Legislature(2003 - 2004)
06/23/2004 03:43 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 1003
An Act relating to the income of and appropriations
from the Alaska permanent fund under art. IX, sec.
15(b), Constitution of the State of Alaska, and making
conforming amendments; relating to permanent fund
dividend payments of at least $1,000; relating to the
determination of net income of the mental health trust
fund; and providing for an effective date.
CHERYL FRASCA, DIRECTOR, DIVISION OF MANAGEMENT & BUDGET,
OFFICE OF THE GOVERNOR, observed that the legislation would
provide for a dividend that is equal to 50% of the annual
POMV income or a $1,000 dollar dividend, whichever is
greater.
ROBERT D. STORER, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND
CORPORATION, DEPARTMENT OF REVENUE, explained that the
income from the Amerada Hess settlement may not be
distributed as a dividend under current law. Income from the
settlement can only go into the principal of the Fund. These
funds are a component within the Fund, which has continued
to grow. The legislation would change this status and allow
the funds to be considered in the calculation of dividends.
In response to a question by Representative Croft, Mr.
Storer felt that the change could be made within the limits
of the settlement. He did not have a legal opinion to
substantiate this opinion [Mr. Storer later notes that the
legislation would not include this change.]
Representative Hawker corrected the previous statements by
Mr. Storer and pointed out that language in the original
version (HB 298) made the income available. He observed that
HB 1003 would hold the status quo and the income would not
be available for distribution.
Mr. Storer acknowledged that the distinction would remain
the same as under current statute.
Representative Joule MOVED to ADOPT conceptual Amendment #1
for the distribution: 7.5 percent for municipalities, 32.5
percent to public education and 60 percent to dividends.
Co-Chair Williams OBJECTED.
Representative Hawker suggested that the amendment would
place dividends at a higher priority to education.
Representative Joule disagreed and pointed out that there is
a formula for education, regardless of the funding source.
The amendment is a switch in the fund source.
Representative Hawker asked if Representative Joule would
support a reduction of the dividend payout to 50%.
Representative Joule did not support the change.
A roll call vote was taken on the motion.
IN FAVOR: Foster, Joule, Moses, Stoltze, Croft
OPPOSED: Hawker, Meyer, Chenault, Fate, Williams
Co-Chair Harris was absent from the vote.
The MOTION FAILED (5-5).
Representative Chenault asked what would happen if the
Permanent Fund did not have a market gain in a period of
time.
Ms. Frasca pointed to page 3, line 26: if funds were
insufficient to meet the $1,000 [dividend] minimum, the
other percentages would be reduced accordingly with the
anticipation that the legislature would back fill to fully
fund the 45 and 5 percent payouts [to education and
municipalities.]
Mr. Storer explained that the POMV approach allows a 5
percent payout with any distribution. Under the proposal a
$1,000 dividend would be given priority; as long as 5
percent of the average of the Fund equal to $1,000 [times
the number of dividend recipients] is available, the
dividend would be paid. The Fund size would have to average
around $14 billion to [pay a $1,000 dividend]. He observed
that during the past three year's bear market the Fund went
from $28 billion to $21 billion, which still allowed for
inflation proofing and full funding of the dividend.
Statistically there is a small possibility [that the Fund
would drop below the level needed to fund a $1,000
dividend]. There would have to be an extremely severe bear
market in the stock market.
Ms. Frasca pointed out that the legislation would provide a
statutory change. The legislature would have the latitude to
amend the statute.
In response to a question by Vice-Chair Meyer, Ms. Frasca
reiterated that the $1,000 minimum provision was added by
the Governor and was not in the version passed by the House
[HB 298].
TAPE HFC 04 - 1, Side B
Representative Foster MOVED to report HB 1003 out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
HB 1003 was REPORTED out of Committee with a "do not pass"
recommendation and with a zero fiscal note by the Department
of Revenue.
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