Legislature(2021 - 2022)BUTROVICH 205
03/29/2021 01:00 PM Senate JUDICIARY
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing | |
| SB9 | |
| SJR1 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 9 | TELECONFERENCED | |
| += | SJR 1 | TELECONFERENCED | |
| + | TELECONFERENCED |
SJR 1-CONST AM: GUARANTEE PERM FUND DIVIDEND
2:37:19 PM
CHAIR REINBOLD reconvened the meeting and announced the
consideration of SENATE JOINT RESOLUTION NO. 1, Proposing
amendments to the Constitution of the State of Alaska relating
to the Alaska permanent fund and appropriations from the Alaska
permanent fund.
2:37:33 PM
SENATOR BILL WIELECHOWSKI, Alaska State Legislature, Juneau,
Alaska, sponsor of SJR 1, stated that he introduced a similar
resolution for the past eight or nine years. He said that
placing the permanent fund in the constitution is the only way
to protect the permanent fund dividend. The legislature
attempted to do so in 2018 by passing legislation, yet the
permanent fund dividends (PFDs) continue to dwindle. Many people
were shocked when then-Governor Bill Walker cut the PFD by
$1,000 by vetoing full permanent fund dividend funding in 2016.
In the last four years, the legislature cut the PFD amount. The
Alaska Supreme Court said that the legislature and the governor
could ignore the plain mandatory language in multiple statutes
that require a full PFD to be paid each year. Any governor can
reduce the PFD by vetoing the amount to whatever level chosen.
Further, any future legislature can set the PFD at whatever
level it determines, including setting it to zero.
SENATOR WIELECHOWSKI said corporations or special interest
groups often speak to the importance of stability,
predictability and consistency in Alaska's tax structures. He
offered his view that Alaskans deserve the same predictability
and consistency with their PFDs.
2:39:22 PM
SENATOR WIELECHOWSKI pointed out that the permanent fund
dividend program has been one of the most popular programs in
American history. According to the Institute of Social and
Economic Research (ISER) at the University of Alaska, tens of
thousands of Alaskans were elevated from poverty due to the
statutory PFD. Alaska has among the lowest income inequality in
the United States, largely because of the PFD. According to
ISER, the PFD creates thousands of jobs in Alaska.
He said many people don't realize that the founders of the
permanent fund in 1976 had envisioned the prospect of a dividend
to the people of Alaska. Governor Hammond spoke of having a
dividend flow from the permanent fund. In members' packets are
several historical statements that were made about the future
plan for a dividend program, he said. The 1976 constitutional
amendment was specifically changed to allow for PFD payments and
a letter of intent was added to clarify these payments.
2:40:43 PM
SENATOR WIELECHOWSKI said that in 1982, the legislature observed
that special interests and the politically connected were
reaping more benefit from the permanent fund earnings through
government spending than average Alaskans. He reported that the
current value of the Permanent Fund is approximately $74
billion. Article IX, Section 15 of the Alaska Constitution
requires that at least 25 percent of the mineral lease rentals,
royalties, royalty sale proceeds and federal mineral revenue
sharing payments and bonuses received by the state go into the
permanent fund.
2:41:13 PM
SENATOR WIELECHOWSKI cautioned that the PFD is not an
entitlement since the subsurface rights of the state belong to
the people collectively. Under Article IX, Section 2 of the
Alaska Constitution, the state has an obligation to "provide for
the utilization, development, and conservation of all natural
resources belonging to the State, including land and waters, for
the maximum benefit of its people." He said the authors of the
1982 PFD legislation tied the current PFD to this constitutional
obligation. Every Alaskan has a right to their share of Alaska's
oil wealth and the legislature found that the best, most
efficient way to do this was through a dividend.
SENATOR WIELECHOWSKI reported that Alaskans have only received a
very small share of the state's oil wealth. For example, 100
percent of state property taxes, income taxes, and production
taxes and 75 percent of royalties go to the government. The
people receive 25 percent of the state's royalties. Since
royalties are typically set at 12.5 percent, Alaskans only
receive 3.125 percent of Alaska's oil value deposited to the
permanent fund. While Alaskans received 50 percent of the
earnings generated from those contributions, the rest was
available for the government. The current PFD law included a
letter of intent stating that "The people should have the first
call on the earnings of the permanent fund." However, in recent
years, the people have gotten the scraps.
2:42:59 PM
SENATOR WIELECHOWSKI said that SJR 1 will honor the historical
formula. Thus, the people will see the first call not the last
call over the fund income. The government will still have the
authority to use a portion of the permanent fund to fund
government. However, the government must look to generate
revenue in the same way that every other state does.
