Legislature(2017 - 2018)BUTROVICH 205
02/28/2017 03:30 PM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB46 | |
| SB21 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 46 | TELECONFERENCED | |
| += | SB 21 | TELECONFERENCED | |
| += | SB 26 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 21-PERMANENT FUND: INCOME; POMV; DIVIDENDS
4:14:51 PM
CHAIR DUNLEAVY announced the consideration of SB 21. He declared
that public testimony is closed on SB 21.
4:15:11 PM
At ease.
4:15:48 PM
CHAIR DUNLEAVY called the committee back to order. He asked
Senator Stedman, sponsor of SB 21, if he had any final comments
or remarks.
4:15:57 PM
SENATOR BERT STEDMAN, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 21, said the bill is an integral part of a fiscal
solution for Alaska. He commented as follows:
There are a lot of Alaskans that are very concerned
that as we try to move through to a fiscal solution,
the biggest pot of gold is the permanent fund sitting
there, roughly $57 billion, a very large, sweet target
of which we could probably appropriate, us in the
Legislature, somewhere around currently $8 billion or
$9 billion and then maybe an additional $4 billion or
so of unrealized earnings. It's very easy to go in for
us in the Legislature to appropriate large sums out of
the permanent fund.
The concern is as we move forward to try to find a
fiscal solution is that we ensure that the viability
of the permanent fund stays intact and that we that
were fortunate enough to live through the vast oil
boom of the last four decades leaves something for our
kids and our children's children on into the future,
that we don't over the next decade just liquidate it
or cripple it in a significant way. We are very
fortunate to be stewards of the subsurface assets in
the State of Alaska unlike all other states, and it's
incumbent upon us to look forward to the next
generation.
Senate Bill 21 would basically ring-fence or set aside
and protect the permanent fund from adverse
withdrawals setting up a percent of market value
management approach to it where you could only take
out 4.5 percent per year of a 5-year moving average of
the fund going back 6 years; and that [4.5] percent,
50 percent of that would go automatically to
dividends, which is 2.25 percent, the other 50 percent
would be available for us in the Legislature to
appropriate either to the general fund to deal with
fiscal issues at the time, when clearly that's the
time we have today, but looking forward there will be
a time when it's not needed and we can appropriate
that back to the permanent fund to make the permanent
fund grow faster, or add it to the dividends if we
want to increase the dividends.
Now this structure is set up ignoring the current
fiscal position of the state; in other words, the
percentage withdrawal amount is driven by the asset
allocation of the fund and its goal is to be in
perpetuity. That 4.5 percent would allow the permanent
fund to not change its management style and would
block us from taking more than 4.5 percent out per
year. It just so happens we are around the mid-50s in
billions in the permanent fund, if we were at $100
billion it would be double the numbers, and if we were
at $25 billion it would be half the numbers. The
dividend calculation defaults out at $1,700; now I
know some folks around the state might think that's
too big of a dividend and some folks might think it's
too small of a dividend, but it's a 50-50 split and it
happens to be the time frame we are in allowing that
balance to be measured at about $55 billion.
So that Mr. Chairman is what is in front of the
committee on a second hearing. I think there's some
amendments and some other discussions, but I just
wanted to take a few minutes to frame it for the
people at home because this is not a bill that fixes
our physical deficit, it is a bill to protect the
permanent fund from us, the Legislature, and to ensure
that we have an intact, vast amount of wealth from our
oil boom going forward to future generations of
Alaskans and we are not talking two or three
generations, we are talking in perpetuity.
4:20:51 PM
SENATOR GIESSEL commented as follows:
I appreciate the carefulness that Senator Stedman has
put into this bill. I especially like that 50-50
split. Certainly, citizens at home receiving their
check in the mail can say, "Okay, this is how much I
got and I know how much government got, I'm going to
keep an eye on how they spend the 50 percent they
got." I think that would create a more engaged
citizenry and that's a good thing.
CHAIR DUNLEAVY asked Senator Stedman if he wanted to touch upon
the future of the fund someday that there may be discussions
about constitutionalization.
SENATOR STEDMAN explained as follows:
I've been asked how come I didn't write the bill and
come forward with a constitutional amendment, it's
because clearly, it's the constitution that protects
the corpus of the permanent fund, we cannot spend it
without authorization of the people. We can spend and
have the authority to as the Legislature, as the
appropriators, all of the earnings and trading profits
of the fund which we call the earnings reserve.
There are two reasons why it's not requested as a
constitutional amendment today. Number one is the
cash-flow draws and needs in the current environment
of the state, I don't think we have the time to get
there right away. Also, I would like to see the
opportunity for all of us in the Legislature to have a
discussion with our constituents to make sure that
they are onboard in protecting the permanent fund for
future generations and they are comfortable with the
endowment approach so that we can move forward. I
think that would be nice if we could have that come
after the statutory bill has passed, which is what we
have in front of us and we have a thorough
understanding at the public level.
This is very clear and transparent, this is not smoke
and mirrors, there's not a lot of moving parts, it's
very straight forward; and then, hopefully we will
have the ability in the future to have a
constitutional amendment and that would enclose the
earnings account, basically there would be no need for
it, it would just go away for all practical purposes,
and we the Legislature could only get our hands-on 4.5
percent per year, and half of that then would go to
the citizens for dividends.
