Legislature(2003 - 2004)
03/22/2004 01:42 PM House FIN
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HOUSE JOINT RESOLUTION NO. 9
Proposing amendments to the Constitution of the State
of Alaska relating to an appropriation limit and a
spending limit.
Co-Chair Harris MOVED to ADOPT Work Draft 23-LS0435, Version
Z dated 3/19/04. There being NO OBJECTION, it was so
ordered.
MR. PETER ECKLUND, STAFF TO CO-CHAIR WILLIAMS, explained
that line 7 in Section 16, would change the average to three
of four fiscal years from an average of two of four fiscal
years in the previous version. He said that it is an
attempt to smooth out the starting point between fiscal
years, which Mr. Tangeman could explain, and he noted the
chart (copy on file) showing it in visual format.
MR. BRUCE TANGEMAN, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION stated that the previous version included one base
year two years prior in order to get an accurate base year.
He explained that it was because last year, or our current
FY 04, does not yet include supplemental appropriations.
The problem was that it could allow a stair-step of the
appropriation: if the Legislature doesn't appropriate the
full limit one year, but does the following year, there
would be a gap causing a stair step in future years.
TAPE HFC 04 - 62, SIDE B
Mr. Tangeman continued stating that the change smoothes out
the low years when less than the full limit is appropriated.
Mr. Ecklund continued discussing the changes in Work Draft
Version Z. The change to Section 16(b) on page 1, line 16,
would provide that if a future Legislature desired to exceed
the spending limit, it could do so by two methods.
Exceeding by 2% would require a 2/3 vote of both houses, and
exceeding by a further 2%, for a total of 4%, would require
a ¾ vote of both houses.
Mr. Ecklund explained that the change on page 2, line 7, in
the last part of (b) states that any exceeding of the limit
must be done in a separate appropriation bill. A future
Legislature wishing to exceed the spending limit by, or up
to, 2% or 4% would have to introduce separate legislation
and get a 2/3 vote for 2%, and a ¾ vote for 4% increases.
Representative Croft questioned whether the change on page 1
would recreate the supplemental problem in the new draft by
using the earliest 3 of the 4 preceding fiscal years. Mr.
Tangeman clarified that FY 04 would be skipped, and FY 01,
FY 02 and FY 03 would be averaged.
Representative Croft asked how the "anti-log rolling"
section would work if the operating and capital budgets both
passed but exceed the limit by 4%, and which of the two
would require the 2/3 vote. He asked if it would be similar
to the Constitutional Budget Reserve special vote
provisions. Mr. Ecklund replied, with a limit that used the
prior three fiscal years averaged and adjusted for half of
the population and the income increase, that would be the
limit for the operating and capital budgets. To exceed that
limit- to go over 3.5%- for capital or operating spending, a
separate piece of legislation would have to be introduced
and voted on.
Representative Croft continued discussing a hypothetical
situation and reiterated his question of which appropriation
would stand alone. Mr. Ecklund clarified through example
that if the cap were $3.5 million, the operating and capital
budgets could not exceed it. As the budgets were developed,
if it appeared that they would exceed the cap, items would
be pulled and put in a separate piece of legislation. The
intent was to highlight and separate the exceeding of the
limit instead of burying it in the operating and capital
budgets requiring a lot of successive votes. The intent was
to make it less confusing.
Representative Croft questioned how it would work in
practical effect, if the budgets run up to the cap in every
fiscal year. He said that a separate appropriation might be
needed each year to assure the gap in the operating budget
would be filled. Mr. Ecklund replied that it is hard to
anticipate future events, but the concept is based on a hard
limit that can't be exceeded. The intent is to build in a
safety valve to highlight what the percentage exceeding the
limit is, and to conduct separate votes on separate pieces
of legislation.
Co-Chair Williams commented that he and Representatives
Stoltze and Hawker, and Mr. Ecklund worked with Ms. Frasca
to draft the changes.
Mr. Ecklund continued discussing the changes. On page 2,
line 21, the debt service of General Obligation (GO) Bonds
was added to the exemptions from the limit. On page 3, line
1, (12) the new language mirrors that in statute, in order
to include an exception such as the Kodiak Launch Facility.
He explained this is intended not to penalize the Facility
for getting more business income. In Section 30 on page 3,
the language stating the ballot proposition would come up
again in 2010 wasn't changed. He explained that a "yes"
vote means the voter wants to keep the spending limit, and a
"no" vote means the voter rejects it.
Representative Hawker commented that the base indexing is
the average annual percentage rate change for state
population and personal income. One factor that is not in
the index is the inflation factor or Consumer Price Index
(CPI). He asked the sponsor's and committee's thoughts on
whether the CPI ought to be in the base indexing. He
referred to a chart by Legislative Finance (copy on file)
which shows that population and income projected from the
base year of 1996 is a higher number than combining
population and the CPI.
Representative Stoltze offered that his original intent was
not to have any indexing at all. He agreed to use the
Governor's Office formula of personal income. He was open
to hearing the committee's thoughts.
Representative Hawker MOVED to ADOPT Amendment #1. Co-Chair
Williams OBJECTED for purposes of discussion.
Amendment #1 reads:
Page 2, line 12:
Delete "of Alaska permanent fund income"
Insert "from the Alaska permanent fund"
Representative Hawker explained that the amendment involves
an addition to the exemptions not subject to the spending
limit. The Permanent Fund money dedicated to dividends
should be exempted. On page 2, line 12, the language
reflects the current statute in which dividends are paid
from Permanent Fund income, and Amendment #1 would make the
language more encompassing: to appropriations from the
Permanent Fund for payments of dividends. He believed that
the language would accommodate either a POMV or the current
statute, depending on what the public decides.
