Legislature(2021 - 2022)BUTROVICH 205
08/27/2021 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SB53 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 53 | TELECONFERENCED | |
SB 53-PERM FUND; ADVISORY VOTE
1:37:21 PM
CHAIR HOLLAND announced the consideration of SENATE BILL NO. 53
"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; relating to an
advisory vote on the permanent fund; providing for an effective
date by repealing the effective date of sec. 8, ch. 16, SLA
2018; and providing for an effective date."
[SB 53 was previously heard on 4/21/21 and 4/26/21. Public
testimony was opened and closed on 4/26/21.]
1:37:38 PM
CHAIR HOLLAND stated his intent to take amendments on SB 53 and
hold the bill in committee. He reminded members that passing
this bill would change the statutory permanent fund dividend
formula established by Senate Bill 26 in 2018. Under SB 53, the
permanent fund dividend (PFD) would receive 2.5 percent, or half
of the average 5 percent market value of the permanent fund as
calculated over the first five of the last six years. This
calculation would yield the $2,350 PFD in 2021 currently being
discussed.
1:38:23 PM
CHAIR HOLLAND stated that this bill is part of the governor's
larger fiscal plan. Further, it was supported by the
legislature's Fiscal Policy Working Group (FPWG). He pointed out
that the legislature has not followed the existing PFD statute
for the past six years. SB 53 would provide the legislature with
an opportunity to follow the statutory provisions when deciding
the amount of the dividend each year by aligning the statue with
the proposed constitutional amendment [SJR 6].
1:38:55 PM
CHAIR HOLLAND acknowledged that many Alaskans would prefer to
maintain and follow the historical formula. However, the 50:50
plan in SB 53 is a compromise that meets the original intent of
the historical formula. He stated his intent to consider
amendments.
1:39:15 PM
SENATOR HUGHES related her understanding that additional
amendments would be considered at the next hearing.
CHAIR HOLLAND agreed. He further indicated that the committee is
authorizing Legislative Legal Services to make technical changes
to meet the intent expressed during this hearing.
1:40:14 PM
CHAIR HOLLAND moved Amendment 1, work order 32-GS1693\A.13.
32-GS1693\A.13
Nauman
8/26/21
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR HOLLAND
TO: SB 53
Page 1, lines 3 - 4:
Delete "providing for an effective date by
repealing the effective date of sec. 8, ch. 16, SLA
2018;"
Page 2, line 6:
Delete "five [5.25]"
Insert "five"
Page 5, line 2:
Delete "First"
Insert "Second"
Page 5, lines 13 - 14:
Delete all material.
Renumber the following bill sections accordingly.
Page 5, line 16:
Delete "sec. 12" and the
Insert "sec. 10"
Delete "July 1, 2021"
SENATOR KIEHL objected for discussion purposes.
1:40:40 PM
ED KING, Staff, Senator Roger Holland, Alaska State Legislature,
Juneau, Alaska, explained Amendment 1. SB 53 was debated during
the regular legislative session. Since this is a new fiscal
year, some of the terms and provisions in the bill are out of
date. For example, Senate Bill 26 had a delayed effective date
from 2018 to June 30, 2021. When SB 53 was originally discussed
that provision had not yet taken effect. It has now taken
effect. Thus, the phrase "providing for an effective date by
repealing the effective date of Sec. 8 ch. 16 SLA 2018;" is no
longer necessary since it is in effect.
MR. KING referred to page 2, lines 6-7 of SB 53 to language that
reduces the POMV rate from 5.25 to 5 percent. This language is
no longer needed because the delayed effective date has taken
effect. The rest of the changes are consistent and conform to
the new fiscal year, he said.
MR. KING directed attention to lines 19-22 of Amendment 1
pertaining to the effective date clause. He explained that
Amendment 1 would delete the effective date of July 1, 2021,
since that date has passed and replace it with July 1, 2022.
1:42:28 PM
SENATOR HUGHES asked whether the date should remain as July 1,
2021, since the legislature would want the bill to be in effect
now.
MR. KING answered that under Amendment 1 the bill would not take
effect until the first day of the next fiscal year. He said July
1, 2022, might be too late if the legislature wants changes in
this bill to affect FY 2022. He deferred to Ms. Nauman to
recommend how to correct it.
1:43:34 PM
EMILY NAUMAN, Attorney, Legislative Legal Services, Legislative
Affairs Agency, Juneau, Alaska, answered that to the extent the
committee would like the to bill to take effect for the current
fiscal year, the language could be amended to read "take effect
immediately."
1:44:43 PM
CHAIR HOLLAND asked whether the preference would be to use the
language "take effect immediately" or to strike lines 21 and 22
of Amendment 1.
1:44:03 PM
MS. NAUMAN opined that retaining some amendment to those lines
is important. Essentially, the bill will have an effective date
that has already passed unless the committee adds a
retroactivity provision. She advised that under Wielechowski v.
State, the legislature could appropriate at any time any amount
from the Earnings Reserve Account (ERA) in FY 2022 regardless of
the effective date in the bill.
1:44:46 PM
SENATOR HUGHES said one goal Chair Holland articulated in his
opening remarks was that the committee wants legislative
appropriations to align with the law. She related her
understanding that if the committee wanted to follow the
statutes this year, lines 21 and 22 of Amendment 1 should remain
as written. She asked for guidance on the specific language to
make it work.
CHAIR HOLLAND asked Ms. Nauman to provide specific language that
would replace line 22, "Delete July 1, 2022".
MS. NAUMAN responded that the language should read "take effect
immediately." She opined that language should be sufficient for
now.
