Legislature(2021 - 2022)ANCH LIO DENALI Rm
10/22/2021 10:00 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB4008 | |
| Presentation: Permanent Fund Formula Changes; Percent of Market Value | |
| HB4010 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB4008 | TELECONFERENCED | |
| += | HB4010 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 4008-PFD: 50/50 POMV SPLIT
10:06:00 AM
CHAIR SPOHNHOLZ announced that the first order of business would
be HOUSE BILL NO. 4008, "An Act relating to use of income of the
Alaska permanent fund; relating to the amount of the permanent
fund dividend; relating to the duties of the commissioner of
revenue; and providing for an effective date."
10:06:27 AM
REPRESENTATIVE LIZ SNYDER, Alaska State Legislature, as prime
sponsor, presented HB 4008. She said the proposed legislation
offers guidance regarding expenditures of earnings from the
Alaska permanent fund. She named two goals: to overcome
legislative gridlock and bring the state a comprehensive fiscal
plan to benefit the state. She said the bill would: retain a 5
percent, percent of market value (POMV) draw; repeal conflicting
statute; and add a revised permanent fund dividend (PFD)
formula, called a 50/50 contingency plan. She said HB 4008 was
designed to balance essential government services with growing
the permanent fund and PFD. She advised that the strength of
the 50/50 plan is that it can mitigate the impact of budget
fluctuations on the PFD by using a five-year moving average in
calculating the baseline budget. She said this would reduce the
capacity for using the PFD as political leverage and provide
budgetary stability. The bill would establish a spending cap
and would encourage the seeking out of additional revenue.
10:09:01 AM
ALLIANA SALANGUIT, Staff, Representative Liz Snyder, Alaska
State Legislature, on behalf of Representative Snyder, prime
sponsor, provided a sectional analysis of HB 4008 [hard copy
included in the committee packet].
10:11:09 AM
REPRESENTATIVE SNYDER gave a PowerPoint presentation, [hard copy
included in the committee packet]. She listed the
considerations of HB 4008 [slide 2]: the 50/50 split;
sustainable, reliable, and high-quality government services;
constitutional obligations; the need to remedy conflicting
statutory language; the need for fiscal plan; the need for
flexibility in challenging budgetary climates; household and
economic benefits of direct payments; and recommendations from
the fiscal [policy] working group. Representative Snyder
acknowledged that while she does not subscribe to some of the
rationale behind the 50/50 split, she understands it as a
compromise to existing statute. She named the components of HB
4008 [slide 3] as comprising: a 5 percent POMV draw; guidance
on the distribution of the POMV draw between general fund and
dividend fund; and conforming language. Representative Snyder
drew attention to an illustration [slide 4] showing how the POMV
can be adjusted to fill a budgetary gap in years when the 50/50
split does not flat fund the previous year's budget.
10:15:25 AM
REPRESENTATIVE SNYDER brought up two scenarios. In Scenario 1
[slide 5], HB 4008 would be adopted, and there would be no new
revenue or cuts, and there would be a flat fund. She covered
the categories: appropriations less revenue; 5-year moving
average adjusted for the consumer price index (CPI) and
inflation, a baseline budget; the POMV of 50 percent, with
baseline budget less 50 percent POMV, and showing amount left
for PFD; and the dividend payout and percent of POMV for the
PFD. The scenario shows these items from fiscal year 2023 (FY
23) through FY 30. She gave as example that under this
scenario, the dividend payout in FY 23 would be $838, and the
percent of POMV for the PFD would be 19 percent. By FY 30 there
would be a 30/70 split.
10:18:18 AM
CHAIR SPOHNHOLZ clarified for the record that "appropriations
less revenue" is a flat budget minus known revenue that would be
used in projections by the Legislative Finance Division. She
added, "It's what we need to raise."
REPRESENTATIVE SNYDER confirmed that is correct. She then moved
on to Scenario 2 [slide 6], which would include adoption of HB
4008 and $7 million in new revenue, as well as continue flat
funding. What would change over time is the size of the PFD and
the proportion needed to cover "less revenue." Under this
scenario, the trajectory of the evolution of the PFD percentage
would be accelerated to approximately 50 percent by FY 30.
