04/19/2007 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB171 | |
| SB134 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 134 | TELECONFERENCED | |
| + | HB 8 | TELECONFERENCED | |
| + | HB 210 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 171 | ||
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
April 19, 2007
9:05 a.m.
MEMBERS PRESENT
Senator Lesil McGuire, Chair
Senator Gary Stevens, Vice Chair
Senator Hollis French
Senator Lyda Green
Senator Con Bunde
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 171(STA) am
"An Act relating to the date and time for convening regular
legislative sessions, certain procedures of the legislature, the
date for organizing the Legislative Budget and Audit Committee,
and deadlines for certain matters or reports to be filed or
delivered to the legislature or a legislative committee;
prohibiting bonuses for legislative employees; and providing for
an effective date."
MOVED SCS CSHB 171(STA) OUT OF COMMITTEE
SENATE BILL NO. 134
"An Act relating to the policy of the state regarding the state
budget and the source of funding used to cover a shortfall in
general fund revenue."
HEARD AND HELD
HOUSE BILL NO. 8
"An Act naming the law enforcement training facility in
Fairbanks the J. Kevin Lamm Law Enforcement Training Facility."
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 171
SHORT TITLE: ACCOMMODATE 90-DAY SESSION
SPONSOR(S): RULES
03/01/07 (H) READ THE FIRST TIME - REFERRALS
03/01/07 (H) STA
03/06/07 (H) STA AT 8:00 AM CAPITOL 106
03/06/07 (H) Scheduled But Not Heard
03/15/07 (H) STA AT 8:00 AM CAPITOL 106
03/15/07 (H) Heard & Held
03/15/07 (H) MINUTE(STA)
03/22/07 (H) STA AT 8:00 AM CAPITOL 106
03/22/07 (H) Heard & Held
03/22/07 (H) MINUTE(STA)
03/24/07 (H) STA AT 10:00 AM CAPITOL 106
03/24/07 (H) Heard & Held
03/24/07 (H) MINUTE(STA)
03/29/07 (H) STA AT 8:00 AM CAPITOL 106
03/29/07 (H) Moved CSHB 171(STA) Out of Committee
03/29/07 (H) MINUTE(STA)
03/30/07 (H) STA RPT CS(STA) NT 1DP 3NR 2AM
03/30/07 (H) DP: COGHILL
03/30/07 (H) NR: JOHNSON, ROSES, LYNN
03/30/07 (H) AM: GRUENBERG, DOLL
04/03/07 (H) BEFORE THE HOUSE
04/03/07 (H) TRANSMITTED TO (S)
04/03/07 (H) VERSION: CSHB 171(STA) AM
04/04/07 (S) READ THE FIRST TIME - REFERRALS
04/04/07 (S) STA
04/12/07 (S) STA AT 9:00 AM BELTZ 211
04/12/07 (S) Heard & Held
04/12/07 (S) MINUTE(STA)
04/17/07 (S) STA AT 9:00 AM BELTZ 211
04/17/07 (S) Heard & Held
04/17/07 (S) MINUTE(STA)
BILL: SB 134
SHORT TITLE: FUNDING SHORTFALL POLICY
SPONSOR(S): SENATOR(S) WILKEN
03/21/07 (S) READ THE FIRST TIME - REFERRALS
03/21/07 (S) STA, FIN
04/19/07 (S) STA AT 9:00 AM BELTZ 211
BILL: HB 8
SHORT TITLE: J. KEVIN LAMM TRAINING FACILITY
SPONSOR(S): REPRESENTATIVE(S) RAMRAS
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) TRA
02/15/07 (H) TRA AT 1:30 PM CAPITOL 17
02/15/07 (H) Heard & Held
02/15/07 (H) MINUTE(TRA)
03/06/07 (H) TRA AT 1:30 PM CAPITOL 17
03/06/07 (H) Moved Out of Committee
03/06/07 (H) MINUTE(TRA)
03/07/07 (H) TRA RPT 1DP 3NR
03/07/07 (H) DP: FAIRCLOUGH
03/07/07 (H) NR: DOOGAN, JOHNSON, JOHANSEN
03/21/07 (H) TRANSMITTED TO (S)
03/21/07 (H) VERSION: HB 8
03/23/07 (S) READ THE FIRST TIME - REFERRALS
03/23/07 (S) TRA, STA
04/10/07 (S) TRA RPT 2DP 1NR
04/10/07 (S) DP: KOOKESH, OLSON
04/10/07 (S) NR: WIELECHOWSKI
04/10/07 (S) TRA AT 1:30 PM BUTROVICH 205
04/10/07 (S) Moved HB 8 Out of Committee
04/10/07 (S) MINUTE(TRA)
04/19/07 (S) STA AT 9:00 AM BELTZ 211
WITNESS REGISTER
RYNNIEVA MOSS, Staff
to Representative Jack Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions regarding HB 171.