1:45:44 PM
CHAIR HUGHES ask for clarification that the amendment would
delete "July 1, 2022" and replace it with "take effect
immediately."
MR. KING pointed out that the language "take effect" is
currently in SB 53 so adding the word "immediately" would
suffice.
CHAIR HOLLAND stated that Legislative Legal is authorized to
make conforming changes to the bill.
1:46:18 PM
SENATOR HUGHES asked if the remedy would be to delete the date
on line 21 of Amendment 1 and insert "immediately."
CHAIR HOLLAND reiterated the language.
MS. NAUMAN cautioned members that it is difficult to determine
what effect specific language changes made during the committee
meeting will have on the rest of the bill. For example, [on page
5, line 15 of SB 53,] Section 12 establishes an immediate
effective date for Section 9. She opined that the entire bill
should be included in that change. Since this language provides
a more technical change than the committee likely contemplated,
she suggested the committee adopt a conceptual amendment to make
the entire bill effective immediately.
1:47:40 PM
At ease
1:48:08 PM
CHAIR HOLLAND reconvened the meeting.
1:48:16 PM
SENATOR HUGHES noted that during the break the committee learned
a forthcoming amendment contains a provision that would delete
Section 12, if passed.
SENATOR HUGHES moved to adopt Conceptual Amendment 1 to
Amendment 1, on line 22, delete July 1, 2022, and insert
"immediately."
CHAIR HOLLAND found no further objection, so Conceptual
Amendment 1 to Amendment 1 was adopted.
SENATOR HUGHES asked Legislative Legal to make any conforming
changes necessary.
1:49:18 PM
SENATOR KIEHL removed his objection.
CHAIR HOLLAND heard no further objections and Amendment 1, as
amended, was adopted.
1:49:39 PM
CHAIR HOLLAND moved Amendment 2, work order 32-GS1693\A.8.
32-GS1693\A.8
Nauman
8/26/21
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR HOLLAND
TO: SB 53
Page 2, line 19, following " AS 43.23.045,":
Insert "not less than
Page 2, line 22, following "fund,":
Insert "up to"
SENATOR HUGHES objected for discussion purposes.
1:49:59 PM
MR. KING explained that Amendment 2 would align SB 53 to the
changes this committee made to SJR 6. The committee discussed
ensuring that the permanent fund dividend (PFD) calculation
would be based on the full calculation. Thus, if the legislature
opted to appropriate an amount less than that, the calculation
for the dividend would not change. On page 2, line 19, "not less
than" would be inserted in relationship to the PFD calculation.
On page 2, line 22, the language "up to" is inserted to indicate
that the government's portion of the POMV can be less than or
equal to that amount.
CHAIR HOLLAND asked Senator Shower (participating via
teleconference) to confirm that he is online and has no
objections to the actions taken thus far.
1:51:18 PM
SENATOR SHOWER responded that he did not have any issues thus
far.
1:51:29 PM
SENATOR HUGHES asked the record to reflect that legislators can
participate remotely and vote on amendments.
1:51:47 PM
SENATOR KIEHL stated that he was not 100 percent clear that
Amendment 2 is necessary. The legislature always has the
authority to deposit extra general fund monies in the permanent
fund. He asked whether Amendment 2 was symbolic.
MR. KING stated that as Legislative Legal counsel mentioned
earlier, the legislature has the power of appropriation and
regardless of the current or future statutory language, that
power is not diminished.
1:52:29 PM
CHAIR HOLLAND asked if Amendment 2 would symbolically align this
bill with the proposed third special session's constitutional
language in SJR 6.
MR. KING answered yes. He related his understanding that the
committee's intent is to align the law with the proposed
constitutional amendment. Although it is not necessary to align
SB 53 with the proposed constitutional amendment, it is symbolic
to do so.
1:53:07 PM
SENATOR MYERS related his understanding that the intent is to
tie SB 53 to the constitutional amendment. Thus, Amendment 2
provides the language to match SB 53 to the constitutional
amendment, SJR 6.
1:53:34 PM
SENATOR SHOWER commented that three committee members
participated in the Fiscal Policy Working Group (FPWG). He
stated that part of the challenge is to restore the public trust
in the legislature's ability to follow the law. While he viewed
Amendment 2 as symbolic, it is important in terms of
accountability to the public that this legislature and future
legislatures intend to follow the law.
1:54:33 PM
CHAIR HOLLAND highlighted the importance of aligning SB 53 and
the proposed constitutional amendment. He emphasized the
necessity for the legislature to follow the law.
1:54:53 PM
SENATOR HUGHES observed that Section 2, AS 37.13.145 (b) on page
2, line 16 of SB 53 reads, "Each fiscal year, the legislature
may appropriate" rather than "shall" appropriate from the
earnings reserve account. She suggested that if today's
amendments do not fix this, the committee should address this
language at the next meeting.
MR. KING deferred to Ms. Nauman.
MS. NAUMAN agreed with Senator Hughes. She said "may
appropriate" is retained because it is consistent with the
decision under Wielechowski v. State. She opined that changing
the law to say "shall appropriate" would be unconstitutional
because the constitutional amendment has not yet passed.
MS. NAUMAN said that is the reason the term "may" is retained in
subsection (b).
1:56:23 PM
SENATOR HUGHES asked if the committee could add contingency
language to change "may" to "shall" if the proposed
constitutional amendment were to pass.
MS. NAUMAN answered yes.
1:56:42 PM
SENATOR MYERS advised members that a forthcoming amendment to
tie SB 53 to the proposed constitutional amendment contains
"shall."