REPRESENTATIVE SNYDER noted that HB 4008 would allow for
increasing or decreasing the budget. She summarized the
moderating effects. In decreasing the budget, it would not
result in a decreased PFD in the same year; it would contribute
to a reduction in the five-year average and to an increased PFD
in subsequent years. Nothing in the proposed legislation would
preclude the legislature from increasing the state's budget in
future years, she said. An increase would increase the five-
year average use in subsequent years, in effect increasing the
budget and "increasing the proportion that we need to make sure
that we cover utilizing the POMV draw."
10:21:58 AM
REPRESENTATIVE STORY expressed concern that there were no
interventions proposed in the bill. She said she believed
investments in the future were necessary and that the proposed
legislation did not account for that.
REPRESENTATIVE SNYDER answered that the bill was focused on the
PFD formula, but reiterated that nothing in the bill would limit
the legislature from expanding the budget to meet new needs.
REPRESENTATIVE STORY expressed concern that past experience was
not being considered. She said appropriations have been made in
the past that were vetoed.
10:26:12 AM
CHAIR SPOHNHOLZ said the truth is that the budget had been cut
for the past seven years, and initiatives with wide bipartisan
support cannot be funded without the revenue to do so. She
emphasized the importance of grounding these bills in a broader
context.
10:27:11 AM
REPRESENTATIVE SNYDER highlighted the flexibility which HB 4008
would allow. She said the bill did not prescribe a specific
percentage split. She argued that the flexibility would allow
for the legislature to address unexpected needs.
10:28:47 AM
REPRESENTATIVE PRAX asked for confirmation that future
legislators could not be held to the provisions of HB 4008.
REPRESENTATIVE SNYDER answered that is correct; regardless of
what is in statute, the legislature has the ability to make the
decision on an appropriation, as decided under Wielechowski v.
State of Alaska. Notwithstanding that, she said a common
refrain from critics is to "follow the law." Many of the bills
proposing statutory change and meant to provide guidance are
valuable, particularly in removing current conflicting language.
REPRESENTATIVE PRAX thanked the bill sponsor for being
forthright.
REPRESENTATIVE SNYDER replied that HB 4008 proscribes a 50/50
split as a target, which she called unique.
CHAIR SPOHNHOLZ said the legislature had been appropriating a
dividend without regard to historic formula, and HB 4008 would
develop a new formula based on balancing the budget. She argued
that while it is not a hard stop formula, it is a change to the
way things are currently done.
10:31:40 AM
REPRESENTATIVE PRAX said the bill would at least clarify that
what the legislature does is pay for all state spending and then
fund the PFD with whatever is left; however, he said he thinks
[Alaskans] would be disappointed. He said, "I think we'd be
better off ignoring it and moving on."
10:32:58 AM
REPRESENTATIVE STORY argued that since many items funded by the
legislature have been vetoed by the governor, the PFD is not
funded by with leftover funds.
10:33:53 AM
CHAIR SPOHNHOLZ announced that HB 4008 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4010 Presentation 10.20.21.pdf |
HW&M 10/22/2021 10:00:00 AM |
HB4010 |
| HB 4008 Fiscal Note - PF.pdf |
HW&M 10/22/2021 10:00:00 AM |
HB4008 |
| HB 4008 Sponsor Statement.pdf |
HW&M 10/22/2021 10:00:00 AM |
|
| HB 4008 Sectional.pdf |
HW&M 10/22/2021 10:00:00 AM |
|
| HB 4008 Presentation, 10.22.21.pdf |
HW&M 10/22/2021 10:00:00 AM |
HB4008 |
| LFD Presentation - POMV and PFD bills,10.22.21.pdf |
HW&M 10/22/2021 10:00:00 AM |
|
| HB 4008 Sectional.pdf |
HW&M 10/22/2021 10:00:00 AM |
HB4008 |
| HB 4008 Presentation, 10.22.21.pdf |
HW&M 10/22/2021 10:00:00 AM |
HB4008 |
| HB 4008 Sponsor Statement.pdf |
HW&M 10/22/2021 10:00:00 AM |
HB4008 |