Legislature(2021 - 2022)BUTROVICH 205
09/01/2021 09:00 AM 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
9:08:33 AM
CHAIR HOLLAND announced the consideration of SB 53 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, 4/26/21, 8/27/21 and
8/30/21. Public testimony was open and closed on 4/26/21.]
CHAIR HOLLAND stated his intention to finish hearing amendments
and report the bill from committee.
CHAIR HOLLAND recognized that Senator Shower had joined the
meeting telephonically.
9:09:10 AM
SENATOR KIEHL moved Amendment 7, work order 32-GS1693\A.16, as
a conceptual amendment. He explained that this is a conceptual
amendment because the first four and three-quarter pages were
addressed in an earlier amendment. It read:
32-GS1693\A.16
Nauman
8/30/21
AMENDMENT 7
OFFERED IN THE SENATE BY SENATOR KIEHL
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; NOTIFICATION. (a) Sections 2,
4, 6, 8, 9, 11, 13, and 15 of this Act take effect
only if, before July 1, 2022, revenue laws anticipated
to generate at least an estimated $160,000,000 of new
revenue each year have not been passed by the Thirty-
Second Alaska State Legislature and enacted into law.
(b) The commissioner of revenue shall notify the
revisor of statutes if, before July 1, 2022, revenue
laws anticipated to generate at least an estimated
$160,000,000 of new revenue each year have not been
passed by the Thirty-Second Alaska State Legislature
and enacted into law.
* 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 section accordingly.
Page 5, line 16:
Delete "sec. 12"
Insert "sec. 18"
9:09:26 AM
SENATOR HUGHES objected for discussion purposes.
9:09:36 AM
SENATOR KIEHL explained Conceptual Amendment 7. He directed
attention to the last three lines of page 5 and to page 6. He
explained that the Fiscal Policy Working Group (FPWG) strongly
recommended that the legislature pass a comprehensive solution
to the state's fiscal policy. This amendment would make SB 53
conditional on the enactment of laws prior to July 1, 2022, that
would establish new annual revenue of $160 million, which is not
as much as he would like to see raised. Amendment 7 was written
to be broad and permissive. New revenue could be raised by an
increase to the Oil and Gas Property Tax, changes to the oil and
gas per barrel credits that the commissioner of the Department
of Revenue (DOR) presented, or a broad-based tax like income or
sales taxes, he said. He characterized it as a good faith effort
to move a comprehensive proposal forward.
9:11:14 AM
SENATOR HUGHES stated that she was also a FPWG participant. The
FPWG stressed the importance of moving the components forward as
a package. She acknowledged that FPWG members compromised. She
highlighted that she has a history of urging the legislature to
reduce state government spending but the legislature does not
have the votes for those kinds of reductions at this point. One
of the primary constitutional duties of the legislature is to
pass the budget each year. The legislature must be able to fund
its services and it cannot accrue debt as the federal government
can do. She said it is hard to support Conceptual Amendment 7
but she will do so as a good faith effort to settle the PFD
issue and move forward on other issues.
9:12:42 AM
At ease
9:13:28 AM
CHAIR HOLLAND reconvened the meeting.
9:13:40 AM
SENATOR HUGHES recapped comments she made prior to the committee
break.
9:15:10 AM
SENATOR HUGHES removed her objection.
CHAIR HOLLAND asked Senator Shower to comment but he was unable
to do so due to audio difficulties.
9:16:52 AM
At ease
9:19:53 AM
CHAIR HOLLAND reconvened the meeting.
9:20:05 AM
SENATOR SHOWER acknowledged that he could now hear the committee
(via teleconference).
9:20:34 AM
SENATOR SHOWER asked for a recap of Conceptual Amendment 7 since
he missed some comments due to audio difficulties.
9:20:59 AM
CHAIR HOLLAND noted the committee was experiencing some ongoing
audio difficulties.
9:21:06 AM
SENATOR KIEHL stated that the core changes of Conceptual
Amendment 7 are on page 6, which would add one more condition to
SB 53. It would require the legislature to enact into law $160
million in new annual revenue. Although he was unsure $160
million was sufficient, it would provide a good faith effort to
pass a comprehensive fiscal policy as per the FPWG
recommendations.
CHAIR HOLLAND objected for discussion purposes since the
objection was previously removed.
9:22:15 AM
SENATOR SHOWER said he agreed with Senator Kiehl that the FPWG
developed a comprehensive plan. He noted FPWG members had
different ideas on solutions to solve each component, the group
supported a comprehensive plan. He said he does not want to
raise taxes, but he acknowledged the need to provide a balanced
approach. He offered his support for Conceptual Amendment 7 as a
good faith effort to adopt the FPWG's recommendations for a
balanced approach. It's time for the Senate to lead, he said.
9:23:39 AM
SENATOR MYERS stated it was important to note for members who
represent conservative parts of the state that the point is not
to provide the state with revenue but to establish a different
source of revenue. He remarked that the state will obtain
revenue even if nothing is done. The state will either raise
revenue or obtain it from the permanent fund dividend funds,
which would be unacceptable to him. The goal is not to grow
taxes or government but to alter the structure, he said. He
offered his view that the state has experienced some structural
issues in revenue collection for the past forty years, which
ensures that government will continue to grow. For a number of
years, revenue was related to North Slope oil activities, but as
the state moves away from oil revenues and towards funding state
government from its investments, it loses that connection. He
vowed to review the tax structure to make the government tie
back to the economy and be more accountable to the voters,
taxpayers and businesses. The private sector should drive the
economy not the government, he said.