We would not be able to take the easy road, which is
vote huge chunks out of the earnings reserve which we
can do today with a simple majority vote and a
signature by the governor, we can easily move $7
billion or $8 billion this year, and to me it just
makes me want to stay awake at night worrying about
that, it's not any public servant I don't think ever
came to Juneau to see that.
4:23:59 PM
CHAIR DUNLEAVY moved to adopt Amendment 1, labeled 30-
LS0128\O.1:
30-LS0128\O.1
Martin
2/17/17
AMENDMENT 1
OFFERED IN THE SENATE
Page 1, line 2, following "dividends;":
Insert "authorizing an advisory vote on legislative
action that changes the calculation of the permanent
fund dividend and the amount available for
distribution from the earnings reserve account and
making the legislative action contingent on the
advisory vote receiving an affirmative majority vote;"
Page 3, line 19:
Delete all material and insert:
"* Sec. 6. The uncodified law of the State of
Alaska is amended by adding a new section to read:
ADVISORY VOTE. At a special election to be
held on September 26, 2017, in substantial compliance
with the election laws of the state, including
absentee voting and the preparation, publication, and
mailing of an election pamphlet under AS 15.58, the
lieutenant governor shall place before the qualified
voters of the state a question advisory to the
legislature and the governor. The election pamphlet
for the special election must comply with
AS 15.58.020(a)(6), including the requirement that it
contain statements that advocate voter approval or
rejection of the question. Notwithstanding
AS 15.80.005 and other laws relating to preparation of
the ballot proposition, the question shall appear on
the ballot in the following form:
Q U E S T I O N
Do you approve of the passage by the Alaska State
Legislature of a bill that changes the calculation of
the permanent fund dividend and the amount available
for distribution from the earnings reserve account
established under AS 37.13.145?
Yes [ ] No [ ]
* Sec. 7. The uncodified law of the State of Alaska
is amended by adding a new section to read:
NOTICE TO THE REVISOR OF STATUTES. The
director of elections shall notify the revisor of
statutes when the results of the election have been
certified under AS 15.15.450 if the advisory vote
authorized in sec. 6 of this Act receives an
affirmative majority vote.
* Sec. 8. The uncodified law of the State of Alaska
is amended by adding a new section to read:
CONDITIONAL EFFECT. Sections 1 - 5 of this
Act take effect only if the director of elections
notifies the revisor of statutes under sec. 7 of this
Act that the question in the advisory vote under sec.
6 of this Act received an affirmative majority vote.
* Sec. 9. If, under sec. 8 of this Act, secs. 1 - 5
of this Act take effect, they take effect on July 1 in
the year following the year in which the notice is
given under sec. 7 of this Act.
* Sec. 10. Section 6 of this Act takes effect
immediately under AS 01.10.070(c).
* Sec. 11. Except as provided in secs. 9 and 10 of
this Act, this Act takes effect July 1, 2017."
4:24:08 PM
SENATOR GIESSEL objected for purposes of discussion.
4:24:18 PM
CHRISTA MCDONALD, Staff, Senator Mike Dunleavy, Alaska State
Legislature, Juneau, Alaska, said Amendment 1 places an advisory
vote of the people to have SB 21 become effective and explained
as follows:
· Section 6: is the language of the advisory vote that
reads, "Do you approve of the passage by the Alaska
State Legislature of a bill that changes the
calculation of the permanent fund dividend and the
amount of it available for distribution from the
earnings reserve account?".
· Section 7: establishes that the Director of Elections
will notify the reviser of statutes if the vote
receives a majority.
· Section 8: creates a conditional requirement of an
affirmative majority vote in order for Sections 1 to 5
of the bill to become effective which is SB 21 which
you see before you.
· Section 9: states that Sections 1 to 5 of the
legislation will take place on June 1 after an
affirmative majority vote.
· Section 10: issues the advisory vote and states that
it will become effective immediately.
· Section 11: is the rest of the effective dates of the
bill.
CHAIR DUNLEAVY noted that the last advisory vote regarding the
permanent fund went to the people 18 years ago. He pointed out
the permanent fund is a unique instrument not just in this
country, but worldwide. He admitted that there are varying
opinions on the purpose of the permanent fund and the dividend,
but explained that the reason he offered the amendment is that
the people of Alaska are partners with their government
regarding the permanent fund issue and the 50-50 proposition. He
said the people constitutionalized the permanent fund decades
ago during a time when the Alaska Legislature was spending a lot
of money and they wanted to figure out a way to preserve the
money for future generations. He noted that after the permanent
fund was constitutionalized, other instruments as well went to
the people for a vote over a 12-year period, including the
Constitutional Budget Reserve, the appropriations limit, and a
statutory dividend.
