Legislature(2003 - 2004)
03/27/2003 01:37 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 11
"An Act relating to deposits to the Alaska permanent
fund from mineral lease rentals, royalties, royalty
sale proceeds, net profit shares under AS 38.05.180(f)
and (g), federal mineral revenue sharing payments
received by the state from mineral leases, and bonuses
received by the state from mineral leases, and limiting
deposits from those sources to the 25 percent required
under art. IX, sec. 15, Constitution of the State of
Alaska; and providing for an effective date."
REPRESENTATIVE NORMAN ROKEBERG, SPONSOR, testified in
support of the bill. He explained that the legislation
returns the percentage of all mineral lease royalties and
bonuses deposited into the Permanent Fund to the
constitutionally mandated 25 per cent.
Representative Rokeberg maintained that the bill would
provide Alaska with a source of general fund revenue while
staying true to the purposes of the Permanent Fund and the
intent of the Constitution. He referred to Article 9,
Section 15 of the Alaska State Constitution, which states
"At least twenty-five per cent of all mineral lease rentals,
royalties, royalty sale proceeds, federal mineral revenue
sharing payments and bonuses received by the State shall be
placed in a permanent fund".
Representative Rokeberg observed that in 1980 the
legislature recognized that the state had "excess revenues".
He pointed out that the general fund expenditure during that
legislative session was $4.07 billion. He speculated that
the current budget was roughly one third of that amount.
Representative Rokeberg pointed out the fiscal gap facing
the current Legislature. He proposed that the bill would
generate approximately $42 million per year over the next
seven years.
Representative Rokeberg speculated that contributions of
smaller fields such as Alpine and North Star offset the
decline in the production at major fields such as Prudhoe
Bay. However he maintained that the replacement of
resources was not entirely equitable. He pointed out that
Prudhoe Bay was contributing 75 percent into the General
Fund and 25 percent into the Permanent Fund.
Representative Rokeberg refuted criticism that the bill was
"a raid on the permanent fund". He maintained that the bill
merely redirects monies being deposited while taking nothing
out of the Permanent Fund. He also maintained that the bill
would have little effect on the dividend program, projecting
zero impact in the first two years, potentially growing to a
$20 per dividend impact within ten years.
Representative Rokeberg summarized that the bill would
diminish the draw on the Constitutional Budget Reserve (CBR)
and minimized the need for more general taxation programs.
Co-Chair Williams asked for clarification on the criticism
of the bill. Representative Rokeberg reiterated that the
bill would withdraw no monies from the Permanent Fund. He
conceded that to put less into the Fund might result in
lesser output. He maintained that market conditions had
much greater impact on the Fund's performance. He drew the
analogy that increasing savings while in a deficit might not
be prudent management. He suggested that this bill might be
a step toward correcting the state's fiscal situation.
Representative Rokeberg suggested that many potential plans
for correcting the state's finances, such as possible
taxation, had the effect of withdrawing income from the
economy, thereby curtailing economic growth. He maintained
that since the bill merely redirects funding from
investment, it would not have a negative effect on the
state's economy.
Representative Croft asked for a distinction to be drawn
between not depositing money and depleting the fund. He
maintained that failing to place money into the account had
the same effect as taking money out.
Representative Rokeberg cited his experience in business and
contended that not depositing funds was different than
withdrawing funds. He maintained that if funds were not
available, they should not be deposited.
Representative Hawker referred to the debate regarding the
difference between long-term fiscal solutions and
incremental steps toward a solution. He asked whether the
sponsor viewed the legislation as a solution or an
increment, and if an increment, whether consideration was
given to a long-term solution which did not include this
bill.
Representative Rokeberg noted that the legislature in the
past had considered this concept as part of a long-range
plan. He characterized it as a "common sense" first step in
narrowing a fiscal gap. He observed that it only had an
impact of $43 million on the general fund, which he conceded
might be an optimistic projection. He suggested that this
step presented the least detriment, since it did not
implement a "tax" but rather only affected prospective
future income.
Representative Whitaker observed that the change from the
constitutional requirement from 25 to 50 percent occurred in
1980, when the general fund budget was $4.07 billion. He
maintained that the legislature implemented the change at
that time since the funding was not needed. He asked
whether the money was needed at this time, with the budget
at roughly one third of that in 1980.