MR. KING confirmed it was in a forthcoming amendment. He offered
to raise the issue when the amendment is offered.
1:57:20 PM
SENATOR HUGHES removed her objection.
CHAIR HOLLAND found no further objection and Amendment 2 was
adopted.
1:57:42 PM
SENATOR MYERS moved to adopt Amendment 3, work order 32-
GS1693\A.11.
32-GS1693\A.11
Nauman
8/27/21
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR MYERS
TO: SB 53
Page 1, lines 3 - 4:
Delete "relating to an advisory vote on the
permanent fund; providing for an effective date by
repealing the effective date of sec. 8, ch. 16, SLA
2018;"
Page 2, line 6:
Delete "five [5.25]"
Insert "five"
Page 2, following line 14:
Insert a new bill section to read:
"* Sec. 2. AS 37.13.140, as amended by sec. 1 of
this Act, is amended to read:
Sec. 37.13.140. Income. (a) Net income of the
fund includes income of the earnings reserve account
established under AS 37.13.145. Net income of the fund
shall be computed annually as of the last day of the
fiscal year in accordance with generally accepted
accounting principles, excluding any unrealized gains
or losses. Income available for distribution equals 21
percent of the net income of the fund for the last
five fiscal years, including the fiscal year just
ended, but may not exceed net income of the fund for
the fiscal year just ended plus the balance in the
earnings reserve account described in AS 37.13.145.
(b) The corporation shall determine the amount
available for appropriation each year. The amount
available for appropriation is five percent of the
average market value of the fund for the first five of
the preceding six fiscal years, including the fiscal
year just ended, computed annually for each fiscal
year in accordance with generally accepted accounting
principles. In this subsection, "average market value
of the fund" includes the balance of the earnings
reserve account established under AS 37.13.145, but
does not include that portion of the principal
attributed to the settlement of State v. Amerada Hess,
et al., 1JU-77-847 Civ. (Superior Court, First
Judicial District). [THE AMOUNT AVAILABLE FOR
APPROPRIATION MAY NOT EXCEED THE BALANCE IN THE
EARNINGS RESERVE ACCOUNT DESCRIBED IN AS 37.13.145.]"
Renumber the following bill sections accordingly.
Page 2, following line 23:
Insert a new bill section to read:
"* Sec. 4. AS 37.13.145(b), as amended by sec. 3 of
this Act, is amended to read:
(b) At the end of each [EACH] fiscal year, the
corporation shall transfer [LEGISLATURE MAY
APPROPRIATE] from the earnings reserve account to the
[(1)] dividend fund established under
AS 43.23.045, 50 percent of the income [AMOUNT]
available for distribution [APPROPRIATION] under
AS 37.13.140 [AS 37.13.140(b); AND
(2) GENERAL FUND, 50 PERCENT OF THE AMOUNT
AVAILABLE FOR APPROPRIATION UNDER AS 37.13.140(b)]."
Renumber the following bill sections accordingly.
Page 3, following line 10:
Insert a new bill section to read:
"* Sec. 6. AS 37.13.145(c), as amended by sec. 5 of
this Act, is amended to read:
(c) After the transfer [APPROPRIATIONS] under
(b) and an appropriation under (g) of this section,
the corporation shall transfer [LEGISLATURE MAY
APPROPRIATE] from the earnings reserve account to the
principal of the fund an amount sufficient to offset
the effect of inflation on the principal of the fund
during that fiscal year. However, none of the amount
transferred shall be applied to increase the value of
that portion of the principal attributed to the
settlement of State v. Amerada Hess, et al., 1JU-77-
847 Civ. (Superior Court, First Judicial District) on
July 1, 2004. The corporation shall calculate the
amount to transfer to the principal under this
subsection by
(1) computing the average of the monthly
United States Consumer Price Index for all urban
consumers for each of the two previous calendar years;
(2) computing the percentage change between
the first and second calendar year average; and
(3) applying that rate to the value of the
principal of the fund on the last day of the fiscal
year just ended, including that portion of the
principal attributed to the settlement of State v.
Amerada Hess, et al., 1JU-77-847 Civ. (Superior Court,
First Judicial District)."
Renumber the following bill sections accordingly.
Page 3, following line 21:
Insert new bill sections to read:
"* Sec. 8. AS 37.13.145(d), as amended by sec. 7 of
this Act, is amended to read:
(d) Notwithstanding (b) of this section, income
earned on money awarded in or received as a result of
State v. Amerada Hess, et al., 1JU-77-847 Civ.
(Superior Court, First Judicial District), including
settlement, summary judgment, or adjustment to a
royalty-in-kind contract that is tied to the outcome
of this case, or interest earned on the money, or on
the earnings of the money shall be treated in the same
manner as other income of the Alaska permanent fund,
except that it is not available for distribution
[APPROPRIATIONS] to the dividend fund, for transfers
[UNDER AS 37.13.140(b) OR] to the principal under (c)
of this section, or for an appropriation under (g) of
this section, and shall be annually deposited into the
Alaska capital income fund (AS 37.05.565).
* Sec. 9. AS 37.13.145 is amended by adding new
subsections to read:
(g) The legislature may not appropriate from the
earnings reserve account to the general fund a total
amount that exceeds the amount available for
appropriation under AS 37.13.140(b) in a fiscal year.
(h) The combined total of the transfer under (b)
of this section and an appropriation under (g) of this
section may not exceed the amount available for
appropriation under AS 37.13.140(b)."
Renumber the following bill sections accordingly.