TAMARA COOK, Director
Legislative Legal and Research Services Division
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions regarding HB 171.
PAM VARNI, Executive Director
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Explained an amendment to HB 171.
SENATOR GARY WILKEN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 134 as sponsor.
ACTION NARRATIVE
CHAIR LESIL MCGUIRE called the Senate State Affairs Standing
Committee meeting to order at 9:05:47 AM. Senators McGuire,
Stevens, Bunde, Green, and French were present at the call to
order.
HB 171-ACCOMMODATE 90-DAY SESSION
CHAIR MCGUIRE announced the consideration of HB 171. [Before the
committee was CSHB 171(STA) am.] An amendment labeled KA.1 has
the legislative session start in February, and Senator French
had suggested a January start date.
The committee took an at-ease at 9:07:27 AM.
9:07:34 AM
CHAIR MCGUIRE offered Amendment 1, labeled 25-LS0653\KA.1.
SENATOR STEVENS suggested that that wasn't the amendment.
The committee took an at-ease from 9:08:40 AM to 9:10:24 AM.
CHAIR MCGUIRE withdrew Amendment 1 and offered Amendment 2,
labeled 25-LS0653\KA.4, as follows:
Page 2, line 17, through page 3, line 1:
Delete all material and insert:
"Sec. 24.05.090. Duration of legislature;
[REGULAR] sessions. The legislature shall convene at
the capital each year on the second Monday in February
[JANUARY] at 1:00 p.m. Each [10:00 a.m.; HOWEVER,
FOLLOWING A GUBERNATORIAL ELECTION YEAR, THE
LEGISLATURE SHALL CONVENE ON THE THIRD TUESDAY IN
JANUARY AT 10:00 a.m. EXCEPT AS PROVIDED IN THIS
SECTION, EACH] legislature has [SHALL HAVE] a duration
of two years and consists [SHALL CONSIST] of a "First
Regular Session [,]" that meets [WHICH SHALL MEET] in
the odd-numbered years, and a "Second Regular Session
[,]" that meets [WHICH SHALL MEET] in the even-
numbered years, and any special session [OR SESSIONS]
that the governor or legislature calls [MAY FIND
NECESSARY TO CALL]."
Page 3, lines 24 - 25:
Delete all material.
Insert "Legislative Affairs Agency at any time
before February [JANUARY] 1."
SENATOR FRENCH objected, and he noted the nice weather and said
if the session starts in January, "we would be done today."
SENATOR BUNDE said Senator French makes a good argument;
however, consistency is important for voters. It is hard for
them to keep track of when the legislature is in Juneau. He is
tempted by the sunshine, but a consistent date is better.
SENATOR FRENCH withdrew his objection. Hearing no further
objections, Amendment 2 was adopted.
9:12:30 AM
CHAIR MCGUIRE said she would like to make two conforming
amendments with respect to the budget. She offered Amendment 3
to change, on Page 6, line 18, the word "thirtieth" to "fifth"
and add a period after day and strike "in odd numbered years and
through the fifth day in even numbered years." Hearing no
objections, Amendment 3 was adopted.
CHAIR MCGUIRE offered Amendment 4. On page 6, line 22, after
"only through the", add "fifteenth legislative day." Also
strike: thirtieth legislative day in odd-numbered years and
through the fifteenth legislative day in even-numbered years.
She said Amendment 4 conforms to the removal of the staggered
start dates. Hearing no objections, Amendment 4 was adopted.
CHAIR MCGUIRE then offered Amendment 5. On Page 7, lines 22-23,
after the word "sessions", strike: or following a gubernatorial
election year within the first 30 days after the legislature
convenes in regular session. "What we're doing is taking out
that reference to the staggering that the other body had." The
House version had January and February start dates, she noted,
with conforming budget language.
SENATOR STEVENS said it is not budget, but the names of persons.