9:25:55 AM
SENATOR HUGHES remarked that the public should understand that
the state will be making some adjustments due to declining
annual revenue from oil. She offered her assurance that as
revenue proposals come before the legislature language will link
them to the spending cap in an effort to halt runaway spending
and provide checks and balances in state government.
9:27:07 AM
SENATOR SHOWER said Conceptual Amendment 7 is a comprehensive,
balanced bipartisan approach, one in which the FPWG addressed
proposed taxes but also reductions in spending. Although the
$200 million in reductions is not as much as he would like, it
acknowledges that the state must continue to reduce spending.
9:28:07 AM
CHAIR HOLLAND removed his objection.
CHAIR HOLLAND heard no further objection, so Conceptual
Amendment 7 was adopted.
9:28:17 AM
SENATOR KIEHL moved Amendment 8, work order 32-GS1693\A.9.
32-GS1693\A.9
Nauman
8/26/21
AMENDMENT 8
OFFERED IN THE SENATE BY SENATOR KIEHL
Page 2, lines 15 - 23:
Delete all material and insert:
"* Sec. 2. AS 37.13.145(b) is amended to read:
(b) Except as provided in (g) of this section,
[AT THE END OF] each fiscal year, the legislature may
appropriate [CORPORATION SHALL TRANSFER] from the
earnings reserve account to the dividend fund
established under AS 43.23.045, the amount necessary
to distribute the following amounts for permanent fund
dividends to each eligible individual for each of the
following fiscal years:
(1) $1,100 in fiscal year 2022;
(2) $1,500 in fiscal year 2023;
(3) $2,000 in fiscal year 2024; and
(4) $2,250 in fiscal year 2025 [50 PERCENT
OF THE INCOME AVAILABLE FOR DISTRIBUTION UNDER
AS 37.13.140].
* Sec. 3. AS 37.13.145(b), as amended by sec. 2 of
this Act, is amended to read:
(b) Each [EXCEPT AS PROVIDED IN (g) OF THIS
SECTION, EACH] fiscal year, the legislature may
appropriate from the earnings reserve account to the
(1) dividend fund established under
AS 43.23.045, 50 percent of the amount available for
appropriation under AS 37.13.140(b); and
(2) general fund, 50 percent of the amount
available for appropriation under AS 37.13.140(b) [THE
AMOUNT NECESSARY TO DISTRIBUTE THE FOLLOWING AMOUNTS
FOR PERMANENT FUND DIVIDENDS TO EACH ELIGIBLE
INDIVIDUAL FOR EACH OF THE FOLLOWING FISCAL YEARS:
(1) $1,100 IN FISCAL YEAR 2022;
(2) $1,500 IN FISCAL YEAR 2023;
(3) $2,000 IN FISCAL YEAR 2024; AND
(4) $2,250 IN FISCAL YEAR 2025]."
Renumber the following bill sections accordingly.
Page 3, following line 21:
Insert a new bill section to read:
"* Sec. 6. AS 37.13.145 is amended by adding a new
subsection to read:
(g) The amount appropriated for permanent fund
dividends each year under (b) of this section may be
reduced if the amount necessary to distribute the
dividends for that year exceeds the amount available
for appropriation under AS 37.13.140(b)."
Renumber the following bill sections accordingly.
Page 4, line 28:
Delete "and 37.13.145(f)"
Insert ", 37.13.145(f), and 37.13.145(g)"
Page 5, line 15:
Delete "Section 9 of this Act takes"
Insert "Sections 2, 6, and 11 of this Act take"
Page 5, line 16:
Delete "sec. 12"
Insert "sec. 14"
Delete "July 1, 2021"
Insert "July 1, 2025"
CHAIR HOLLAND objected for discussion purposes.
9:28:32 AM
SENATOR KIEHL explained Amendment 8. He stated that the FPWG
unanimously agreed that the PFD and fiscal gap could not be
solved in one year. Amendment 8 would stair-step the 50:50
proposal over four fiscal years (FY) rather than using the
current PFD funding of spending available cash. The 50:50 plan
would divide the state's revenue available for appropriation,
with 50 percent for state government services and 50 percent for
the PFD. Under Amendment 8, the PFD amount would be
approximately $1,100 for this year's PFD and reach the 50:50
plan by FY 2026. This would allow the legislature to phase in
revenue and budget cuts envisioned by the FPWG, which will
protect the long-term value of the Alaska Permanent Fund.
Amendment 8 would provide a $1,500 PFD in FY 2023, $2,000 PFD in
FY 2024, and reach a $2,250 PFD in FY 2025 and thereafter. This
would provide a 50:50 split of the sustainable draw. This
approach would allow the legislature to follow the law without
overdrawing the permanent fund. He said he understood the Alaska
Constitution recognizes that appropriations are binding law.
However, the legislature should follow the statutes it enacts.
At the same time, it is important to protect the long-term value
of the state's endowment fund. Markets surge up and decline and
are unpredictable. Amendment 8 will allow the state to maintain
a 5 percent POMV draw even when markets surge, which will move
the state forward.