Representative Stoltze asked if the spending limit would
allow for money to come out of the Permanent Fund principal
by the nature of this language. He asked for guidance from
legal counsel.
Ms. Cook did not think it would create the concern that
Representative Stoltze articulated. She did not see
subsection (c) as granting authority to make any particular
type of appropriation. It simply states that an
appropriation would not be counted toward the spending
limit. She said that the extent of the power of the
Legislature to make an appropriation will be handled under
the constitutional provision for the Permanent Fund in
Section 15, whether it is amended or not. Ms. Cook pointed
out that if it is not amended, and HJR 9 were to pass,
obviously any appropriation from the Fund would have to be
from income. She continued, if it is amended, and HJR 9
were to pass, obviously there would be no distinction
between income and principal, but any appropriation made
would be subject to a limit based on Percent of Market
Value.
Representative Stoltze expressed that if HJR 9 were to pass,
the legislative record would be very important. He asked Ms.
Cook to provide her comments as a legal opinion to the
committee. Ms. Cook replied that she would.
There being NO further OBJECTION, Amendment #1 was adopted.
Co-Chair Williams MOVED to adopt Amendment #2.
Representative Stoltze OBJECTED for the purposes of
discussion.
Amendment #2 reads:
Page 3, line 7, following "Section 30.":
Insert "Contingent Effect and Effective Date;"
Page 3, line 7:
Delete "(a) The"
Insert "(a) The 2004 amendment relating to an
appropriation limit (art. IX, sec. 16) takes effect only if
a 2004 amendment relating to and limiting appropriations
from the Alaska permanent fund based on an averaged percent
of the fund market value (art. IX, sec. 15) is approved by
the voters and takes effect. If the 2004 amendment relating
to an appropriation limit (art. IX, sec. 16) under this
subsection takes effect, it takes effect on the effective
date of the 2004 amendment relating to and limiting
appropriations from the Alaska permanent fund based on an
averaged percent of the fund market value (art. IX, sec.
15).
(b) If the"
Page 3, line 8, following "(art. IX, sec. 16)":
Insert "takes effect under (a) of this section,
it"
Page 3, line 10:
Delete "(b) Notwithstanding Section 1 of Article
XIII,"
Insert "(c) If it takes effect under
(a) of this section,"
Page 3, following line 15:
Insert "(d) To the extent this section conflicts
with Section 1 of Article XIII, this section prevails."
Co-Chair Williams explained that Amendment #2 basically
states that if the POMV doesn't pass, this measure doesn't
pass.
Representative Joule commented that it would be asking the
voters to approve two constitutional amendments, but
Amendment #2 would link one to the other. He questioned what
would happen if the voters chose only one, and he asked if
their votes don't count.
Vice-Chair Meyer agreed with Representative Joule. He
suggested that the spending limit should move forward
because if some new sources of revenue were passed, the
Legislature would want to guarantee a limit to spending. If
the voters were to approve HJR 9, that is also what they
would want, regardless of passage of the POMV. He objected
to the amendment.
Representative Hawker agreed that the spending limit
amendment would stand on its own merits. The real impetus
for the sponsorship of HJR 9 was to avail of some of the
Permanent Fund earnings for general government so that the
public would have confidence that future legislatures would
not spend the money frivolously. He stated that HJR 9 was
originally brought forth as part of a fiscal legislation
package, and he felt that there is strong merit to having
them linked. Representative Hawker said that he didn't feel
this disrespects the individual voter who might adamantly
prefer one to the other. He has listened to the counsel
from the Minority Leadership who require a comprehensive
fiscal package that will work for future years. He
concluded that he supports Amendment #2.
Representative Stoltze expressed that passage of the POMV
will require building the trust of the voters. He did not
think that tying HJR 9 with the POMV would build that public
confidence. He thought that both measures should prevail or
fall on their own merits. He did not want to lose votes on
his measure. He stated that he did not support Amendment #2
although he respected the motivations of its sponsor.
Representative Croft commented that it prohibits the
dividend protection as a spending cap. He thought that a
logical approach would be to spend no more money than is
available and not touch the revenue source, which is the
type of limit that individuals impose on themselves. He
voiced concern with the proposed approach while commending
the process presented by Representative Stoltze. He said
that Amendment #2 precludes the people from choosing the
alternative form of spending cap. He stated that if the
public rejects dividend protection, they don't get a
spending cap, and the public will get neither if they vote
down the POMV.
Representative Croft pointed out the tenor in Amendment #2
is that the Legislature can be trusted to manage the
Permanent Fund, but it cannot be trusted on spending in
future years. He expressed concern that the POMV and the
spending cap should not be tied together. He felt that
constitutional amendments must be done thoughtfully and
carefully because they remain in effect for a long time. He
worried that it is inappropriate to say, "if you don't let
us take half your dividend, we won't promise to be good with
your money."
Co-Chair Williams commented that he has heard talk that the
only way he would support the POMV is if a spending cap was
put on it. He stated he has been, and remains, opposed to a
spending cap because he believes it goes against the
Constitution to give up the Legislature's right to
appropriate. He expressed concern that the way the bill is
currently written, a 2% increase requires 27 votes, and a ¾
vote on 4% would put the Legislature in the same position
that it's in at the end of session with the ¾ vote [CBR].
He expressed that he does not distrust the electorate and he
supports the amendment,
A roll call vote was taken on the motion to adopt Amendment
#2.
IN FAVOR: Fate, Foster, Hawker, Williams
OPPOSED: Chenault, Croft, Joule, Meyer, Moses, Stoltze,
Harris
The MOTION FAILED (4-7). Amendment #2 was not adopted.
HJR 9 was heard and HELD in Committee for further
consideration.
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