Representative Rokeberg maintained that the money is needed,
especially considering the fluctuating price of oil. He
speculated that if the bill had been in place for the
current fiscal year, some $57 million would have been
available to spend in FY03. He maintained that the bill
freed funding for use, without the negative impacts of taxes
and user fees.
Representative Croft asked how this could extend the life of
the CBR. Representative Rokeberg replied that the bill
minimized the amount of the draw on the CBR by making more
general funds available.
Representative Croft commented that in effect the funds
would be moved from the Permanent Fund to the CBR.
Representative Rokeberg conceded that this theory was
somewhat valid, but pointed out that the money was therefore
available in the General Fund. He speculated that the
legislature might choose to spend the general funds rather
than reserving them in the CBR.
Representative Croft asked if it was the intention to spend
the funds or to extend the life of the CBR. Representative
Rokeberg responded by pointing out that the current budget
contained some recommendations with which he did not agree.
He observed that the Governor maintains a budgetary
principal whereby, if the legislature disagrees with a
recommendation, they may suggest an alternative that is
still in keeping with the Administration's budget goals. He
suggested that the bill fit this type of process, and
recommended that the legislature would be wise to embrace
such a concept for budget making.
Representative Joule asked if Representative Rokeberg would
support the revenue being directed to a dedicated fund,
which would require a change in the Constitution.
Representative Rokeberg acknowledged that some dedicated
funds currently function, but noted his own belief in the
constitutional principle of avoiding dedicated funds. He
clarified that, while the legislature had the ability to
choose whether or not to spend the funds, he himself did not
advocate spending but rather increased flexibility.
ED MARTIN, SR., SOLDOTNA, testified via teleconference, in
opposition to the proposed legislation. He read from
prepared testimony (copy on file), maintaining that the bill
erodes the dividend program, encourages overspending, and
undermines voter's confidence in the legislature.
FRED STURMAN, SOLDOTNA, testified via teleconference in
opposition to the bill. He noted that he had not perceived
any "cutting of the budget" support from the Legislature.
He countered that taking the Permanent Fund was not a viable
option. He observed, "everyone seems to want more". He
encouraged budget cuts rather than spending.
JAMES PRICE, NIKISKI, testified via teleconference in
opposition of HB 11. He commented that the only work
currently being done by the Legislature was the proposal of
"user fees". He stressed that HB 11 was not a viable
solution and speculated that the root of the problem is
bringing spending to a workable level.
Representative Croft MOVED to ADOPT Amendment #1:
Page 1, line 6, after Alaska insert:
"and relating to the disposition of permanent fund
income"
Page 2, after line 19, a new subsection is added to AS
37.13.145: "(e) AS 37.13.140 and AS 37.13.145 (b) may
not be amended unless the amendment is approved a
majority of the voters voting on the question."
Co-Chair Williams OBJECTED.
Representative Croft summarized that the Amendment recalled
efforts in 1999 to present the concept [fiscal plan] to the
Alaskan people. He suggested that, considering the
initiative and referendum power in the state of Alaska, no
fiscal plan would succeed without the agreement of the
people.
Co-Chair Williams disagreed. He expressed his belief that
it was wrong in 1998 and 1999 to send this message to the
people. He recalled that when the initial bill was
presented to the Senate and the Governor, the House had
agreed that there would not be a vote by the people. He
further recalled that at that time, the Governor and the
Senate recommended that the bill receive a public vote. He
maintained that HB 11 did not represent a "raid" on the
Permanent Fund.
Representative Rokeberg echoed comments made by Co-Chair
Williams. He proposed that the amendment claims
unconstitutional delegations of authority. He pointed out
that the amendment would require a constitutional amendment
for implementation.
Representative Stoltze observed that the amendment
practically represented a non-binding advisory vote and
suggested that it be presented in that way to voters for
full disclosure of its true function.
Co-chair Harris objected to the amendment. He commented
that the Legislature could conceivably ask the public every
year about budgetary spending. He strongly expressed his
belief that this did not present good public policy.
Representative Croft maintained that the dividend was
established to generate public support for the Permanent
Fund by giving people "a stake in" the fund. He noted that
this resulted in a public sense of ownership. He proposed
that this sense of ownership must be recognized. He agreed
that the legislature could change statue, which made it not
"legally binding", however he maintained that the amendment
helped establish an important principal.