9:31:38 AM
SENATOR MYERS stated that SB 53 is tied to the proposed
constitutional amendment [SJR 6], which would include a 50:50
PFD. The problem is that it would go into effect in FY 2024 if
approved by the voters. He expressed concern that this would
fall in year three of the stair-step approach in Amendment 8 so
it would be overridden by the proposed constitutional amendment.
9:32:27 AM
SENATOR KIEHL recalled that the conditional effect [Amendment 3
A.11] adopted by the committee on 9/27/21 was not specific to
the effective date of the constitutional amendment so it would
not necessarily create a conflict.
SENATOR MYERS said the effective date of SJR 6 is July 1, 2023,
or FY 2024.
9:33:07 AM
At ease
9:33:12 AM
CHAIR HOLLAND reconvened the meeting.
9:33:42 AM
CHAIR HOLLAND explained that his overriding concern is that the
approach taken in Amendment 8 will require Alaskans to bear the
brunt while the legislature attempts to achieve fiscal
stability. He said he preferred the 5 percent POMV 50:50 plan be
enacted this year. He advised members that a different approach
will be taken up in a subsequent amendment. That approach would
use a bridge fund or an alternate funding option to achieve a
$2,300 PFD, he said. He stated that he will not support
Amendment 8.
9:34:39 AM
SENATOR HUGHES expressed concern that Amendment 8 would put the
proposed constitutional amendment at risk. She opined that the
public is frustrated because the legislature has not solved the
PFD and fiscal issues. Currently, the legislature's approval
ratings are very low, she said. She advocated solving these
issues in a manner that could regain the public's trust by
passing legislation to settle the PFD calculation and providing
solutions to achieve a sustainable budget.
9:35:50 AM
SENATOR HUGHES expressed concern that if the amount of this
year's PFD is as low as those issued in the last six years, the
public will likely vote no at the polls in November 2022.
Further, voters might vote against a constitutional amendment
solely because of the delayed effective date of FY 2025 and not
due to a lack of support for the 50:50 plan embodied in SB 53
and SJR 6. If the constitutional amendment were to fail, the
legislature would need to start the process over, which would
put the state in a real bind, she said. Although she said she
appreciated the math and logic used in Amendment 8, members must
consider not only what will pass in the legislature but what
will pass muster with the voters. She highlighted that some
members have expressed concern about taking an additional draw
from the permanent fund. She has heard conversations from the
Senate majority and House majority and minority expressing
support. The Speaker of the House said she would be open to a
package on a temporary basis if it contained revenues that could
close the fiscal gap. She cautioned against assuming that the
stair-step approach is the only one that could pass the
legislature. Since the approach in Amendment 8 could derail the
constitutional amendment, she said she cannot support it. The
public needs to feel as though the legislature truly solved
this. She offered her belief that if the legislature could pay a
50:50 split this year and next year, the public would strongly
support the constitutional amendment. It would allow the
legislature to address other issues that have been shoved aside
in recent years.
9:38:10 AM
CHAIR HOLLAND recognized Representative McCarty.
9:38:20 AM
SENATOR SHOWER pointed out that three committee members serve on
the FPWG. The group considered multiple approaches to solve the
problem. He said he favors a different approach than the one in
Amendment 8. He recalled a floor speech made earlier this year
in which a long-serving legislator stated that the reason the
legislature was considering raising taxes was to pay for
government and not to provide funding for the PFD. In 2016 and
2017, changes were made to the PFD process by a former governor.
Until then, funding the PFD was considered the first call and
any remaining revenue was available to fund government services
or were redeposited to the permanent fund. He questioned whether
the laws were really in conflict since the legislature could
decide to adhere to the statutory formula and follow Senate Bill
26. He said he did not believe the laws are in conflict. The
issue only arises when funds are insufficient to fund the
dividend and government services and which one has the first
priority, he said.
9:40:08 AM
SENATOR SHOWER maintained that the 50:50 plan will work although
he acknowledged that some legislators have issues with it.
However, there are different approaches to arrive at the 50:50
plan. Since the permanent fund has enjoyed good growth, he
stated his preference was to use some permanent fund monies to
provide bridge funding. It might make it a little easier to pass
this. He offered his view that a good plan is available. He said
it would show good faith to the people that the legislature does
not take a stair-step approach but go right to the 50:50
approach. He indicated he would not support Amendment 8.
9:42:11 AM
SENATOR KIEHL offered his view that $160 million is not enough
to achieve the 50:50 plan, which would require at least $500
million or more in new revenues. Without new revenue sources the
legislature must drastically cut government services. He pointed
out that the last effort to drastically cut government in Alaska
led to a recall petition. He said he shared Senator Hughes'
concern that the voters might not support a constitutional
amendment but that vote cannot be predicted with any certainly.
In fact, he has learned to never underestimate the voters'
ability to make the right decisions. He cautioned against using
a proposal that would make radical changes that would debilitate
the economy and to Alaskans who depend on plowed roads and other
services provided by government. He offered his view that with
the stair-step approach coupled with ensuring voters have
sufficient information to understand that a steadily rising PFD
will lead to a 50:50 split, it can work. Amendment 8 represents
a responsible approach to achieve the 50:50 plan over a few
years.
9:44:28 AM
CHAIR HOLLAND maintained his objection.
