELF,  JUNEAU (via teleconference), opposed                                                                    
HB 249. He  shared that he was  a miner. He had  not seen an                                                                    
analysis  of the  potential economic  impacts or  effects of                                                                    
the  legislation   and  thought  the  proposed   tax  seemed                                                                    
arbitrary. He added that appointing  a committee to consider                                                                    
the  mining license  after passing  the bill  seemed out  of                                                                    
order. He opined that miners  paid more than their share. He                                                                    
wondered  what  else  the   legislature  wanted  the  mining                                                                    
industry  to  pay for.  HB  249  created a  disincentive  to                                                                    
develop new mines. New mines would grow state revenue.                                                                          
8:45:17 PM                                                                                                                    
VINCE  O'SHEA, VICE  PRESIDENT,  PACIFIC SEAFOOD  PROCESSORS                                                                    
ASSOCIATION,  JUNEAU,  testified  against  HB  249.  Pacific                                                                    
Seafood   Processors  Association   (PSPA)   had  9   member                                                                    
companies operating  27 fishery processing plants  in Alaska                                                                    
and  3  motherships. The  companies  employed  more than  15                                                                    
thousand  employees. All  of the  member companies  would be                                                                    
impacted  by   HB  249.   The  association   had  previously                                                                    
testified  regarding  the need  for  a  broad-based plan  to                                                                    
address  the state's  fiscal  crisis.  The seafood  industry                                                                    
already   paid  millions   in  state   and  federal   taxes.                                                                    
Additionally,  the industry  provided tens  of thousands  of                                                                    
jobs  to  Alaskans.  The administration's  approach  to  the                                                                    
fisheries  tax was  to add  1  percent to  the current  rate                                                                    
which punished the industry and  Alaska fishermen; it raised                                                                    
taxes on canned  salmon when most companies  were sitting on                                                                    
a 2 year supply. The industry  had stepped up with a plan to                                                                    
be  included in  a comprehensive  fiscal plan  approach. The                                                                    
association's plan  raised nearly the same  level of revenue                                                                    
from  fisheries but  in way  that reflected  the global  and                                                                    
economic  realities of  the fishing  industry.  He listed  a                                                                    
number of  items included in their  approach. Unfortunately,                                                                    
the  plan  had  been  rejected by  the  first  committee  of                                                                    
referral. He  expressed concern that  HB 249 had  had little                                                                    
or no  analysis of the impacts  on the industry. It  was his                                                                    
understanding that  the goal  of the  increase was  to close                                                                    
the  gap between  revenues received  from fisheries  and the                                                                    
cost  associated  with  the  Commercial  Fisheries  Division                                                                    
within DFG. The association  was concerned that the industry                                                                    
was  being asked  to pay  more  with no  assurance from  the                                                                    
state  that  the  Commercial  Fisheries  Division  would  be                                                                    
provided the resources necessary  to continue the management                                                                    
of Alaska's commercial fisheries.  He asked the committee to                                                                    
look carefully  at their proposal. He  thanked the committee                                                                    
for the extra time given for industry testimony.                                                                                
8:49:02 PM                                                                                                                    
MARLEANNA  HALL,  RESOURCE  DEVELOPMENT  COUNCIL,  testified                                                                    
against  HB 249.  She stated  that increasing  taxes on  the                                                                    
natural   resource   industry   would  not   encourage   the                                                                    
development of  new mines, boost  investment in  the fishing                                                                    
industry, attract  more tourists, or increase  throughput in                                                                    
the Trans-Alaska Pipeline System  (TAPS). She purported that                                                                    
higher  taxes  would likely  deter  investment  and lead  to                                                                    
lower state  revenues and  a weaker  private sector.  One of                                                                    
the  council's concerns  was that  a risk  analysis had  not                                                                    
been conducted on  the impact of the bill.  She reviewed the                                                                    
negative impacts  of removing  needed incentives.  She urged                                                                    
members to reject the legislation  and thanked the committee                                                                    
for the opportunity to testify.                                                                                                 
8:51:44 PM                                                                                                                    
249. He  reported that United  Fishermen of Alaska  held the                                                                    
longstanding  position that  any  new taxes  on the  fishing                                                                    
industry should be part of  a comprehensive fiscal solution.                                                                    
Combining  the fisheries  and mining  taxes  together was  a                                                                    
small step  in that direction. His  organization opposed the                                                                    
CFEC  fee cap  elimination  in the  current  version of  the                                                                    
bill,  as  it  would  affect families  and  outside  fishing                                                                    
operations.  United Fishermen  of  Alaska  also opposed  the                                                                    
