05/11/2019 11:30 AM House STATE AFFAIRS

          HB 132-PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS                                                                      
                                                                                                                              
11:41:05 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS   announced  that  the  next   order  of                                                               
business would  be HOUSE BILL  NO. 132,  "An Act relating  to the                                                               
Alaska permanent fund; relating  to the earnings reserve account;                                                               
relating  to the  permanent fund  dividend; relating  to deposits                                                               
into  the  permanent  fund; relating  to  appropriations  to  the                                                               
dividend fund  and general fund;  and providing for  an effective                                                               
date."                                                                                                                          
                                                                                                                                
11:41:45 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE WOOL, as  prime sponsor of HB  132, explained that                                                               
HB 132  would change  the formula  for calculating  the permanent                                                               
fund dividend (PFD).  He  stated that since the statutory formula                                                               
for  the  PFD  has  not  been followed  for  several  years,  the                                                               
proposed  legislation   would  replace  it  with   one  that  the                                                               
legislature  can   follow.     He  mentioned   discussions  among                                                               
legislators  regarding  using  a  percentage of  the  percent  of                                                               
market value  (POMV) to calculate the  PFD.  He relayed  that his                                                               
disagreement with  that method  is based on  his belief  that the                                                               
POMV  will increase  in value  over the  next decades,  as it  is                                                               
based  on the  performance of  the [stock]  market; whereas,  the                                                               
legislation he  is proposing would  derive the amount of  the PFD                                                               
from oil revenues,  which he maintained would be safer.   He said                                                               
that when oil  revenues are up, state revenue is  healthy and the                                                               
state can afford  a dividend check of a set  value; however, when                                                               
oil  revenue  is  down,  POMV  money  is  needed  to  fund  state                                                               
operations.   The PFD amount  would depend  on oil revenues.   He                                                               
maintained that  if oil revenues were  to decrease precipitously,                                                               
the state  would not be  obligated to pay  out a large  PFD check                                                               
based on the  performance of "Wall Street."  He  offered that oil                                                               
prices  tend move  in the  opposite direction  than the  U.S. and                                                               
global   economies;   therefore,    there   exists   an   inverse                                                               
relationship between  the Alaska economy and  the market economy.                                                               
He reiterated  his belief that the  PFD amount should be  tied to                                                               
oil  revenues.     He  mentioned  that   currently  the  proposed                                                               
legislation specifies  the appropriation  for the  PFD to  be the                                                               
lesser  of 33  percent  of oil  revenues or  $1,800;  there is  a                                                               
forthcoming amendment  to change  that percentage to  40 percent.                                                               
He offered  that as  oil revenues increase,  the PFD  check would                                                               
increase as well.                                                                                                               
                                                                                                                                
11:45:27 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  STORY referred  to  the PowerPoint  presentation,                                                               
entitled  "HB  132:   A  New  Approach  to  the PFD,"  [slide  7,                                                               
entitled  "PFD Values,  HB 132  vs. Proposed  POMV Splits"],  and                                                               
asked whether  based on current  projections of oil  revenue, the                                                               
PFD would be about $1,200-$1,400 per year in the next few years.                                                                
                                                                                                                                
REPRESENTATIVE WOOL deferred the question to staff.                                                                             
                                                                                                                                
11:46:33 AM                                                                                                                   
                                                                                                                                
NATHANIEL GRABMAN, Staff, Representative  Adam Wool, Alaska State                                                               
Legislature, on  behalf of Representative Wool,  prime sponsor of                                                               
HB 132, responded that based  on the revenue projections from the                                                               
Revenue  Sources Book  Fall 2018  [Department of  Revenue (DOR)],                                                             
under the  33 percent, the PFD  would continue to rise  over time                                                               
but would  be a steady climb  from about $1,500 in  2020 to close                                                               
to $2,000 a decade later.                                                                                                       
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  indicated that  HB  132  would be  held                                                               
over.