A roll call vote was taken. Senator Kiehl voted in favor of
Amendment 8 and Senators Hughes, Myers, Shower and Holland voted
against it. Therefore, Amendment 8 failed by a 1:4 vote.
9:45:05 AM
CHAIR HOLLAND moved Amendment 6, work order 32-1693\A.6, which
was previously tabled [at the August 27, 2021, meeting].
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"
9:45:27 AM
At ease
9:45:55 AM
CHAIR HOLLAND reconvened the meeting.
9:46:05 AM
CHAIR HOLLAND explained that Amendment 6 would provide a 1.5
percent POMV draw with the same five-year lag used for the
annual draw. This would produce $1 billion per year for the next
two years from the Earnings Reserve Account (ERA) to cover
projected budget shortfalls. He characterized it as sustainable
and reliable draw. The permanent fund has experienced a 9
percent annual growth in the last 40 years, a 12 percent over
the last five years, and 25 percent growth over the last 12
months. He offered his belief that the 1.5 percent draw is in
the safety zone for draws from the permanent fund.
9:47:39 AM
SENATOR KIEHL objected for discussion purposes.
9:48:02 AM
SENATOR KIEHL noted that the timing on the returns makes a big
difference. The projected growth of the fund over 5-10 years is
estimated at an average of 6.2 percent. However, averages are
deceiving and it makes an even bigger difference for draws. In
the process of reviewing how to stress test its projections, the
FPWG considered a flat 6.2 percent growth rate. It also reviewed
growth during several historic periods: from 2000-2008 and from
2009-2017, in which the permanent fund performed at 6.3 and 6.5
percent, respectively. He noted that both periods started with a
recession and by the end of the timeframe the permanent fund was
substantially reduced because it started with a draw. He
expressed concern that the oversize draw for two years proposed
in Amendment 6 could coincide with a drop in the market and
damage the permanent fund. He maintained his objection.
9:49:51 AM
CHAIR HOLLAND recognized Representative Kronk's presence.
9:49:59 AM
SENATOR HUGHES said she understood Senator Kiehl's concern. She
stated that the FPWG stress tested the 6.2 percent rate but did
not use the five-year lag. Amendment 6 would provide a 1.5
percent POMV draw this year based on $83 billion, which would
bring it up to a 5 percent POMV effective rate. Dr. Rietveld, an
international sovereign wealth fund advisor, provided a
PowerPoint to the committee yesterday. Dr. Rietveld did not
think a 5 percent draw was reckless. Instead, he found it to be
a reasonable draw. Recently, the House passed a budget with a
$1,100 PFD, which is not fully funded. Since the 5 percent draw
is used to fund government services, there is only enough
funding available for a $600 PFD this year. It would require
additional funds drawn from the ERA. The legislature would not
even be able to reach the stair-step approach Senator Kiehl
proposed, she said.
9:52:36 AM
SENATOR HUGHES argued that the legislature cares about the
strength of the fund. However, the permanent fund has exceeded
predictions. In 2019, the Alaska Permanent Fund Corporation
predicted the fund would reach $80 billion in 2028, but it has
already reached nearly $83 billion. She maintained that if this
proposal package were to pass the legislature and a
constitutional amendment is adopted by a vote of the people in
November 2022 to address the PFD, it would garner public trust.
She highlighted that the legislature always has the ability to
reduce the amount of the draw. She said she wants to preserve
the fund for her children and grandchildren. She acknowledged
that the Senate Finance co-chairs share concerns about the
permanent fund's growth. However, many Alaskans could use the
PFD right now and a $600 PFD is simply inadequate to regain the
public trust, she said.
9:54:48 AM
SENATOR SHOWER said he agrees philosophically with Senator
Hughes. He acknowledged the math, logic and political
considerations with the PFD draw. Not only did the endowment
expert say it is reasonable to take draws but other countries
are drawing from their endowment funds to address economic
problems related to COVID-19. He advocated for the legislature
to use the windfall earnings now to provide 1 percent or more
funding from the permanent fund windfall to bridge the fiscal
gap for a year or two in order to help Alaskans.
SENATOR SHOWER acknowledged the importance of the legislature to
express empathy to show people that the legislature cares. After
cutting the PFDs for six years, passing Amendment 6 would
express the legislature's good faith and the additional 1.5
percent will provide a bridge and help the economy. He stated
that taxes will need to be raised. In fact, the legislature
currently does not have the ability to fund the PFD according to
the provisions adopted in Senate Bill 26 unless it takes an
additional percentage draw from the permanent fund. Otherwise,
as Senator Kiehl mentioned, the legislature must find another
$500 million to fund this year's PFD, likely through taxes. He
reminded members that the 50:50 plan would also provide $750
million more to fund government services. Further, future draws
can be adjusted down since the legislature is not required to
take the entire 5 percent POMV draw. Currently, the 50:50 plan
is a balanced proposal. He cautioned against going too far one
way or the other on the PFD size because it will affect
legislative support for the overall plan. He viewed the 50:50
plan as a compromise plan. He offered his belief that simply
having a plan in place to help people and help the economy that
is ready to be implemented could help sway public opinion.