Page 3, following line 25:
Insert a new bill section to read:
"* Sec. 11. AS 37.13.300(c), as amended by sec. 10
of this Act, is amended to read:
(c) Net income from the mental health trust fund
may not be included in the computation of net income
or market value [THE AMOUNT] available for
distribution or appropriation under AS 37.13.140
[AS 37.13.140(b)]."
Renumber the following bill sections accordingly.
Page 4, following line 1:
Insert a new bill section to read:
"* Sec. 13. AS 37.14.031(c), as amended by sec. 12
of this Act, is amended to read:
(c) The net income of the fund shall be
determined by the Alaska Permanent Fund Corporation in
the same manner the corporation determines the net
income of the Alaska permanent fund under AS 37.13.140
[AND SHALL BE COMPUTED ANNUALLY AS OF THE LAST DAY OF
THE FISCAL YEAR IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, EXCLUDING ANY UNREALIZED GAINS
OR LOSSES]."
Renumber the following bill sections accordingly.
Page 4, following line 27:
Insert a new bill section to read:
"* Sec. 15. AS 43.23.025(a), as amended by sec. 14
of this Act, is amended to read:
(a) By October 1 of each year, the commissioner
shall determine the value of each permanent fund
dividend for that year by
(1) determining the total amount available
for dividend payments, which equals
(A) the amount of income of the Alaska
permanent fund transferred [APPROPRIATED] to the
dividend fund under AS 37.13.145(b) during the current
year;
(B) plus the unexpended and unobligated
balances of prior fiscal year appropriations that
lapse into the dividend fund under AS 43.23.045(d);
(C) less the amount necessary to pay prior
year dividends from the dividend fund in the current
year under AS 43.23.005(h), 43.23.021, and
43.23.055(3) and (7);
(D) less the amount necessary to pay
dividends from the dividend fund due to eligible
applicants who, as determined by the department, filed
for a previous year's dividend by the filing deadline
but who were not included in a previous year's
dividend computation;
(E) less appropriations from the dividend
fund during the current year, including amounts to pay
costs of administering the dividend program and the
hold harmless provisions of AS 43.23.240;
(2) determining the number of individuals
eligible to receive a dividend payment for the current
year and the number of estates and successors eligible
to receive a dividend payment for the current year
under AS 43.23.005(h); and
(3) dividing the amount determined under
(1) of this subsection by the amount determined under
(2) of this subsection."
Renumber the following bill sections accordingly.
Page 4, line 29, through page 5, line 15:
Delete all material and insert:
"* Sec. 17. The uncodified law of the State of
Alaska is amended by adding a new section to read:
CONDITIONAL EFFECT. Sections 2, 4, 6, 8, 9, 11,
13, and 15 of this Act take effect only if, by
November 30, 2023, the voters have not approved a
resolution that appears on a statewide election ballot
that amends the Constitution of the State of Alaska to
(1) specify that the amount that may be
appropriated from the Alaska permanent fund is a draw
based on the average fiscal-year-end market value of
the permanent fund; and
(2) require deposit of the unencumbered
balance of the earnings reserve account established
under AS 37.13.145 into the Alaska permanent fund to
become part of the principal of the fund.
* Sec. 18. If, under sec. 17 of this Act, secs. 2,
4, 6, 8, 9, 11, 13, and 15 of this Act take effect,
they take effect July 1, 2023."
Renumber the following bill sections accordingly.
Page 5, line 16:
Delete "sec. 12"
Insert "sec. 18"
1:57:44 PM
CHAIR HOLLAND objected for discussion purposes.
SENATOR SHOWER asked for the work order number for Amendment 3
to verify whether he has the correct amendment before him.
1:58:05 PM
At ease
1:58:46 PM
CHAIR HOLLAND reconvened the meeting. He stated that the
amendments to SB 53 were recently posted on BASIS. He identified
the work order for Amendment 3 as 32-GS1693\A.11.
1:59:25 PM
SENATOR MYERS explained that Amendment 3 would tie SB 53 to the
proposed constitutional amendment. Initially the bill called for
an advisory vote of the people. He understood that a separate
amendment would remove the proposed advisory vote.
2:00:32 PM
SENATOR MYERS elaborated that the concept was to align SB 53
with the constitutional amendment. He stated that the
constitutional amendment cannot become effective unless voters
approve it during the next general election to be held in
November 2022. If that constitutional amendment were to fail,
the law would revert to the current statute by repealing SB 53.
2:00:55 PM
SENATOR MYERS directed attention to page 2, line 14 of Amendment
3, which would make the change Senator Hughes pointed out
earlier by changing "may" to "shall." As Ms. Nauman indicated,
the "shall" language is only constitutional if the voters
approve the constitutional amendment, he said.
SENATOR HUGHES asked for confirmation that if the constitutional
amendment were to fail in November 2022 and SB 53 was repealed,
it would affect the PFDs issued in 2021 and 2022.
SENATOR MYERS answered that is correct.
2:01:51 PM
SENATOR MYERS directed attention to the effective date on page
6, line 11 in Section 18 of Amendment 3. He asked for the
outcome of the bill if the legislative vote on the passage of
the effective date failed.
MS. NAUMAN asked whether he was speaking about SB 53 or
Amendment 3.
SENATOR MYERS asked what the overall effect would be if SB 53
were to pass the legislature but the legislature failed to adopt
the effective date clause.
MS. NAUMAN answered that the question is complicated. She
predicted it would be chaotic for Legislative Legal to determine
the legal implications. She suggested it was likely that the
changes would occur simultaneously and so the outcome would
result in no changes to the statutes.