canned salmon  tax increase and  wanted it to remain  at 4.5                                                                    
percent. The organization opposed  the proposed tax increase                                                                    
to  4  percent for  new  fisheries.  He disagreed  with  the                                                                    
concept  of  fisheries taxes  going  into  the general  fund                                                                    
rather  than  being  directed to  the  Commercial  Fisheries                                                                    
Division.  He reviewed  the revenue  formula:  the tax  rate                                                                    
times  the volume  times  the price.  He  relayed that  both                                                                    
price  and volume  were highly  variable,  although the  tax                                                                    
rate could  be controlled. He  opined that DFG needed  to be                                                                    
funded in order to have  weir counts, stock assessments, and                                                                    
proper management of Alaska's fisheries.                                                                                        
8:55:18 PM                                                                                                                    
CURTIS THAYER, PRESIDENT, ALASKA  STATE CHAMBER OF COMMERCE,                                                                    
ANCHORAGE, provided  some background  about the  chamber. He                                                                    
spoke  about the  legislature focusing  on  new tax  revenue                                                                    
which  was  getting in  the  way  of looking  at  government                                                                    
spending.  He  spoke  about  labor  contracts  giving  state                                                                    
employees  raises of  3.5  percent to  10  percent over  the                                                                    
following  3 years  to the  tune  of over  $70 million.  The                                                                    
chamber believed the  State of Alaska could  not afford such                                                                    
pay  increases. He  relayed that  companies were  laying off                                                                    
employees,  furloughing employees,  and cautiously  avoiding                                                                    
new  hires  and  new  investment. He  claimed  that  it  was                                                                    
inappropriate to  place the burden on  private industry. The                                                                    
Alaska Chamber  emphasized the need  to reduce the  size and                                                                    
spending  of government  before turning  to industry  to pay                                                                    
additional  taxes. The  chamber had  laid out  a very  clear                                                                    
plan  which  included a  reduction  in  state government,  a                                                                    
decrease in spending,  a cap on the PFD, and  the use of the                                                                    
PF  earnings. Taxes  should only  be  considered after  such                                                                    
measures  were  taken.  He  urged   members  to  consider  a                                                                    
balanced approach. He thanked the committee.                                                                                    
8:58:55 PM                                                                                                                    
KRIS NOROSZ, ICICLE SEAFOODS, JUNEAU,  spoke against HB 249.                                                                    
The  company  understood the  fiscal  issues  the state  was                                                                    
facing and  had been supportive of  a comprehensive approach                                                                    
that  included   a  combination  of  actions.   The  actions                                                                    
included   budget  cuts,   broad-based  revenue   generating                                                                    
measures,  and  a  closure of  loopholes  in  fisheries  tax                                                                    
collection. The company  offered a tax plan  for the fishing                                                                    
sector  that  would  generate revenues  very  close  to  the                                                                    
amount targeted by the  administration. The seafood industry                                                                    
harvested   and  processed   a  sustainable   and  renewable                                                                    
resource that  had been  an economic  engine for  Alaska for                                                                    
over a  century. Good fisheries  management was  critical to                                                                    
the company's  operations and the industry.  She agreed with                                                                    
previous  testifiers that  canned  salmon  could not  handle                                                                    
additional  taxes. She  spoke  of the  need  for equity  for                                                                    
inshore floating processors and  provided some examples. She                                                                    
mentioned  the implications  of  some of  the proposed  rate                                                                    
increases. Icicle  Seafoods was  willing to  be part  of the                                                                    
solution as long  as it was a well thought  out and rational                                                                    
plan that took into  consideration the collective impacts of                                                                    
the proposed  actions on the  fishing industry.  She relayed                                                                    
additional  sideboards. She  thanked the  committee for  its                                                                    
9:03:07 PM                                                                                                                    
Representative  Wilson  was  uncertain about  the  plan  Ms.                                                                    
Norosz was referring to.                                                                                                        
Co-Chair  Thompson  asked  that  Ms.  Norosz  to  leave  her                                                                    
written statement with  his staff so that  they could follow                                                                    
up with her.                                                                                                                    
Co-Chair Thompson CLOSED public testimony.                                                                                      
HB  245  was  HEARD  and   HELD  in  committee  for  further                                                                    
HB  249  was  HEARD  and   HELD  in  committee  for  further                                                                    
HB  250  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  Thompson reviewed  the  agenda  for the  following                                                                    
Co-Chair Thompson  recessed the meeting  to the call  of the                                                                    
chair [Note: The meeting never reconvened].                                                                                     

Document Name Date/Time Subjects
HB 245 Public Testimony.pdf HFIN 4/15/2016 7:00:00 PM
HB 245
HB 250 Public Testimony.pdf HFIN 4/15/2016 7:00:00 PM
HB 250