CHAIR MCGUIRE agreed, and the other was for the budget. She said
she is just trying to clean up the references to a staggered
start date. The language is no longer necessary unless the
legislature wants staggered start dates.
SENATOR GREEN said, "This puts it at nearly what the procedure
is now because it's at February fifteenth every year."
9:16:54 AM
RYNNIEVA MOSS, Staff to Representative Jack Coghill, Alaska
State Legislature, said Section 5 needs to be amended.
CHAIR MCGUIRE heard no objection, so Amendment 5 was adopted.
MS. MOSS said she assumes that if the legislature is convening
the second Monday of February it would want a February 1
deadline for prefiled bills.
CHAIR MCGUIRE said Amendment 2 has done that.
9:18:57 AM
SENATOR BUNDE offered Amendment 6, labeled 25LS0653\KA.5, as
follows:
Page 3, following line 30:
Insert new bill sections to read:
"* Sec. 6. AS 24.10.130(b) is amended to read:
(b) Legislators and officers and employees of
the legislative branch of government are entitled to a
per diem allowance while the legislature is in regular
or special session if authorized by the policy adopted
under (c) of this section, except that a legislator
who resides in the state capital may not receive a per
diem allowance. A legislator may receive a stipend
while the legislature is not in session if authorized
by the policy adopted under (c) of this section.
* Sec. 7. AS 24.10.130(c) is amended to read:
(c) The Alaska Legislative Council shall adopt a
policy regarding reimbursement for moving expenses
applicable to all legislators and an applicable per
diem allowance and stipend policy. The policy must set
conditions for the reimbursement for moving expenses,
[AND] payment of per diem during legislative sessions,
and payment of stipends during the interim between
sessions. The policy must also prescribe the amounts
of reimbursement, per diem, and the stipend adapted to
the special needs of the legislative branch as
determined by the council."
Renumber the following bill sections accordingly.
SENATOR BUNDE said the legislature is divided on the 90-day
session, but the people have spoken. He said the people also
spoke during the Jan Faiks era expressing concern about
legislative pay. Changes were made in response to public outcry,
and those should be cleaned up, he said. Amendment 6 addresses
"mislabeling." Members get a salary and per diem while in
session. During the interim the legislators can qualify for
money labeled as per diem, but it is not per diem; it is more of
a stipend. A cynic would say the salary is disguised by calling
it per diem instead of a stipend. If it is a stipend, the Juneau
legislators are paid more than others because they receive a per
diem during session even though they live in their own homes. It
more accurately portrays the legislators' salary during the
interim as a stipend and "when we live in our own homes we
shouldn't qualify for per diem."
9:21:53 AM
SENATOR STEVENS objected.
SENATOR BUNDE said it is wise to make sure that amendments fit
under the title of the bill, and Amendment 6 was deemed
appropriate for HB 171.
CHAIR MCGUIRE referred to Webster's Dictionary and said stipend
is a regular fixed payment as a salary or allowance.
SENATOR STEVENS withdrew his objection.
SENATOR GREEN asked if stipend is used anywhere else in statute.
9:23:15 AM
CHAIR MCGUIRE asked about a policy change with legislative
council that allowed lawmakers who worked more than four hours
per day to receive a per diem of maybe $100 per day, and how the
amendment might impact that.
TAMARA COOK, Director, Legislative Legal and Research Services
Division, said the amendment would have to fall within the
portion of the title that speaks to procedures of the
legislature, but she doesn't know how narrowly the court would
define legislative procedures. Compensation of legislators may
be an administrative procedure. But the title is not specific,
so it would probably survive. The legislative council policy
would need to be changed to conform to the amendment because it
provides for per diem for legislators who reside in Juneau
during session. The way it is written, the council would still
be free to allow a stipend for some number of hours that a
legislator works in the interim, but how that will work will be
subject to legislative council policy. Right now it has a four-
hour work test in order to get the per diem during the interim.
9:26:20 AM
CHAIR MCGUIRE read the description of per diem: For or by the
day; A daily fee or allowance.
SENATOR STEVENS said per diem should not apply to someone living
in their own home.
SENATOR BUNDE said the accepted notion of per diem is for
expenses for being out of one's domicile. Session per diem is
not taxed, but salaries, stipends, and interim "per diem" are.
The "per diem" that is paid to Juneau residents is taxed, and
that is an important test.
MS. COOK said the state compensation statutes for the executive
branch allows per diem for traveling employees.
