Legislature(2021 - 2022)ANCH LIO DENALI Rm
10/13/2021 10:00 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB4003 | |
| HB4009 | |
| HB4010 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB4003 | TELECONFERENCED | |
| *+ | HB4008 | TELECONFERENCED | |
| *+ | HB4009 | TELECONFERENCED | |
| *+ | HB4010 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB4010-PERMANENT FUND DIVIDEND; POMV SPLIT
11:25:23 AM
CHAIR SPOHNHOLZ announced that the final order of business would
be HOUSE BILL NO. 4010, "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."
11:25:54 AM
REPRESENTATIVE KEN MCCARTY, Alaska State Legislature, prime
sponsor, introduced HB 4010. He paraphrased the sponsor
statement [included in the committee packet], which read as
follows [original punctuation provided]:
House Bill 4010 would provide an established formula
for the appropriate of annual permanent fund dividend
for Alaskans.
From 1982 until 2016 the annual appropriate of
permanent fund dividends were established and
implemented per Statute. In 2016 the Legislature and
an uncontested governor veto changed the Statute and
the allocation formula resulting in an undetermined
dividend appropriation. House Bill 4010 will integrate
the POMV formula consideration of Statute with an
established percentage formula appropriation for both
the state and dividend for Alaskans. The purposed
formula for consideration is 65% state and 35% Alaskan
dividend.
In addition to the 65% formula for the state that at
least 20% of that must be used for Capital Projects.
The state's expenses involve operations and capital
projects. Over the years the Capital projects have not
been attended to for one reason or another, which at
this time the state is over 2 billion dollars behind
in Capital project repairs. The inclusion of the 20%
will not only secure the importance of attending to
Capital Projects but also avail funds for
infrastructure, promote businesses, avail jobs, secure
and improve roads, bridges, buildings, and school
facilities.
The origin of the Permanent Fund Dividend is in
recognition of individual residents / stakeholders of
Alaska. The appropriation of the funds are done with
equality. No social economic, age, or political
preference determine the dividend. Simply, being a
resident of Alaska under law qualifies an annual
dividend.
Since the 2016 change to the Permanent Fund Dividend
formula and inclusion of the POMV that the people of
Alaska have greatly questioned the intent of its state
government. Alaskans have made statements with themes
that the state is disenfranchised of its people /
stakeholders by depriving them of a reliable annual
dividend. By approving House Bill 4010 it will make a
resounding statement that residents of Alaska are
valued stakeholders of this great state and will be
honored with a reliable annual dividend.
CHAIR SPOHNHOLZ clarified that the 1982 statute had not been
repealed yet.
11:28:05 AM
REPRESENTATIVE MCCARTY presented a sectional analysis for HB
4010 [included in the committee packet], which read [original
punctuation provided]:
Section 1
AS 37.13.140 Income and annual computed formula.
(a) Maintain the origin of income source according to
AS 37.13.145. Deletes the language describing the
distribution formula equals 21 percent of the net
income. The formula has resulted in an incongruent
calculation with (b).
(b) Inserting current language to affirm that
appropriation may not exceed the balance in the
earnings reserve account. The computed annual
calculation remains the same.
Section 2
AS 37.13.145 (b) Appropriation formula.
Adds the new appropriation formula of 35% for the
dividend and 65% toward the state. It also describes
the state appropriation of 65% which 20% of it must be
used toward Capital Projects.
Section 3
AS 37.13.145(c) Appropriation from the Earnings
Reserve Account
Changes the language from transfer to appropriation
and legislature role in the appropriation process.
Section 4
AS 37.13.145(d) Appropriate in consideration of the
State v. Amerada Hess decision
Changing language to be congruent from transfer to
appropriation. There is no change to the State v
Amerada Hess judgment. Delete AS 37.13.145(e) as it is
amended and addressed in Section 1 of AS 37.13.140(b).
Section 5
AS 37.13.300(c) Mental Health Trust funds
Change language according to congruency of other
changes but does not change the autonomy of the mental
health trust funds which is not to be calculated in
the Permanent Fund appropriation.
Section 6
AS 37.14.031(c) Date of annual computation
Inserts language to define the date of the annual
computation according to accepted accounting
principles, excluding any unrealized gains or losses.
Section 7
AS 43.23.025(a) Date of determination and announcement
of the dividend
Changing language to be congruent from transferred to
appropriated. The amendment is to continue congruency
of language changes to recognize the appropriation
process.
Section 8
AS 37.13.145(e) and 37.13.145(f) Repeal of limitation
of the appropriation from Earnings Reserve
Delete (e) and (f) as the language is already
addressing in other changes within the bill.
Section 9
Effective Date
Provides for July 1, 2022 effective date.