Co-Chair Harris asserted that the people of Alaska voted on
the constitutionally mandated 25 percent [permanent fund
deposit]. He pointed out that when the legislature changed
the amount to 50 percent in adopting the statute, they did
not ask for another public vote. He maintained that the
circumstances at that time were different than today. He
proposed that the current Legislature must now determine if
the additional, statutorily mandated 25 percent might be
shifted into the general fund.
A roll call vote was taken on the motion.
IN FAVOR: Moses, Stoltze, Croft, Joule
OPPOSED: Myer, Whitaker, Foster, Hawker, Williams, Harris
Representative Chenault was not present for the vote.
The MOTION FAILED (4-6).
Representative Foster MOVED to report HB 11 out of Committee
with individual recommendations and with the accompanying
fiscal note.
Representative Croft OBJECTED.
Representative Croft observed that the effect of the bill,
assuming that it did not increase current spending levels,
was to transfer $43 million per year that would have gone
into the Permanent Fund into the CBR. He asserted that
this proposition did not make sense.
Representative Croft noted that the Permanent Fund
historically earned 9.5 percent, with projected long-term
earnings of 8 percent. He contrasted that the CBR earned 6
percent annually, since up to half of that fund could be
withdrawn at any time. He summarized that the net effect of
the bill would either be to spend the funds on government or
to transfer it to another account with lower earnings. He
maintained that this was not good public policy.
Co-Chair Williams contended that one must consider the best
use of funds for the state of Alaska. He stated his belief
that the bill would allow additional tools to advocate the
best fiscal interest of the people. He pointed out the
history leading to the current budget reductions, and noted
the lack of change in management of the state's financial
resources. He maintained that the rejection of the House
plan in 1998 by the Senate and a subsequent vote of the
people contributed to the current financial difficulties.
Co-Chair Harris noted that the bill might be one in a series
of steps aimed at balancing the budget based on true
revenues. He pointed out the distinction between the CBR
and general fund monies: use of the CBR requires a three-
quarter vote of both sides of the legislature. He
speculated that use of the CBR might result in a more
partisan budget process. He stressed that the money would
go to the general fund and not the CBR.
TAPE HFC 03 - 40, Side A
Co-Chair Harris went on to observe that expenditure of
general fund monies required only a simple majority of both
bodies. He noted his opinion that Alaska was the only state
that required a three quarter vote to spend certain types of
funding. He maintained that the bill facilitated the
addition of $40 to $50 million of General fund revenue
without requiring a three quarter vote. He suggested that
the bill would enable a balanced budget without such a vote.
Co-Chair Harris also stated his desire to create mechanisms
that did not require a state income tax. He maintained that
a tax would not improve economic growth. He proposed that
the bill encouraged economic growth without a tax. He
contended that the bill did not severely impact Alaskans,
resulting in only an eventual $20 reduction to dividend
payments.
Co-Chair Harris stressed that the bill intended to balance
the budget, and not to increase spending as had been
implied.
Representative Stoltze thanked Representative Rokeberg for
his work in introducing the bill. He expressed his caution
about the bill but his willingness to discuss the issues.
Representative Whitaker suggested that the primary debating
points related to the actions of the 1980 Legislature, which
was operating with a more than $4 billion budget. He
maintained that current spending was significantly lower and
that funds were needed to meet the now $2 billion budget.
Representative Joule noted his continued support of the
legislation. He suggested, however, that at some point
discussion must occur regarding generating broad based state
revenue and the fate of the Permanent Fund. He expressed
disappointment that these discussions were not occurring.
He speculated that the bill could be part of a package of
legislation aimed at addressing these issues. He exhorted
the Majority to show leadership in beginning these
discussions.
Representative Rokeberg thanked public testifiers and
concurred with Co-Chair Harris in not wishing to institute
taxation. He suggested that the bill presented a viable
alternative.
A roll call vote was taken on the motion.
IN FAVOR: Whitaker, Foster, Hawker, Joule, Meyer, Harris,
Williams
OPPOSED: Moses, Stoltze, Croft
Representative Chenault was not present for the vote.
The motion PASSED (7-3).
HB 11 was REPORTED out of Committee with a "do pass"
recommendation and three fiscal impact notes from the
Department of Revenue(#1, zero; #2 & #3, fiscal impact).
| Document Name | Date/Time | Subjects |
|---|