2:03:26 PM
SENATOR KIEHL directed attention to the conditional effects
provision on page 6, line 3 of Amendment 3. He stated that the
language would revert back to the original PFD language "? if,
by November 30, 2023 the voters have not approved a
constitutional amendment." However, the resolution can only
appear on the ballot during a general election. He asked if
there was a reason to use the November 30, 2023 date since the
next general election is in November or if it was a drafting
error.
2:04:33 PM
SENATOR MYERS deferred to Ms. Nauman.
2:04:32 PM
MS. NAUMAN responded that it was probably a typo since the year
should read 2022.
2:04:54 PM
SENATOR HUGHES moved Conceptual Amendment 1 to Amendment 3 on
page 6, line 3, to delete "2023" and insert "2022".
CHAIR HOLLAND found no objection and Conceptual Amendment 1 to
Amendment 3 was adopted.
2:05:29 PM
CHAIR HOLLAND removed his objection. There being no further
objection, Amendment 3, as amended, was adopted.
2:05:48 PM
CHAIR HOLLAND moved Amendment 4, work order 32-GS1693\A.6.
32-GS1693\A.6
Nauman
8/26/21
AMENDMENT 4
OFFERED IN THE SENATE BY SENATOR HOLLAND
TO: SB 53
Page 1, line 3:
Delete "relating to an advisory vote on the
permanent fund;"
Page 4, line 29, through page 5, line 12:
Delete all material.
Renumber the following bill sections accordingly.
Page 5, line 15:
Delete all material.
Renumber the following bill section accordingly.
Page 5, line 16:
Delete "Except as provided in sec. 12 of this
Act, this"
Insert "This"
2:05:53 PM
SENATOR HUGHES objected for discussion purposes.
2:06:10 PM
MR. KING explained that the passage of Amendment 3 would put
this question to a vote of the people through a constitutional
amendment. Therefore, it would nullify the need for an advisory
vote.
CHAIR HOLLAND withdrew Amendment 4.
2:06:43 PM
At ease
2:07:00 PM
CHAIR HOLLAND reconvened the meeting. He stated that he withdrew
Amendment 4 in error. Amendment 4 was before the committee.
2:07:20 PM
SENATOR HUGHES asked if Mr. King could explain the necessity for
Amendment 4.
2:07:29 PM
MR. KING explained that Amendment 4 proposes removing the
advisory vote language in SB 53. With the addition of the
constitutional amendment conditional language, the people will
have an opportunity to vote on the constitutional amendment.
Therefore, establishing an advisory vote in SB 53 is no longer
necessary. Amendment 4 would remove the advisory vote
requirement in SB 53, but it retains the requirement for a
statewide vote on the constitutional amendment.
2:08:27 PM
SENATOR HUGHES removed her objection.
2:08:31 PM
CHAIR HOLLAND found no further objection and Amendment 4 was
adopted.
SENATOR HUGHES advised members that Senator Shower was
experiencing audio issues.
2:08:46 PM
At-ease
2:11:50 PM
CHAIR HOLLAND reconvened the meeting.
2:12:04 PM
SENATOR SHOWER confirmed his audio difficulties were resolved
and he was online.
2:12:29 PM
CHAIR HOLLAND stated he would not offer Amendment 5, work order
32-GS1693\A.10, today but retained the option to offer it at a
later date.
2:13:05 PM
CHAIR HOLLAND moved Amendment 6, work order 32-GS1693\A.14.
32-GS1693\A.14
Nauman
8/27/21
AMENDMENT 6
OFFERED IN THE SENATE BY SENATOR HOLLAND
TO: SB 53
Page 4, following line 28:
Insert a new bill section to read:
"* Sec. 9. The uncodified law of the State of
Alaska is amended by adding a new section to read:
USE OF THE EARNINGS RESERVE ACCOUNT.
Notwithstanding AS 37.13.145(e) and (f), for the
fiscal years ending June 30, 2022, and June 30, 2023,
in addition to the amount available for appropriation
calculated under AS 37.13.140(b), the legislature may
appropriate from the earnings reserve account to the
general fund an additional 1.5 percent of the average
market value of the fund for the first five of the
preceding six fiscal years, including the fiscal year
just ended, computed annually for each fiscal year in
accordance with generally accepted accounting
principles. In this section, "average market value of
the fund" has the meaning given in AS 37.13.140(b)."
Renumber the following bill sections accordingly.
Page 5, line 15:
Delete "Section 9 of this Act takes"
Insert "Sections 9 and 10 of this Act take"
Page 5, line 16:
Delete "sec. 12"
Insert "sec. 13"
2:13:10 PM
SENATOR HUGHES objected for discussion purposes.
2:13:23 PM
MR. KING explained Amendment 6. He said the legislature has
hesitated or resisted using more than the 5 percent of market
value (POMV) cap for use of the Earnings Reserve Account (ERA).
Amendment 6 would authorize the legislature to use additional
funds from the ERA to assist the state in transitioning to a
long-term stable fiscal plan. Amendment 6 would authorize the
use of an additional 1.5 percent of the POMV for FY 2022 and FY
2023 to bridge the gap while the long-term fiscal plan of the
Fiscal Plan Working Group is effectuated. He estimated this
would use $2 billion of the $15 billion surplus earnings from
last year.
CHAIR HOLLAND related his understanding that the governor's
original plan included a $3 billion bridge fund transfer from
the permanent fund to the Constitutional Budget Reserve (CBR).
Amendment 6 would provide a different funding mechanism to cover
the anticipated shortfall for the next two years.
MR. KING agreed. He explained that if the legislature were to
pass the PFD calculation as proposed by SB 53, it would require
$1.5 billion. Those funds have already been spent based on the
appropriations bill that passed the legislature during the last
legislative session. He estimated that roughly $500 million of
funding remains for any additional appropriations this
legislative session, which leaves a shortfall of approximately
$1 billion.