11:31:00 AM
REPRESENTATIVE MCCARTY introduced a PowerPoint presentation,
titled "HB 4010" [hard copy included in the committee packet].
He began on slide 2, which read as follows [original punctuation
provided]:
Since 1982 the State of Alaska has recognized the
resident / stakeholders through annual dividends from
the Alaska Permanent Fund. Unlike no other state, the
equitable nature of dividends for all residents,
according to law, has been bestowed upon and not
entitled to Alaskans.
REPRESENTATIVE MCCARTY continued to slide 3, which read as
follows [original punctuation provided]:
The Alaskan Dividend Tradition has long been fulfilled
through an annual percent of the viable appropriated
distribution base of the Permanent Fund realized
earnings.
REPRESENTATIVE MCCARTY turned to slide 4, which read as follows
[original punctuation provided]:
In 2016 this long Alaskan tradition was altered. A
new appropriation method was placed in Statute, which
has resulted in confusion or contradiction of existing
Statute and the appearance of disenfranchising
Alaskans of their stakeholder investment dividend.
REPRESENTATIVE MCCARTY advanced to slide 5, which read as
follows [original punctuation provided]:
The intent of HB 4010 is to make clear once again the
established annual percentage formula for both the
Permanent Fund Dividend for Alaskans and the
percentage of budget revenue for the state government
to the benefit of Alaskans.
REPRESENTATIVE MCCARTY proceeded to slide 6, which read as
follows [original punctuation provided]:
P.O.M.V.
The Percent of Market Value calculation based on the
growth of the Permanent Fund was changed into Statute
in 2019. At a 5% annual draw on the Permanent Fund
this allows for prudent distribution and continued
growth within the fund into the future.
REPRESENTATIVE MCCARTY continued to slide 7, which read as
follows [original punctuation provided]:
The question is what should the annual distribution
look like from the 5% POMV draw that does not result
in deficiency elsewhere?
REPRESENTATIVE MCCARTY proceeded to review the governor's 50/50
plan, highlighting the advantages and disadvantages (slide 9)
and the fiscal modeling (slides 10-11). On slide 12, he pointed
out that moneys from both the CBR and the SBR had been used
historically for deficit spending.
11:35:05 AM
REPRESENTATIVE MCCARTY outlined HB 4010 on slide 13, which read
as follows [original punctuation provided]:
HB 4010
A Permanent Fund Appropriation Formula that supports
Alaskans in many ways!
35 % -Dividend Amount for Alaskans
20 % -Capital Projects to benefit Alaskans
45 % -Government Operations to support Alaskans
REPRESENTATIVE MCCARTY continued to slide 14, which read as
follows [original punctuation provided]:
PREMISE
Equitable formula that gives Alaskans "More Bang for
the Bucks!"
The McCarty Plan
5% of POMV draw with a 35/65 Percent Split
35% to PFD
65% to State with at least 20% allocated to Capital
Budget Projects
Capital Projects assurance will result in jobs and
projects toward maintenances, improvements, and
infrastructure for roads, airports, A.M.H., bridges,
buildings, fire support, school structures, etc.
11:36:07 AM
REPRESENTATIVE MCCARTY highlighted the perceived advantages and
disadvantages of HB 4010 on slide 15, which read as follows
[original punctuation provided]:
ADVANTAGE
Seeks to establish a distribution plan that is
dependable & sustainable into the future
Equitable for both the people's government and
individual Alaskans
Alaskans benefit from a dividend as well as jobs and
services from Capital Projects
Fiscally sustainable that does not require excessive
revenue expansion / taxation
DISADVANTAGE
Not a 50 / 50 Plan
Not a 25 / 75 Plan
Revenue continues through resource development and
free enterprise industry rather taxation
REPRESENTATIVE MCCARTY discussed the modeling on slide 16,
noting that LFD projected revenue with no liability reduction
until 2028 and surpluses in 2030. Additionally, FY 21 to FY 24
showed a deficit with surplus growth after FY 25.
11:38:59 AM
REPRESENTATIVE MCCARTY addressed appropriations to capital
projects on slide 17, which read as follows [original
punctuation provided]:
More Money to Support Jobs for Alaskans
Boosts the Economy
Infrastructure for now and into the future
REPRESENTATIVE MCCARTY concluded on slide 18 by reiterating his
hope that HB 4010 would provide a more sustainable future for
Alaska by implementing a "safety net" and boosting a strong
economy.
11:39:32 AM
REPRESENTATIVE SCHRAGE commended bill sponsor for putting
forward a plan. He asked why this plan would be favorable to a
75/25 split. He acknowledged the deficits that would need to be
addressed under this proposal and asked why this would be the
appropriate formula for the legislature to move forward with.