9:58:40 AM
CHAIR HOLLAND related some statistics related to the POMV for
permanent fund earnings. He said for the first 20 years of the
permanent fund, it bounced around 4 percent, the next 10 years
it fluctuated around 3 percent and the next 10 years, it
fluctuated around 2 percent. In fact, even though the permanent
fund continues to grow every year, the legislature tweaks down
the percentage of the PFD. Currently, the proposed $1,100 PFD is
1.1 percent POMV. The 50:50 proposal under consideration today
would bring the PFD up to 2.5 percent. This effort would make a
commitment to Alaskans this year and in future years. Some
members advocate saving the permanent fund for their children
and grandchildren. However, children and grandchildren today
need the full PFD. He questioned any assurance Alaskans have
that the legislature will ever provide a full dividend if it
will not do so now. He advocated for providing the additional
1.5 percent POMV in Amendment 6 now.
9:59:57 AM
SENATOR KIEHL said he did not fact check Chair Holland's
statistics but offered corrections. First, during the first 30
years of the program, the legislature did not tweak down the
PFD, he said. However, the changes Chair Holland described might
be related to how the permanent fund was invested, he said.
Initially, the permanent fund investments were for bonds and
money markets but eventually the permanent fund invested in the
mix of investments it uses today. He emphasized that the
statutory net income is statutory income. The formula is the
formula. Any change in the POMV of the fund distributed in PFDs
was not due to actions of the legislature. There was not a shift
in equity from what Alaskans received as a direct PFD from the
PFD program. Second, he indicated he reviewed Dr. Rietveld's
slides from yesterday's presentation. He referred to a bullet
point [on slide 13], which read, "Moving averaging is
essential." Dr. Rietveld indicated that the legislature should
not look at today's value but must smooth the fund over years.
Dr. Reitveld specifically said on his last slide that the
legislature must ensure unanticipated future revenue windfalls
aren't immediately spent but rather grow the APF or replenish
other fiscal buffers. Dr. Rietveld's advice to Alaska was to be
careful. That was his guidance, he said.
10:02:00 AM
SENATOR KIEHL said he appreciated the needs in a state where the
governor turned down additional unemployment benefits for people
who lost their jobs because of the pandemic. He said he shared
the public's frustrations since certainly there are needs-based
programs that should be increased. He indicated he was opposed
considering overdrawing the permanent fund.
10:02:40 AM
SENATOR HUGHES suggested that one of the reasons the governor
acted was due to the state's need for employees. She said she
just realized she had not finished her earlier remarks. She
recapped her remarks, that the additional 1.5 percent draw would
provide an effective rate of about 5 percent. However, she said
she had failed to relate the stress testing the FPWG conducted.
The stress test reviewed two recessions, yet the fund grew by
6.3 percent. Even in a downturn taking an effective rate draw of
5 percent would still allow a 1.3 percent fund growth.
Therefore, a temporary 5 percent draw would not erode the fund.
She pointed out Dr. Reitveld said in 2010 the Harvard Endowment
Fund drew out a 6.1 percent effective rate during a downturn.
However, this proposal consists of a 5 percent draw during this
good market uptick. Lastly, under the 50:50 plan the proposed
PFD amount would be $2,300, which in 1982 dollars was $830. She
offered her view that the PFD amount being proposed is quite
reasonable.
10:05:12 AM
SENATOR MYERS said in January 2021, he was hesitant to take
money out of the permanent fund to fill the funding gap unless
the legislature had a fiscal plan in place moving forward. Now
the legislature has that plan in place. Passing the
constitutional amendment is the way to address any concerns
about the potential that ad hoc draws might take out too much
money from the permanent fund for dividends or to fund
government. Legislative Legal Services has been advising the
committee that technically, per Wielechowski v. State, the
legislature already has the legal authority to do everything
proposed in SB 53. He acknowledged that this bill is somewhat
redundant but it would create a plan to put the PFD formula in
the Alaska Constitution so violations of the 5 percent statutory
formula cannot occur. He asserted that even without passing
Amendment 6 or SB 53, the legislature could decide to draw 6-7
percent from the permanent fund until the CBR is down to zero.
10:07:24 AM
SENATOR MYERS said he did not think anyone wants that to happen
but the political pressure to keep spending without a
constitutional amendment could make that occur. This discussion
reinforces the importance of passing the constitutional
amendment.
10:08:00 AM
SENATOR SHOWER agreed with Senator Kiehl that the lack of
additional unemployment insurance funds hurts. However, the
legislature could take some of the state's funds to help people
and Alaska's economy rather than using federally-funded
unemployment benefits. He acknowledged that Dr. Reitveld
cautioned the legislature about using windfalls. He recalled
asking Dr. Reitveld if it was reasonable to use endowment funds
during the pandemic and his response was yes, that it was a
reasonable draw. Finally, everyone agrees that the legislature
must solve the problem. Each proposal that has been put forward
has been stress tested for the worst conditions. Each proposal
could solve the problem moving forward. Although he does not
favor drawing down the permanent fund without a plan, he is
willing to accept some risk. He concluded that it is reasonable
to provide bridge funding because a long-term fix for the
permanent fund is planned with the constitutional amendment.
SENATOR HOLLAND said he agreed with Senator Shower's remarks.
10:11:28 AM
SENATOR KIEHL maintained his objection.
10:11:32 AM
A roll call vote was taken. Senators Myers, Shower, Hughes, and
Holland voted in favor of Amendment 6 and Senator Kiehl voted
against it. Therefore, Amendment 6 passed by a 4:1 vote.