2:15:43 PM
SENATOR HUGHES asked if Amendment 6 were to fail but the
legislature passed SB 53, the legislature would be in the
position that it could not follow the law.
MR. KING responded that is correct. He advised that there is
currently enough money in CBR for the legislature to balance the
budget, but it would take the CBR balance to a very low
unsustainable level. Rather than transfer money from the ERA to
the CBR as the governor has proposed, Amendment 6 would take the
funds directly from the ERA and use it for the appropriations
currently being debated.
SENATOR HUGHES indicated she had a question for Mr. Painter.
2:16:39 PM
ALEXI PAINTER, Director, Legislative Finance Division,
Legislative Agencies and Offices, Juneau, Alaska, stated that he
was experiencing audio difficulties and could not hear members.
2:16:51 PM
MS. NAUMAN indicated that she was also experiencing audio
issues.
2:17:26 PM
SENATOR SHOWER advised members that his audio connection was now
fine.
2:17:37 PM
At ease
2:21:51 PM
CHAIR HOLLAND reconvened the meeting. He explained that the
committee was experiencing some audio difficulties so Mr.
Painter has joined the meeting in person.
2:22:17 PM
SENATOR HUGHES asked if Amendment 6, which would allow a $1.6
billion POMV draw in addition to the annual 5 percent POMV draw
were to fail, whether the legislature could follow the law under
SB 53 since it provides for a 50:50 POMV. The PFD would be
approximately $2,300. She asked if the legislature would have
sufficient funds to pay for the draw, and if so, the source of
the draw and the CBR balance after the draw. She offered her
view that if the bill passed without Amendment 6 being adopted
she did not believe the legislature could take the additional
1.5 percent draw.
MR. PAINTER responded that the current budget has a $500 million
surplus before the payment of the PFD or any other unrestricted
general fund (UGF) items. The proposed PFD would cost $1.5
billion, which would result in a $1 billion deficit. Since the
CBR balance is projected to be less than that amount and
assuming a reverse sweep, there would not be sufficient funds to
fund the budget. The legislature would need to turn to accounts
such as Power Cost Equalization (PCE), the Higher Education Fund
or some other account to bridge the deficit.
2:24:07 PM
SENATOR HUGHES related her understanding that it would
essentially reduce the CBR to zero and the legislature would
need to pull funds from other accounts if Amendment 6 does not
pass and the legislature desires to follow the statutes and
issue a full PFD.
MR. PAINTER answered yes.
2:24:39 PM
SENATOR SHOWER asked for clarification that if Amendment 6 were
to pass as opposed to a bridge fund, the legislature could draw
up to 1.5 percent from the permanent fund but the entire amount
might not be needed. He asked whether Amendment 6 would provide
more flexibility than making a direct transfer because the
entire 1.5 percent might not be needed. He acknowledged that Mr.
Painter indicated it wouldn't be necessary to draw the entire
1.5 percent, depending on moving other funds to cover the budget
and fund the PFD.
He asked whether Amendment 6 would be more palatable politically
because the legislature wouldn't be moving the entire 1.5
percent without knowing if the funds were needed. The
legislature would only have to use what was needed until other
things fell into place.
MR. PAINTER answered that the language in Amendment 6 reads "may
appropriate up to" so the legislature could choose to
appropriate less than the full 1.5 percent in additional funds
depending on revenue performance over the next year. In FY 2023
the deficit is unknown so it would provide the legislature the
flexibility to pick the amount needed.
2:26:25 PM
SENATOR SHOWER asked for a rough estimate of the percentage
needed for the draw based on this year's projection. He asked if
the percentage would be .75 percent or 1 percent.
MR. PAINTER answered that it will depend on the FY 2022 budget.
He stated that the House would like to pay for oil and gas tax
credits. Further, the governor identified $7.5 million in budget
vetoes of undesignated general fund (UGF) funds yesterday. Thus,
there is some uncertainty in the final FY 2022 budget even
though the legislature passed the appropriations bill.
2:27:25 PM
MR. PAINTER explained that currently the state faces a $1
billion deficit. The additional 1.5 percent draw proposed in SB
53 would bring in an additional $900 million. He suggested that
the legislature may want to take the full 1.5 percent draw to
maintain a higher CBR balance. On the other hand, the
legislature might only need to draw 1 percent or .75 percent and
spend down the CBR balance to $500 million. However, there would
be less funds available if the legislature added back funding to
restore items the governor vetoed, address the oil tax credits,
school debt reimbursement and other unfunded items. These items
were unfunded at the end of the legislative session due to the
CBR vote failure.
2:28:34 PM
SENATOR HUGHES asked if it would be possible to bring in other
revenue sources retroactively to July 2021 to help solve the PFD
funding shortfalls. In other words, the legislature could draw
some funds from the CBR and rely on additional revenue rather
than wait for an effective date of July 1, 2022.
MR. PAINTER answered that it would depend on the specific
revenue measures selected. The governor's proposed "S Corp"
taxes could be applied retroactively because the companies have
not yet filed their taxes. This could provide income in the
current fiscal year. Similarly, changing oil and gas taxes could
be accomplished in the current fiscal year with an effective
date of January 1 or some other date. However, increasing an
excise tax like the motor fuel tax cannot be done retroactively
because people have already paid for the fuel. Further, setting
up a new tax would require establishing infrastructure, which
would take time to develop.