REPRESENTATIVE MCCARTY believed that a 65/35 plan would be more
balanced than a 75/25 split in terms of fairness to both
residents and government services.
11:42:04 AM
REPRESENTATIVE JOSEPHSON asked whether the proposed legislation
would result in substantial cuts to the operating budget.
REPRESENTATIVE MCCARTY claimed that there would not be a deficit
and argued that the budget would be balanced under HB 4010.
REPRESENTATIVE JOSEPHSON asked Mr. Bell whether the operating
budget would need to be cut without the addition of new revenue
if HB 4010 were to pass.
MR. BELL said it was unclear whether the bill sponsor had
intended 20 percent of the entire POMV draw would go to the
capital budget or if it was 20 percent of 65 percent of the POMV
draw. Regardless, it would increase the capital budget either
way.
CHAIR SPOHNHOLZ clarified that 20 percent of the overall POMV
would go to the capital budget under Representative McCarty's
plan. She asked what kind of deficit that would create.
11:48:17 AM
MR. BELL confirmed that based on DOR's spring forecast, there
would be small deficits through FY 30 if the entire amount was
appropriated towards the capital budget.
CHAIR SPOHNHOLZ asked what the deficit would be in FY 23.
MR. BELL estimated a deficit of slightly over $1 billion.
11:49:20 AM
REPRESENTATIVE JOSEPHSON pointed out that slide 16, which
provided modeling of HB 4010, showed the capital budget from FY
22 to FY 30 using assumptions from the FY 22 enacted budget, as
opposed to modeling the proposed 20 percent of 65 percent of the
POMV draw.
MR. BELL confirmed. He said the fiscal model on slide 16 did
not use the 20 percent minimum for the capital budget
assumption, which was proposed in HB 4010. Instead, it modeled
the capital budget assumptions that grow with inflation based on
the enacted budget.
CHAIR SPOHNHOLZ said that's an important distinction.
REPRESENTATIVE JOSEPHSON sought to confirm that slide 16 did not
accurately reflect the bill.
MR. BELL said it did not include that aspect of the bill. He
offered to follow up with an assumption that increased the
capital budget to conform with the language in the bill.
11:51:08 AM
CHAIR SPOHNHOLZ shared her understanding that HB 4010 would
create a fairly significant fiscal gap. If the bill were to
become law, she asked the sponsor how he would recommend
balancing the budget.
REPRESENTATIVE MCCARTY believed that investments in
infrastructure could lead to an increase in revenue.
CHAIR SPOHNHOLZ asked how state revenue would increase based on
capital spending.
REPRESENTATIVE MCCARTY shared an example from the North Slope.
CHAIR SPOHNHOLZ sought to confirm that Representative McCarty
was suggesting that the legislature increase oil industry
subsidies to increase state revenue.
REPRESENTATIVE MCCARTY responded, "Well, I suggest looking into
all the different things that's increasing the infrastructure
within the state." He discussed ports in Alaska and potentially
moving more commodities through them.
11:55:07 AM
CHAIR SPOHNHOLZ pointed out that economic development would take
a long time to produce new revenue; further, she opined that
there wasn't a clear relationship between short-term capital
spending and short-term revenue. She addressed the billion-
dollar deficit beginning in FY 23 under this proposal, adding
that there would need to be a billion dollars in net cuts or new
revenue sources to balance the budget. She encouraged the
sponsor to consider ways to balance the budget.
REPRESENTATIVE MCCARTY believed that the dividend formula in HB
4010 would boost the economy.
11:58:18 AM
REPRESENTATIVE SCHRAGE appreciated the idea of increasing the
capital budget and the argument that government spending could
facilitate the economy. Nonetheless, he expressed concern that
Alaska's revenue was highly was dependent on oil and gas
revenue. Additionally, he pointed out that there was no
indication of a correlation between private industry success and
an increase in state revenue.
CHAIR SPOHNHOLZ appreciated the consensus from the fiscal policy
working group that different elements had to come together to
create a successful fiscal plan, such as broad-based revenue, a
robust dividend, modest cuts to the budget from systemic
reforms, and an updated spending cap.
[HB 4010 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4009 Sponsor Statement.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4003.PDF |
HW&M 10/13/2021 10:00:00 AM |
|
| HB 4010.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4003 Presentation.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4003 |
| HB 4009 Presentation.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4009.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4009 Fiscal Note, OMB.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4009 |
| HB 4010 Sponsor Statement.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4010 Sectional Analysis.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4010 Fiscal Note, OMB.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |
| HB 4010 Presentation 10.13.21.pdf |
HW&M 10/13/2021 10:00:00 AM |
HB4010 |