9:28:50 AM
SENATOR GREEN said parts of the state have large districts. A
legislator may not be spending the night out of the home, but it
is not a cheap adventure. Travel merits something, she said.
SENATOR FRENCH asked the difference in the per diem of
legislators who live in Juneau.
MS. MOSS said people in Juneau get 75 percent of the standard
per diem. For federal tax codes, a person has to travel 50 miles
in order to get per diem.
CHAIR MCGUIRE said the Anchorage lawmakers who collect it are
taxed on it. But for Senator Olson who might be traveling a
great distance, the per diem is not taxed.
9:31:12 AM
MS. MOSS said in order to claim a per diem deduction for taxes,
a person has to travel more than 50 miles.
SENATOR BUNDE said all legislators are taxed on it. He said
Senator Kookesh has a district larger than the state of Texas,
and he should be able to claim travel expenses, but that's
different from the taxable interim per diem. He said
Representative Salmon eats up the per diem in one hour of flight
within his district. The amendment is simply focusing on calling
salary a salary.
CHAIR MCGUIRE said she is concerned about doing more interim
work, and there was a very heated debate about if that amount is
something that people could live on. "The concern that I have is
if we adopt the amendment today … the policy for leg council
will not follow, so we'll be back to the days we were before.
Second of all, I'm concerned about … I don't think the semantics
are as different as you think they are, but I don't disagree
that we call it per diem." She views herself as still at home,
going back to her district almost every weekend. There is no
question that most lawmakers work more than full time but are
paid a set salary. The per diem helps supplement that. She
doesn't think she is trying to hide anything, "but I think the
reality of it is that some people don't collect retirements to
help live, and so it's a question."
9:34:12 AM
SENATOR FRENCH objected to the amendment. This is a new level of
complexity without enough discussion. "I don't see that it's
necessary at all." It is not fair to keep people who live in the
Capital to not get per diem. The legislative salary doesn't
require anyone to show up to work. "If you show up for work
everyday, you have to drive to work, dry clean your clothes, you
have to have meal expenses, you have living expenses that are
incurred because of the fact that you come to the capital
everyday, and that's partly what the per diem compensates you
for is that you're here operating in the world. You and I pay
rent in the town." Maybe people who live in Juneau should get
paid less. The amendment says they get none whatsoever, and it
is aimed at three people who are not here to speak to the
amendment. It's worth a discussion, but the committee is trying
to move a 90-day bill.
SENATOR STEVENS asked if this issue could be addressed by the
legislative council or if it needs to be in statute.
9:36:08 AM
SENATOR BUNDE said the interim per diem has existed for over 15
years. Perhaps if the members ask them politely they might.
Juneau legislators could get a stipend during the interim, "as
we all should." He said it is a bad precedent to tax the per
diem for Juneau legislators but not others. It should not be
left under the rug like it has for 15 to 16 years.
MS. MOSS said the reason Juneau members' per diem is taxable is
because they don't travel 50 miles.
SENATOR STEVENS said if the amendment fails he would like it
addressed by the legislative council. It is important, but it is
happening too fast.
9:39:09 AM
CHAIR MCGUIRE said she will do so. There have been many
discussions about lawmaker salaries and the link to employment.
She noted that she has a juris doctorate degree and she can't
get a job. It is a very good point and should be discussed, but
not on the fly. Other state have commissioned a group to look at
the issue as a whole, including what type of outside work should
be allowed, per diem, and the 90-session. Her vote against it is
not a vote against the concept, but it needs to be more
thoroughly vetted.
A roll call was taken. Senator Bunde voted in favor of Amendment
6, and Senators French, Green, Stevens, and McGuire voted
against it. Therefore, Amendment 6 failed on a vote of 1 to 4.
9:41:27 AM
CHAIR MCGUIRE moved Amendment 7, labeled 25-LS0653\K.A, as
follows:
Page 8, lines 1-9:
Delete all material.
The committee took an at-ease from 9:41:51 AM to 9:42:51 AM.
CHAIR MCGUIRE said Amendment 7 refers to the report on the 90-
day regular session, and it was requested by Senator Cowdery.
SENATOR GREEN objected to get an explanation.
CHAIR MCGUIRE said Senator Cowdery felt that a report on the 90-
day session was unnecessary.
SENATOR GREEN said Section 24 said any assignments to be given
to the council shall be by resolution.