CHAIR HOLLAND announced Amendment 6 was adopted by a vote of 4
yeas and 1 nay.
10:12:07 AM
CHAIR HOLLAND moved Amendment 9, work order 32-GS1693\A.21.
32-GS1693\A.21
Nauman
8/31/21
AMENDMENT 9
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 2, following line 14:
Insert new bill sections to read:
"* Sec. 2. AS 37.13.140(b), as amended by sec. 1 of
this Act, is amended to read:
(b) The corporation shall determine the amount
available for appropriation each year. The amount
available for appropriation is 4.5 [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.
* Sec. 3. AS 37.13.140(b), as amended by secs. 1
and 2 of this Act, is amended to read:
(b) The corporation shall determine the amount
available for appropriation each year. The amount
available for appropriation is five [4.5] 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 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 5, lines 13 - 14:
Delete all material and insert:
"* Sec. 12. The uncodified law of the State of
Alaska is amended by adding a new section to read:
CONDITIONAL EFFECT. Sections 2 and 3 of this Act
take effect only if, by November 30, 2022, 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."
Renumber the following bill sections accordingly.
Page 5, line 15:
Delete "Section 9"
Insert "Section 11"
Page 5, following line 15:
Insert new bill sections to read:
"* Sec. 14. If, under sec. 12 of this Act, sec. 2
of this Act takes effect, it takes effect July 1,
2023.
* Sec. 15. If, under sec. 12 of this Act, sec. 3 of
this Act takes effect, it takes effect July 1, 2028."
Renumber the following bill section accordingly.
Page 5, line 16:
Delete "sec. 12"
Insert "secs. 13 - 15"
SENATOR HUGHES objected for discussion purposes.
10:12:18 AM
CHAIR HOLLAND explained that Amendment 9 was another idea he
thought was important to bring before the committee for
discussion. He asked his staff to explain Amendment 9.
10:12:41 AM
ED KING, Staff, Senator Roger Holland, Alaska State Legislature,
Juneau, Alaska, on behalf of Senator Holland, explained that
Amendment 9 was a good faith effort especially considering that
Amendment 6 was adopted, which will draw an additional 1.5
percent from the ERA for a total 5 percent effective rate. He
stated that there was some concern that the additional 1.5
percent draw may be an unstainable way to transition towards a
long-term stable plan. Amendment 9 would provide some
conditional language that would effectively pay back the ERA for
the additional draw. He explained that the 1.5 percent draw over
the next two years would total roughly $1.9 billion. In the
event that the rest of the fiscal plan fell apart, such that the
constitutional amendment failed and new revenues were not
enacted, Amendment 9 would reduce the percent of market value
(POMV) for the next 5 years from 5 percent to 4.5 percent. The
reduction of .5 percent over five years would result in
retaining an additional $1.9 billion in the ERA, relative to a 5
percent draw. He summarized that this would provide a payback
provision.
10:14:20 AM
SENATOR HUGHES recalled that Senator Kiehl previously expressed
concern that it could set precedent if the constitutional
amendment were to fail. This is a concern, she said. Amendment 9
would provide a way to address these concerns some have with
drawing out additional funds now. She pointed out that if the
constitutional amendment failed in 2022, the legislature could
do this in 2023 because the statute does not require drawing out
the full 5 percent. Even without Amendment 9, a future
legislature could make that adjustment she said.
10:15:37 AM
CHAIR HOLLAND clarified that a future legislature would have the
option to reduce the 5 percent POMV draw.
SENATOR HUGHES agreed.
10:15:53 AM
SENATOR KIEHL said Amendment 9 is important since Amendment 6
was just adopted. He said he was a little less than optimistic
that a future legislature would stick to this language but it
was important to aspire to it moving forward. He offered his
support for Amendment 9.
10:15:41 AM
CHAIR HOLLAND stated his intention to withdraw Amendment 9
because of his concern that the legislature might revert to the
statutory formula and decide to pay a zero dividend. He
explained that he brought Amendment 9 up for discussion
purposes.
10:18:14 AM
SENATOR SHOWER agreed with Senator Kiehl that Amendment 9 was
intriguing because it is important moving forward not to
overspend the fund. He said he appreciated having time outside
the meeting to consider the mechanics of Amendment 9.
10:19:38 AM
SENATOR HUGHES offered her support for Amendment 9. She opined
that nothing would prevent the legislature in 2023 from doing
what Amendment 9 proposes. For those concerned about the 5
percent draw, Amendment 9 highlights the option to draw less
than the 5 percent POMV depending on its effect on the PFD.
10:20:51 AM
CHAIR HOLLAND said Amendment 9 appears to provide motivation for
a fix if the constitutional amendment does not pass. He
expressed concern that it might be dangerous to reduce the POMV
to 4.5 percent today given the current economic situation
10:21:48 AM
CHAIR HOLLAND withdrew Amendment 9.
10:22:08 AM
SENATOR MYERS moved Amendment 10, work order 32-GS1693\A.19.
CHAIR HOLLAND objected for discussion purposes.
32-GS1693\A.19
Nauman
8/31/21
AMENDMENT 10
OFFERED IN THE SENATE BY SENATOR MYERS
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 that half of the amount of the
draw shall be used for permanent fund dividends; 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"
CHAIR HOLLAND objected for discussion purposes.