2:30:15 PM
SENATOR HUGHES asked for a rough estimate of potential revenue
for some of the ideas Commissioner Mahoney outlined for the
committee. Further, she asked for the revenue derived from
raising taxes retroactively, such as corporate taxes. She said
she assumed that Governor Dunleavy's gaming proposal would be
complicated to set up but she expressed interest in revenue
other measures could bring in.
MR. PAINTER answered that two Department of Revenue (DOR)
measures come to mind. He recalled DOR estimated $60 to $70
million could be raised from "S Corp" taxes in the first year
and in excess of $100 million from the per barrel tax credit,
which would be dependent on oil prices so it could be greater or
less.
2:31:41 PM
At ease
2:31:45 PM
CHAIR HOLLAND reconvened the meeting.
2:32:06 PM
BRIAN FECHTER, Deputy Commissioner, Department of Revenue,
Juneau, Alaska, asked for clarification of the question.
2:32:19 PM
SENATOR HUGHES explained that the committee was exploring new
revenue sources to provide sufficient funds for the 50:50 PFD
proposal. She asked for an estimate of the revenue that could be
assessed retroactively. She said this is important because the
public is understandably frustrated with the legislature since
it has not solved the statutory issues with the PFD in the last
six years. She offered her belief that the public wants the
statutory PFD issue settled, the fiscal gap solved, and a
sustainable fiscal policy. She expressed concern that if the
legislature did not follow the statutory PFD, it will be
confusing to understand the legislature's plan to solve these
issues. If so, the constitutional amendment could fail and the
legislature would need to address it again, she said.
SENATOR HUGHES highlighted that some members do not want to take
a penny more than the 5 percent [POMV] but there's a tradeoff to
doing so. The legislature could protect the ERA long term. This
proposal does not contemplate taking money out year-after-year.
Instead, these draws would be temporary and be "hands off" after
several years. She stressed that to settle this, members must
always bear in mind public sentiment and what may happen at the
ballot box. She acknowledged some members favor a stair-step
approach, which would work mathematically. However, such an
approach could be very confusing and may derail the
legislature's efforts. Her questions relate to addressing
revenue sources as a path forward to pay a 50:50 PFD this year,
she said.
2:35:32 PM
MR. FECHTER echoed Mr. Painter's comments that DOR's two
proposals for FY 2022 were the changes to the corporate income
tax structure and the per barrel tax credit. He explained that
it would not be difficult for the DOR to implement any changes
to the tax rates on alcohol or tobacco since those taxes are in
place and increases to those tax rates would allow the revenue
to flow.
2:36:39 PM
SENATOR HUGHES asked for the estimated revenue from increased
taxes on the items mentioned.
MR. FECHTER estimated an additional $116 million for per barrel
credit limitation to $5 per barrel from the current level and
$60 million in FY 2022 for changes to the corporate income
taxes.
SENATOR HUGHES explained that the PFD program was established to
provide residents with a dividend from the permanent fund. She
said the state needs revenue to close the budget gap to pay for
government. Although it is a matter of semantics for some, it is
a matter of principle for her, she said.
CHAIR HOLLAND remarked that it seemed as though funding for PFDs
is the last funding consideration when many legislators believe
it should be funded first.
2:38:17 PM
SENATOR KIEHL reminded members that the PFD is a program and not
a constitutional obligation. However, he agreed it would be wise
for the legislature to protect the PFD in the Alaska
Constitution for the future. He stated that according to Alaska
Supreme Court decisions it is part of the budget. Therefore, it
is part of the budget deficit issue. He recalled that there was
a bill before the legislature related to Oil and Gas Property
Taxes. He asked how much revenue that could bring in depending
on the effective date. He recalled there was an increase in the
total state property tax from 20 mills to 30 mills with no
change in what municipalities can keep.
MR. FECHTER answered that a rough number for a 10 mill increase
to the current Oil and Gas Property Tax would bring in just
under $300 million. He offered to report back to the committee
on the feasibility of assigning a retroactive date.
MR. PAINTER highlighted that those payments are typically made
at the end of the fiscal year but he believed they were based on
the calendar year. He stated that this is typically one of the
last sources of revenue the state receives.
2:40:28 PM
SENATOR SHOWER asked if the discussion on changes to the Oil and
Gas Property Tax is similar to Senate Bill 57 from several years
ago. If so, he asked if this would be separate from changing the
oil tax structure that companies pay because this discussion is
about the amount that the North Slope and Valdez would receive
from the property tax. He highlighted that some people were
concerned about how much pressure the legislature is exerting on
the oil companies but this relates to what municipalities are
collecting.
2:41:40 PM
MR. PAINTER offered his belief that Senator Kiehl was asking
about an increase in the mill rate of the Oil and Gas Property
Tax. Two years ago, Senate Bill 57 did not change the tax rate
but rather it eliminated the deductibility of municipal taxes
against the state tax. It was a very different structure than
what Senator Kiehl is referring to, he said.
SENATOR SHOWER clarified that a number of issues were being
discussed so he appreciated the response.
2:42:22 PM
SENATOR KIEHL said his question relates to what Senator Hughes
alluded to in terms of how to bridge to a more thorough fiscal
plan. One recommendation of the Fiscal Policy Working Group
(FPWG) was to ensure that any bridge be one time and limited so
Alaskans could depend on it. He pointed out that Amendment 6
would authorize two years of an "overdraw." This is a deviation
from the 5 percent POMV limit. He highlighted that Senator
Hughes expressed concerns that a constitutional amendment to the
permanent fund constitutionalizing the POMV might fail. He asked
what protections would prevent further draws to the permanent
fund beyond the 5 percent draw.