9:43:55 AM
SENATOR FRENCH asked if the committee wants to have a report.
SENATOR GREEN said, "We have to do it by resolution; I don't
plan to do the resolution."
SENATOR FRENCH asked why it is in the bill.
MS. MOSS said the original bill had a sunset clause to force the
legislature to go back and revisit the 90-day session. This
language replaces that idea.
CHAIR MCGUIRE said it was probably without awareness of the site
that Senator Green just gave. She added that she would entertain
a resolution should any committee member request a report but
the thought was that the effects will be what they are. A report
from the legislature won't mean a whole lot, she opined.
9:45:30 AM
SENATOR GREEN removed her objection. Hearing no further
objections, Amendment 7 was adopted.
CHAIR MCGUIRE moved Amendment 8, labeled 25-LS0653\KA.2, as
follows:
Page 4, following line 9:
Insert a new bill section to read:
"* Sec. 7. AS 24.20.140 is amended by adding a new
subsection to read:
(b) In addition to transfers under (a) of this
section, the council may direct the executive director
to transfer amounts from any appropriation to an
office, agency, or committee in the legislative branch
to an appropriation for another office, agency, or
committee in the legislative branch. A transfer under
this subsection may only be made with the written
approval of the head of the legislative office or
agency or the chair of the committee to which the
appropriation was originally made, and the amount
transferred from that appropriation may not exceed the
amount indicated in the written approval."
Renumber the following bill sections accordingly.
Page 8, line 10:
Delete all material and insert:
"* Sec. 19. The uncodified law of the State of
Alaska is amended by adding a new section to read:
RETROACTIVITY. Section 7 of this Act is
retroactive to January 1, 2007.
* Sec. 20. Sections 7 and 19 of this Act take
effect immediately under AS 01.10.070(c).
* Sec. 21. Sections 1 - 6 and 8 - 18 of this Act
take effect January 1, 2008."
9:46:09 AM
PAM VARNI, Executive Director, Legislative Affairs, said
Amendment 8 will help the legislature in the future. Since 1960
there has been a statute to allow the legislative council to
direct the executive director to transfer amounts from one
appropriation to another if the transfer is considered necessary
to accomplish the work of the council. That has been done at
least 30 times since 1960 to accomplish projects or for special
sessions. This year the council is in a "minus situation"
because the previous legislature had four special sessions. The
amendment gives the council the authority to transfer amounts
from any appropriation in the legislative branch and also
protects people. Whenever transferring amounts from one
component to another, someone would always check with people in
charge of those funds to make sure that there is no problem with
using their funds. The recent legislative council action had
permission from the Legislative Audit and Budget chair to
transfer two session expenses. "So this just really clearly puts
out and gives the authority to transfer within the legislative
branch so that there will not be any question in the future
whether it's next year or ten years from now, and let's say
budget and audit is in a minus situation, legislative council,
who really does a lot of the administrative work and sets policy
for the legislature, will have the ability to do that."
9:50:14 AM
SENATOR BUNDE asked if Amendment 8 limits where money can be
transferred from. A rogue council might take money from the
school budget.
MS. VARNI said money has never been transferred from outside the
legislative branch; this only concerns money within the
legislative branch and between the three appropriations. She
said her understanding has been that the council had the ability
to transfer between them. Recently that was questioned, and
Amendment 8 says that the council can transfer between the
three, but it requires written permission from those who are in
charge of the funds being taken. It is just housekeeping for the
legislative branch, she said.
SENATOR FRENCH asked if line 4 implies a vote of the council.
9:53:12 AM
MS. COOK said it requires action by the council, and the chair
couldn't do it alone.
SENATOR GREEN asked if this was brought about by the money that
was just put in the supplemental.
MS. VARNI said yes.
SENATOR GREEN said it caused quite a stir, because there had
been approval for money to be transferred within the agency and
then it was shown it wasn't a proper transfer, "so we had to
include that language in the supplemental budget to authorize
that transfer." It just allows action during those times.
SENATOR GREEN withdrew her objection. Amendment 8 was adopted.
MS. MOSS said someone from the Alaska Public Office Commission
said its final report is due on February 15, which is close to
the start of session, but it might not pose a problem.
SENATOR GREEN moved HB 171, as amended, from committee with
individual recommendations and accompanying fiscal notes.
SENATOR BUNDE said he sees a serious absence of people to pick
up the apples that they dropped out of the applecart.