10:22:16 AM
SENATOR MYERS explained Amendment 10. He pointed out there was a
drafting error in [Amendment 3 adopted on 8/27/21]. It indicated
SB 53 would be automatically repealed if SJR 6 did not pass the
legislature or was not approved in a statewide election The
original language in the conditional effect section of Amendment
3, page 6 read, "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.
SENATOR MYERS said additional language was needed on page 6,
line 7. He read Amendment 10, page 6, line 7 would add, "half of
the amount of the draw shall be used for permanent fund
dividends; and".
10:23:42 AM
SENATOR MYERS expressed concern that a constitutional amendment
related to the permanent fund would not pass at the ballot box
unless it contains a 50:50 split between the funding for a PFD
and for state government services. He suggested that while this
is not necessary, it is important in the interest of clarity and
to restore public trust by highlighting the legislature's
intent.
10:24:34 AM
SENATOR KIEHL asked if Amendment 10 would effectively say that
SB 53 only takes effect if this bill is not needed. He said if
the constitutional amendment related to the PFD were to pass it
would not matter what the statute said.
SENATOR MYERS answered that in theory the legislature could pass
HJR 1 instead of SJR 6. HJR 1 includes a 5 percent POMV draw but
it does not include any language on the PFD. If so, SB 53 would
still stay in effect, according to the language in Amendment 3,
he said. However, he did not think it would happen because HJR 1
would not likely pass at the ballot box if it passed the
legislature. Still, it is important to signal to voters that the
legislature is not just trying to fix with a draw for government
but to constitutionally protect the PFD. He offered his view
that adopting it could help restore the public trust, given
everything that happened in the last five or six years.
10:26:06 AM
SENATOR KIEHL commented that this answered his question.
10:26:17 AM
MR. KING explained that Amendment 10 would add conditional
language, such that if the 50:50 split for the PFD and
government funding were not in the constitutional amendment
language, the PFD statutes would revert to the original formula.
He offered his belief that the intent is consistent with the
previous committee discussion, that if the fiscal package
doesn't pass in its entirety, that all of the provisions
currently being discussed will be reversed.
10:27:03 AM
SENATOR MYERS said he understood Senator Kiehl's point was that
Amendment 10 was redundant. He disagreed. For example, if HJR 1
passed without any language related to the PFD, it would
effectively change the dividend statute to 50:50. However,
according to the Alaska Supreme Court, the statute would be
unenforceable because the Alaska Constitution did not contain
language requiring that a dividend be paid. He said it is
important to have the statutory language to line up with the
Alaska Constitution. However, the constitutional amendment needs
to look a certain way and narrow the focus.
10:28:10 AM
SENATOR KIEHL expressed concern that the language in Amendment
10 is so prescriptive for the constitutional language that it
would make the bill moot. Other approaches could solve the
problem without a prescriptive approach. Although the FPWG did
not reach consensus on the approach the group discussed two
plans. One approach the FPWG took was to place a formula in the
Alaska Constitution. He opined that it was unlikely that such a
proposal would have sufficient legislative support to make it to
the ballot. However, never say never, he said. A second approach
would explicitly require the PFD as provided by law with an
exemption from the dedicated funds clause that would allow
future legislatures to adjust the formula in an accountable way.
SENATOR KIEHL said that approach would avoid "crab walking" into
a universal income or leaving a small $2 PFD in 100 years. He
said language could ensure the PFD is paid, but that voters have
access to a PFD formula via the referendum process if they don't
like what a legislature does. Amendment 10 would put the 50:50
formula in the Alaska Constitution. He suggested in terms of
writing constitutional language and good statutes, it makes more
sense to require a constitutional amendment that protects the
PFD rather than to require one specific constitutional amendment
approach over all others. He said it would be tough to obtain
the 14 votes in the Senate and the 27 votes in the House for any
of these proposals. He suggested this approach may keep from
"choking off the whole thing."
10:31:04 AM
SENATOR SHOWER agreed that the FPWG discussed two approaches to
address the PFD formula: One approach was to guarantee the PFD
in the Alaska Constitution. However, many legislators expressed
angst about placing the formula in the Alaska Constitution in
accordance with statute. A second approach was to place the
formula in statute. Although the public can use the referendum
process to overturn a statute, that process is expensive,
difficult and often unsuccessful. The FPWG discussed inserting a
safeguard if a constitutional amendment guaranteed the PFD in
accordance with the statute, which was to require any changes
made must be adopted by a vote of the people. He offered his
view that the PFD issue will not be resolved without some
"catch" since the legislature does not have to follow the
statutes. Further, it's possible the guarantee could be met by
issuing a $1 PFD. He said these discussions didn't make it into
the FPWG report but there must be some balance.
10:34:08 AM
At ease
10:36:23 AM
CHAIR HOLLAND reconvened the meeting.
10:36:28 AM
SENATOR MYERS moved Conceptual Amendment 1 to Amendment 10, on
page 6, line 3 to change the date to 2022 to address a drafting
error pointed out by staff during the break. He noted that 2022
is the election year, not 2023.
CHAIR HOLLAND heard no objections so Conceptual Amendment 1 to
Amendment 10 was adopted.
He reminded members that legislative legal is authorized to make
conforming changes.