2:43:38 PM
MR. PAINTER said absent passage of a constitutional amendment,
the legislature could access the ERA at any time. Nothing would
prevent the legislature from additional draws either in this
case to follow a statute or by drawing in excess of the POMV.
SENATOR KIEHL expressed grave concern with Amendment 6 since it
would allow drawing more than 5 percent POMV. Although he
recognized members only plan for additional draws for two years,
he was unsure the legislature could constrain itself. The
benefit of the 5 percent POMV limit for the draw is that it
constrains the legislature.
2:45:40 PM
CHAIR HOLLAND offered his view that the 1.5 percent POMV over
two years was a good limit. He said he reviewed the history of
the PFD. He noted that the government consistently limits the
PFD. The first PFD of $1,000 represented approximately 14.4
percent of the market value. Although people express concern
over the permanent fund, it continues to grow. He reviewed the
percentage of market value (POMV) of the permanent fund
dividend. From 1983 to 2003 the PFD was based on 4 percent POMV,
during the next 10 years the PFD was based on 3 percent POMV,
during the next 10 years the PFD was based on 2 percent POMV and
now the legislature would be asking Alaskans to be happy with a
dividend of 1 percent POMV, which is approximately $1,000. He
said this is not fair. While the state continually reduces the
PFD, the permanent fund continues to grow at unexpected levels.
2:47:25 PM
SENATOR HUGHES said she appreciated the concerns that Senator
Kiehl raised. Without a constitutional amendment, the PFD is
vulnerable, she said. The only thing that might protect it is
who sits in the 60 legislative seats. She advocated for the
legislature to protect the PFD constitutionally. She expressed
concern with public perception.
SENATOR HUGHES asked if the legislature did pass the 1.5 POMV
draw for 2 years but the constitutional amendment did not pass,
whether the money could be paid back to the permanent fund to
provide some kind of stop gap. She stated that some endowment
funds in the world work on the current balance rather than
having a one-year lag and an average of the prior five years.
Thus, the 5 percent POMV draw could be based on the current
balance. Some funds have a range between 4 to 7 percent, she
said. Since Alaska uses a 5 percent POMV but has a lag, it means
the actual effective rate for this year is 3.7 percent of the
current balance of the permanent fund. She suggested that if the
legislature could use a bridge fund to win back the people's
trust, the legislature could then pass a constitutional
amendment to protect the fund by disallowing additional draws.
Such an approach could be a win-win for everyone, she said.
2:50:06 PM
SENATOR HUGHES asked members to consider what would happen if
the constitutional amendment did not pass but Amendment 6 passed
which would allow for an additional 1.5 percent draw. She
emphasized that it was possible that in the second year the
additional 1.5 percent draw might not be needed. She
acknowledged Senator Kiehl's concern yet there is a need to
provide some protection. She offered her belief that the
concerns could be addressed in some manner.
2:50:52 PM
SENATOR MYERS echoed Senator Hughes' point that SB 53 was in
large part symbolic without passage of the proposed
constitutional amendment. As Ms. Nauman and Mr. Painter
indicated, the legislature could pay any size dividend and draw
down the ERA for state services until the $21 billion of
unencumbered ERA funds are depleted. He acknowledged that
Amendment 6 would be symbolic until the constitutional amendment
passes.
2:51:52 PM
SENATOR MYERS said the legislature could do without this bill.
However, a large part of this bill acknowledges the six years
the legislature has ignored the statutory requirements for the
PFD. Amendment 6 provides assurance that the legislature intends
to follow its own laws. He highlighted that part of the public
frustration stems from the legislature not following its own
laws. He concluded that Amendment 6 is a good idea because it
attempts to restore some of the public's trust.
2:52:54 PM
SENATOR HUGHES said she served as one of eight members of the
Fiscal Plan Working Group (FPWG) along with Senator Kiehl and
Senator Shower. She explained that the group put together
economic models to show how to close the fiscal gap. Some models
were based on the 50:50 split. Support for bridge funding
varied, with 1.5 percent as the mid-point and 3 percent as the
upper limit. Members wanted to keep in mind what would
realistically pass on the Senate and House floor since it
requires 11 and 21 for policy votes and 14 and 27 votes, for
constitutional amendments. She emphasized that deciding on the
1.5 percent bridge funding meant members believed it might be
possible to get the votes. She pointed out that 1.5 percent was
less than the governor proposed.
2:54:47 PM
SENATOR SHOWER acknowledged Senator Kiehl's concerns were valid
ones. The FPWG worked on issues and compromises had to happen.
While the group could not unanimously agree, it generically
stepped to the middle in an effort to find a path forward. He
offered his support for Amendment 6 because it represents a
compromise and gives the legislature some flexibility.
2:56:36 PM
SENATOR KIEHL said Amendment 6 does not get him to the level of
security if bridge funding is necessary. He stated his objection
to Amendment 6.
2:57:35 PM
At ease
2:59:41 PM
CHAIR HOLLAND reconvened the meeting
2:59:47 PM
CHAIR HOLLAND tabled Amendment 6.
[SB 53 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2021_Fiscal_Policy_Working_Group-Final_Report.pdf |
SJUD 8/27/2021 1:30:00 PM |
SB 53 |
| Legal Memo on SB 53 amendment A.8.pdf |
SJUD 8/27/2021 1:30:00 PM |
SB 53 |
| SB53 SJUD Amendment Packet 1.pdf |
SJUD 8/27/2021 1:30:00 PM |
SB 53 |
| SB53 A.14.pdf |
SJUD 8/27/2021 1:30:00 PM |
SB 53 |