CHAIR MCGUIRE announced that without objection SCS CSHB 171(STA)
has moved from the Senate State Affairs Committee.
The committee took an at-ease from 9:56:59 AM to 9:57:39 AM.
SB 134-FUNDING SHORTFALL POLICY
9:57:39 AM
CHAIR MCGUIRE announced the consideration of SB 134.
SENATOR GARY WILKEN, Alaska State Legislature, presented SB 134
as sponsor. He said the last Alaska Oil and Gas Report announced
that anxiety mounts as production declines. The oil producers
told the legislature that production was declining by six
percent, and the Department of Revenue (DOR) said it was
declining by 0.9 percent. Either way, there needs to be a fiscal
bridge to the gasline, he said. The desire for a long-range
fiscal plan is a common refrain. He suggested thinking beyond
one year. Senator Dyson has a bill asking the governor to
forecast ahead 15 years.
10:00:25 AM
SENATOR WILKEN said his bill starts the discussion. SB 134 is
policy, not law. The legislature could put it in and take it out
later. He said, "We would put in the Executive Budget Act two
statements: It's the policy of the state to formulate a
responsible, sustainable budget. It is the policy that amounts
necessary to cover projected shortfalls during a fiscal year be
appropriated equally from the Constitutional Budget Reserve
(CBR) and the Earnings Reserve Account of the permanent fund. It
would be used only when needed, he added. He pointed to a graph
of expenditures and revenue. He assumes an increase in spending
of three percent, and he showed the fall revenue forecast. He
thanked staff from the permanent fund division, legislative
finance, and the Office of Management and Budget for helping
with the data and graphs.
10:04:10 AM
CHAIR MCGUIRE noted a 2006 and 2007 spike in revenues and asked
how they figure into the "little pots of money that we have set
aside for savings."
SENATOR WILKEN said, "That would be what's coming into our
checkbook." He said, "We write checks out of our check book,
which is filled up by the general fund." He said checks written
for permanent fund dividends are an expense. The legislature
saved $650 million last year and "people on the campaign were
talking about how we spent everything…we wrote a check and put
it in a saving account."
CHAIR MCGUIRE asked if that $650 million savings is absorbed
into the red input line.
10:05:35 AM
SENATOR WILKEN said yes, "we spend our savings." Alaska is not
going to be saving next year. Last year there was a $10.2
billion budget. Three components are 88 percent of the budget.
In 2004, the two numbers were essentially the same. Federal
funds are falling away, and 85 percent of what the state spends
is from oil and gas. Things can change quickly. The next graph
is titled Fy07 General Fund Budget. The budget of the governor
is balanced at $52 per barrel. Today it is $62.64. He noted that
three or four years the state was "rolling in clover" when oil
hit $30 per barrel. If the price were $30 today, [the state
would have a deficit of] $1.8 billion.
10:08:47 AM
SENATOR WILKEN showed the effect of the escalator in the PPT
[profit-based petroleum production tax of 2006].
SENATOR BUNDE said next year the chart will be out of date
because production will be down. The opportunity for change will
magnify as production declines.
SENATOR WILKEN said there are three big variables: expenses, oil
production, and oil price. "We start to fall away next year or
the year after." He said to expect gas revenue in 2016, and
Alaska needs a bridge until then.
10:11:51 AM
SENATOR WILKEN said the state has used the cushion. He showed
the CBR balance and the draws for FY94 to FY07. The CBR has been
used four times. He said he forgot that Alaska drew $884 million
out of the CBR in 2002, almost $500 million the next year, and
then about $46 million for the last four years. The average draw
has been $275 million for the 14 years. He said the CBR peters
out in 2013 or 2014, so there will be no more cushion. Cutting
government sounded easy before he arrived at the capitol. If the
state cut out public radio and television, as discussed by
Senator Bunde, and it cut out state parks, libraries, museums
and the one percent for arts, the total savings would be $17
million. It is not worth the emails that he would get. The state
needs to save up to hundreds of millions, so if it got rid of
road maintenance, the troopers, the marine highway, and the
universities, it would save $430 million, "but we wouldn't have
any troopers but we wouldn't need them because we don't have any
roads to drive on and we're not educating people so…."