4:27:24 PM
SENATOR GIESSEL expressed concern that the amendment calls for a
vote of the people in less than 6 months. She pointed out that
people may not completely understand the fiscal situation and
the gravity of the decision. She added that the special election
means there are extra costs and its turnout will be
unpredictable. She stated that she is not convinced that the
people's feelings will be received with clarity. She reiterated
that she is not convinced that folks would understand the
ramifications of a "yes" or "no" vote. She asked if he had
considered the factors she noted in terms of a special election.
CHAIR DUNLEAVY replied that the people are probably more in tune
with the permanent fund issue than many others that the
Legislature deals with. He opined that the permanent fund issue
is of such magnitude that the people of Alaska should be a part
of it.
SENATOR EGAN noted that Senator Stedman is the sponsor of SB 21
and asked what his thoughts were on the proposed amendment.
4:30:46 PM
SENATOR STEDMAN replied as follows:
The committee of jurisdiction always makes bills
better. I would like to see at the end of the day
constitutional protection for the permanent fund and a
percent-of-market value setup with a reasonable payout
targeted toward the structure and longevity of the
permanent fund, not our cashflow needs, and I think
that's what the bill does. I always respect the will
of the committees.
CHAIR DUNLEAVY noted that SB 21 is referred to another committee
and continued discussions will address the contents of the bill.
He suggested that the bill be moved to the next committee with
the amendment. He asked if the objection was maintained.
SENATOR GIESSEL maintained her objection.
CHAIR DUNLEAVY asked that a roll call vote be taken on Amendment
1.
A roll call vote was taken. Senator Wilson and Chair Dunleavy
voted in favor of Amendment 1 and Senators Giessel and Egan
voted against it. Therefore, Amendment 1 failed by a 2:2 vote.
4:32:41 PM
At ease.
4:45:14 PM
CHAIR DUNLEAVY called the committee back to order. He asked if
there was a motion to move SB 21.
4:45:20 PM
SENATOR GIESSEL moved to report SB 21, version 30-LS0128\O from
committee with individual recommendations and attached fiscal
note(s).
4:45:30 PM
CHAIR DUNLEAVY announced that there being no objection, SB 21
moved from the Senate State Affairs Standing Committee. He asked
if there were any closing comments or questions.
SENATOR WILSON read a "Letter of Intent" from the Senate State
Affair Committee regarding SB 21 as follows:
It is the intent of the Senate State Affairs Committee
that when subsequent committees of referral in both
bodies of the Alaska Legislature consider Senate Bill
21 (Permanent Fund: Income; POMV, Dividends), or any
related legislation dealing with the use of the
earnings of the Permanent Fund, that those committees
strongly consider including the following elements.
1. Protection of the corpus of the Permanent Fund
against the erosive effect of inflation over
time.
2. A draw limit on the portion of earnings of the
Permanent Fund drawn for use by state government.
3. A savings rule which captures and saves at least
some peak revenue, and places these savings into
the corpus of the Permanent Fund.
CHAIR DUNLEAVY announced that the letter of intent will be
incorporated as the bill moves on to the next committee of
referral. He asked if committee members had any closing
comments.
SENATOR WILSON thanked Senator Stedman for putting forth SB 21.
He said the issues that SB 21 addresses are complicated. He
added that he appreciated the committee's time to address SB 21
and other bills related to the permanent fund. He opined that
hopefully the next committees will spend time diving deep down
into the issues that SB 21 addresses as well as listening to
Alaskans. He stated that he is a strong believer of the
government not having any more than what he has. He reiterated
that he appreciates Senator Stedman's efforts and others'
efforts put forth during the interim to work on the bill.
4:47:31 PM
CHAIR DUNLEAVY said he agreed with many of the sentiments that
Senator Stedman stated. He reiterated that the permanent fund
was constitutionalized decades ago because the people of Alaska
did not trust the Legislature. He hoped that the state was not
entering another period where Alaskans are going to question the
Legislature's motives.
He set forth that he looked forward to working with Senator
Stedman and others to ensure that the permanent fund is ring-
fenced to make sure the worst possible fears are not realized.
He added that he is going to keep pushing for the involvement of
Alaskans in the protection of the permanent fund because they
are partners in the process. He remarked that he was not sure
Alaskans were going to support a plan that they are not a part
of.
SENATOR GIESSEL addressed the letter of intent for SB 21 as
follows:
The letter of intent is very positive, and I think
really fits well with Senator Stedman's bill, SB 21;
he has used the title "Grow and Guard the Permanent
Fund" and I think we all agree with that.
The statement has been made, "The people of Alaska
entrusting to their elected officials," and I agree
with that, in fact I spoke about that on the Senate
floor. I believe that trust was eroded when the
governor vetoed 50 percent of the dividend in 2016;
this is a grave, serious decision that the elected
officials of this body should be making with the
deliberation we are going through right now.
I hope we can restore that trust through this
deliberation with public comment and the various
committees this bill will go through.
4:49:47 PM
CHAIR DUNLEAVY asked if there was a motion to move the letter of
intent regarding the items that Senator Wilson had put into
public record.
SENATOR GIESSEL moved that the letter of intent be attached to
SB 21 as it moves through the committee process.
4:50:12 PM
CHAIR DUNLEAVY found no objection, and SB 21, with the letter of
intent, was reported from the Senate State Affairs Standing
Committee.