10:37:30 AM
SENATOR MYERS agreed with Senator Kiehl theoretically, that
formulas should not be placed in the Alaska Constitution in
order to retain flexibility for changing circumstances. However,
the state is at a unique point in its history. He offered his
view that the voters need to know what formula the courts will
enforce before passing a constitutional amendment. Thus, the
formula needs to be as explicit as possible in order to gain
voter trust.
10:39:13 AM
SENATOR HUGHES stated that the legislature must pass a
constitutional amendment. Senator Shower spoke about the need
for changes to be approved by voters or providing some other
safeguard. She highlighted that the conditional language in the
bill and the constitutional amendment needs to match. She said
she did not feel comfortable making changes "on the fly." She
suggested that the committee could pass Amendment 10, as
amended, with the understanding that it would need to be
adjusted at some point. She solicited Senator Kiehl's opinion.
10:40:25 AM
SENATOR KIEHL suggested that the conditional clause could be
less specific. He said he would be amenable to use language such
as "ensures" or "guarantees" rather than "half of the amount of
the draw" on page 6, line 7. He stated that it did not need to
be as specific as his earlier suggestion that it should "not be
subject to the dedicated funds clause" or Senator Shower's
suggestion that it require "a vote of the people." He expressed
his willingness to work on the language. He acknowledged that
the constitutional amendment language is critical. However, that
task is not before the committee today. Instead, today's task is
to decide how tightly to connect things together. The goal
should be to ensure that the legislative package can pass the
legislature. However, if members attempt to constrain the
legislative package, it will be problematic.
10:41:54 AM
SENATOR HUGHES asked Senator Kiehl whether he was comfortable
fixing it on the floor or if he would prefer to wait to see the
final form of the constitutional amendment and then amend SB 53.
SENATOR KIEHL deferred to the sponsor of Amendment 10.
10:42:30 AM
SENATOR MYERS offered his belief that SJR 6 should stay in the
form that was passed by the Senate Judiciary Standing Committee.
Otherwise, it would not likely gain the trust of the voters, he
said. He said Mr. King reminded him that the Alaska Constitution
[Art. IX, Sec. 15] already designates where the income from the
permanent fund shall be deposited. Wielechowski v. State
effectively indicated that the Alaska Constitution allows the
legislature to override statutory language but he is hesitant to
go that route, he said. He reiterated that he agrees with
drafting standards for the constitution that provide a more
general framework and less rigidity. However, in this case, he
believes that the rigidity is necessary.
10:43:58 AM
SENATOR KIEHL said he would not hold up the bill by objecting to
Amendment 10, but he acknowledged that additional work needs to
be done.
10:44:31 AM
CHAIR HOLLAND removed his objection.
CHAIR HOLLAND heard no further objection so Amendment 10 was
adopted.
10:44:49 AM
CHAIR HOLLAND moved Amendment 11, work order 32-GS1693\A.15.
32-GS1693\A.15
Nauman
8/27/15
AMENDMENT 11
OFFERED IN THE SENATE BY SENATOR HOLLAND
TO: SB 53
Page 1, following line 6:
Insert a new bill section to read:
"* Section 1. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE INTENT. It is the intent of the
legislature to
(1) implement the recommendations of the
2021 Comprehensive Fiscal Plan Working Group;
(2) harmonize the calculation under
AS 37.13.140(a) of net income available for
distribution and net income available for
appropriation under AS 37.13.140(b);
(3) temporarily change the mechanism used
to draw money from the earnings reserve account to
leverage the unprecedented earnings currently
available in the account, so that the legislature has
adequate time to debate, analyze, and implement the
revenue measures and cost reductions required for the
long-term financial stability of the state;
(4) reverse the changes made by this Act if
the recommendations of the 2021 Comprehensive Fiscal
Plan Working Group are not adopted and implemented in
their entirety."
Page 1, line 7:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 5, line 15:
Delete "Section 9"
Insert "Section 10"
Page 5, line 16:
Delete "sec. 12"
Insert "sec. 13"
10:45:09 AM
MR. KING explained that Amendment 11 would add intent language,
beginning on lines 5-16, which he read:
LEGISLATIVE INTENT. It is the intent of the
legislature to
(1) implement the recommendations of the
2021 Comprehensive Fiscal Plan Working Group;
(2) harmonize the calculation under
AS 37.13.140(a) of net income available for
distribution and net income available for
appropriation under AS 37.13.140(b);
(3) temporarily change the mechanism used
to draw money from the earnings reserve account to
leverage the unprecedented earnings currently
available in the account, so that the legislature has
adequate time to debate, analyze, and implement the
revenue measures and cost reductions required for the
long-term financial stability of the state;
(4) reverse the changes made by this Act if
the recommendations of the 2021 Comprehensive Fiscal
Plan Working Group are not adopted and implemented in
their entirety."
10:46:31 AM
CHAIR HOLLAND heard no further objection so Amendment 11 was
adopted.
10:46:45 AM
SENATOR HUGHES moved to report SB 53, work order 32-GS1693\A, as
amended, from committee with individual recommendations and
attached fiscal note(s).
10:47:18 AM
SENATOR KIEHL thanked the committee for starting the process to
move these issues forward during this special session. He said
he did not agree with everything in the bill, but he appreciated
the approach taken by members. He said there is more work to
come.
CHAIR HOLLAND stated that hearing no objection, CSSB 53(JUD) was
reported from the Senate Judiciary Standing Committee.
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