10:15:14 AM
SENATOR WILKEN said his intent is to show that the state is not
going to cut its way out of the deficits. He spoke of other
options, like income tax, alcohol tax, corporate income tax and
sales tax. "Or we can start to talk about the earnings of the
permanent fund, which in January 31, 2007 had $4.7 billion
sitting in it." He suggests filling the gap with contributions
from the CBR and the earnings reserve account. Given a three per
cent growth, the bridge is built from equal draws. The earnings
reserve of the permanent fund is available, always has been, by
a vote of 21 in the House and 11 in the Senate.
10:17:43 AM
SENATOR BUNDE said the state already spends the earnings,
including $1.7 billion for the dividend, the hold harmless
provisions, and several other things. The precedent is set. The
pie chart had $1.7 billion revenue from the permanent fund.
SENATOR WILKEN said hold harmless costs about $34 million and it
costs money to make money, so "we do spend the earnings." He
warned that everyone will say that the legislature can't be
trusted and it will steal the fund. So he asked: "How much of
the corpus has the legislature been responsible for?" The
legislature should be proud that it has put in 65 percent of it.
It also inflation proofed it with $10 billion. The legislature
has certainly been a good steward. "We can manage getting at the
permanent fund," he said. He warned that opponents will accuse
them of robbing the fund, "and the bumper stickers roll out."
10:20:50 AM
SENATOR WILKEN said the principle is protected by the
constitution, and it will be generations before Alaskans go to
the ballot box and vote to spend the permanent fund; it's just
not going to happen. The earnings brought to the earnings
reserve account was $4.7 billion by the end of January. This
year, $878 million will be used for dividends, $860 million for
inflation proofing, and $2.9 billion will be left and available.
The crown jewels of a fiscal plan are the CBR and the earnings
reserve account; "I just can't say enough about that sentence."
It is the only legislature in America deciding how to manage $40
billion for 665,000 residents. He said some people won't support
the idea because there is no income tax and 43 states have one.
"But no other state has $40 billion." Every minute of every hour
of every day there are millions of decisions made on Wall Street
about people investing money, and each one is to create wealth.
Alaska is part of that game. People invest in corporate America,
real estate, bonds, and the last six months of 2006, Alaska's
investments were earning $734,000 per hour, and "we didn't lift
a finger … we're putting it in faster than we can take it out."
That's the plan. It is a whole other industry that creates
wealth for the people of Alaska. It is all about taking a one-
time resource to create wealth for the future. But the next
question will be: "What about my check?"
10:25:04 AM
SENATOR WILKEN showed ten years ahead. "Let's just say we filled
every fiscal gap…let's call it $250 million." The effect on each
PFD check would be nothing the first year, $2.00 the next year,
$20.00 in five years, and $89.00 in 10 years. "You make a good
investment; the money just keeps showing up."
SENATOR STEVENS asked if the check decrease is cumulative.
SENATOR WILKEN said that is the effect of the draw of $250
million every year for 10 years. In 10 years, each PFD check
will be $2,250 instead of $2,339. With the draw, the accumulated
ten checks would be $19,073 instead of $19,409-a difference of
$336 over the ten years. He showed a graph with the draw and
without the draw. The permanent fund stays awfully healthy, and
after 10 years it will be $4.5 billion less than $60 billion.
What does the decline in the PFD check mean to a family? The
third year the loss will be worth two cups of coffee, year-five
it will cost a hair cut, and year-ten it will cost one car tire.
10:29:52 AM
SENATOR WILKEN compared alternative revenue sources. Using an
income tax to fill the fiscal gap would cost $1,000 to a family
of four, and using a sales tax would cost $950. "I like
everybody paying a little rather than a few paying a lot." This
is our bridge to the future gas line. He summarized by saying
that the bill bridges Alaska revenue needs until the gas line is
completed and it establishes accountability by forming a
spending partnership with all Alaskans.
10:33:13 AM
SENATOR WILKEN said SB 134 provides benefits when needed--it
only happens when there is a deficit. It minimizes the financial
impact on families, doubles the life of the CBR, answers the
call from D.C. for Alaskans to help themselves, and provides
Alaska with a stable and dependable long-term fiscal plan.
SENATOR BUNDE asked about the notion of putting new money into
the economy.
SENATOR WILKEN said an income tax just moves money around. This
is new money coming from Wall Street and it is powerful. It gets
the full multiplier effect.
SB 134 was held over.
CHAIR MCGUIRE adjourned the Senate State Affairs Committee
meeting at 10:35:34 AM.
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