Legislature(1993 - 1994)
04/19/1994 08:35 AM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 541
"An Act providing for an advisory vote of the people
concerning a preferred alternative for increasing
revenue available to support state government; and
providing for an effective date."
Co-Chair Larson noted that the legislation provides for an
advisory vote. The ballot provision asks citizens of Alaska
which alternative they prefer for raising revenues:
* A state income tax;
* A state sales tax; or
* Capping permanent fund earnings to be distributed
as earnings.
Co-Chair Larson expressed concern that comparable need to be
set to demonstrate how $450 to $500 million dollars could be
raised.
Representative Hanley maintained that comparisons need to be
drawn between the revenue each item would raise.
Representative Navarre suggested that the response to the
ballot question would be minimal. He observed that the
public wishes to see the budget cut. He stressed the need
to inform the public in regards to the over-all, long-term
state economic picture. He emphasized that there is a
misconception that the budget can be easily cut with no
impact or increased taxes. He observed that reduction in
state support for municipalities has resulted in an increase
in municipal taxes.
Representative Therriault suggested that a reduction of the
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budget should be added to the ballot question.
Representative Navarre emphasized that the perception that
the budget can be cut without impacts is inaccurate.
Representative Grussendorf expressed support for the
legislation.
Representative Martin noted that Alaska has experienced a
high voter turnout in past elections. He stressed that the
ballot question will generate discussion and provide
guidelines. He emphasized that it will allow citizens to
have a voice in the legislature's action.
Representative Grussendorf noted that the ballot question
does not address the use of the earnings income account in
the general fund.
Co-Chair MacLean stressed that varying levels of capping
permanent fund dividends should be discussed in the ballot
question.
Co-Chair Larson provided members with quotations regarding
permanent fund restrictions and the legislature's ability to
spend from the Fund's earnings reserve (copy on file). He
noted that:
* "All income from the permanent fund shall be
deposited in the general fund unless otherwise
provided by law." Article IX, Section 15, Alaska
Constitution
* "The income of the fund would be deposited into
the general fund without any permanent fund
restrictions." Jay S. Hammond, Governor, January
15, 1976
* "The purpose of the language in the last sentence
of the resolution is to give future legislatures
maximum flexibility in using the Fund's earnings
reserve..." Hugh Malone, Chairman House Finance
Committee on CSSSHJR 39
* "When the oil and gas is depleted, where will the
funds to feed our giant government come from? the
answer is: The Alaska Permanent Fund." 1976
Election Pamphlet in regards to proposition no. 2
* Each new legislature "is entitled to make its own
choices about the use of Fund earnings." Alaska
Permanent Fund 1991 Annual Report
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* "The purpose of the Constitutional Budget Reserve
Fund is to cushion the impact of reduced oil
revenue as oil production declines and state
revenues are depleted. Currently, state revenue
is not depleted. For example, there is presently
some $950,000,000 in the Permanent Fund Earnings
Account, available for appropriation by the
legislature." Superior Court Judge John Resse
Co-Chair Larson noted that $551 million dollars will be
distributed as dividends. An income tax would have to be
twice the amount it was when it was discontinued to raise
the equivalent amount. A state sales tax would have to be
set at approximately 20 percent to raise equal revenues. He
stressed the need to open options to the legislature.
Representative Brown stressed that options should be
parallel. She noted that there are other options not on the
list. She suggested that voters choose two of five or six
options. She suggested that an option of other taxes could
include motor fuel, alcohol, cigarette, flat employment,
fish, and mining taxes. She added that specific items could
be identified for budget cuts. She concluded that the
inclusion of more options would allow a lower threshold per
item. She suggested that increased oil taxes and a state
wide property tax should also be included. She suggested an
interim commission be created to address the issue of
raising revenues.
Co-Chair MacLean stressed that the Alaska Permanent Fund
needs to be revisited. She suggested that the amount used
as inflation proofing is too high.
Representative Martin expressed support for HB 541 as
drafted. He felt that too many options would be confusing.
He did not want an interim commission to replace the
legislation.
Representative Navarre observed that a state sales tax would
be difficult to administer. He emphasized that the
legislature holds the economic future of the state. He
stressed that if the economic structure, including the tax
structure, is not addressed the state will be lead into
economic collapse.
Co-Chair Larson noted that the public perception is not
favorable. He questioned if there should be additional
options.
Representative Hanley observed that the public would choose
to cut the budget instead of raising taxes. He stressed the
need to educate the public. He emphasized that the more
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options added the more difficult the process to educate.
Representative Hanley suggested that the legislature state
that: "The total state general fund spending budget for FY
95 is approximately $2.5 billion dollars. If prices for
Alaskan oil average $14 dollars a barrel for that year, the
total general fund recurring revenues are anticipated to be
$1.7 billion dollars. That leaves a gap of $800 million
dollars that we are currently using savings accounts to
fill."
Representative Hanley suggested that the legislation also
state: Each of the following alternatives would fill $250
to $300 million dollars of that gap. Pick no more than 2
options. He stated that he would add: Cut the budget by 10
percent.
Representative Hanley noted that to raise the $250 to $300
million dollars, a sales tax would have to be 10 percent and
dividends would have to be capped at $500 dollars.
Representative Grussendorf noted a lack of clarity on the
dividend question. He emphasized that the state operating
budget does not contain many mid management level jobs. He
suggested that the legislature consider contracting for a
survey.
Representative Navarre stressed that the option to cut the
budget by 10 percent is misleading. He emphasized that the
budget is over inflated by the inclusion of program
receipts, federal matching funds, shared taxes and education
funding.
Representative Brown noted that no one has advocated a state
sales tax as a viable alternative. She suggested that the
state sales tax option be deleted. She accented that
choices should be feasible to implement.
Representative Martin argued that the ballot question will
educate voters and that all options should remain.
(Tape Change, HFC 94-132, Side 2)
Co-Chair Larson expressed his intention to add other options
to the legislation.
HB 541 was HELD in Committee for further discussion.
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