He offered his view that the only way to protect the permanent
fund dividend is to put it in the constitution. SJR 1 does not
specifically authorize the PFD in the constitution. However, it
would allow the people to vote and decide if the PFD should be
protected in the Alaska Constitution. Those who oppose SJR 1
will have a full and fair opportunity to argue against it. He
said an issue as critically important as this should be decided
in an election. He reiterated the need to let the people decide
this issue once and for all. He urged members to support SJR 1.
2:43:49 PM
CHAIR REINBOLD remarked that she has never voted to cut the PFD.
She related her political struggles due to supporting a full
permanent fund dividend.
CHAIR REINBOLD stated that it will be necessary to cut
government or institute taxes to pay a full PFD. She said she
favors cutting government. She asked if the sponsor is willing
to cut government spending and if so, to identify where cuts
should be made.
SENATOR WIELECHOWSKI responded that he had proposed dozens of
cuts during his time in the legislature. He said he did not wish
to debate how to accomplish budgetary solutions. Everyone will
have different ideas and approaches to tackle this. The state
has approximately $75 billion in the permanent fund. The average
generally accepted accounting value is $70 billion in the last
five years. He pointed out that paying the full dividend will
cost $2 billion. Some people argue that a safe draw is 4
percent; others believe 5 percent is sustainable. A 5 percent
draw would make $1.5 billion available for the government. He
offered his view that oil tax credits should be eliminated, that
Alaska has the lowest oil tax rates in the world yet the oil
industry is harvesting money from Alaska and using it to invest
in other places in the world.
2:47:40 PM
CHAIR REINBOLD recalled she agreed not to debate oil tax rates
with the sponsor, which is better left to the Senate Resources
Committee. She argued that the business environment must be
competitive. She said her husband was laid off from the oil
industry.
SENATOR WIELECHOWSKI said the state has a legal obligation to
achieve a reasonable profit. He argued that Alaska is the most
profitable place in the world for oil companies.
CHAIR REINBOLD suggested she could use charts to support her
viewpoint.
2:48:47 PM
At ease
2:49:09 PM
CHAIR REINBOLD reconvened the meeting. She maintained that she
could bring in economists' charts. She related that this
discussion should focus on the permanent fund dividend. She
remarked that she supports the PFD program.
2:49:48 PM
SENATOR MYERS agreed that the people own the resources in
Alaska. He said he noticed that SJR 1 does not change the
percentage of royalties going to the permanent fund. He asked if
the state should maintain its current rate on royalties.
SENATOR WIELECHOWSKI said that SJR 1 retains the statutory
formula his constituents favored. Some have advocated changing
the formula by going to a percentage of market value (POMV). He
acknowledged that the legislature could debate whether to use
POMV. However, it is not in this resolution.
2:51:04 PM
CHAIR REINBOLD offered her view that the private sector is taxed
at a rate that is three times the national average. The oil and
gas industry offers much more than providing revenue to the
state since it provides jobs.
2:52:13 PM
SENATOR KIEHL reminded members that the constitution's preamble
says, "We the people do ordain and establish this Constitution."
The notion that government is something other than the people is
unwarranted. He said he would also argue that Alaskans received
value in other ways. The people got educated, had their roads
plowed and their fish counted. He said he has questions about
the resolution.
2:53:07 PM
CHAIR REINBOLD turned to invited testimony.
2:53:37 PM
CLEM TILLION, Chair, Permanent Fund Defenders, Halibut Cove,
Alaska, said he would like the existing law related to the
permanent fund dividend put into the constitution so that
Alaskans are protected. This law has worked for 40 years, he
said. However, the Alaska Supreme Court ruled that the
legislature does not need to obey that law. He said he would
like a constitutional amendment that makes the legislature obey
the law.
He expressed concern that people working in the fishing industry
in Dutch Harbor do not pay any taxes since they come to Alaska
from the lower 48. He said he is not opposed to taxes, but he is
against excessive government, so he would like to see severe
cuts. He recommended that the legislature decide which services
it will no longer provide. He reminded members that Alaska is
the only land grant state in the nation, having received an
endowment of 100 million acres. At the time, Alaska selected
land it felt was valuable, including oil fields and wells.
MR. TILLION suggested that the tax debate could be held later.
He recalled a territorial legislator who said if you cut the
government by 20 percent, it will cripple the territory forever.
However, cutting 20 percent of the employees will balance the
budget.
2:56:31 PM
MR. TILLION recalled when the permanent fund was established it
was necessary to call upon the Alaska State Troopers to bring in
two senators to vote. He lamented that the dividend was not put
into the constitution at that time. First and foremost, the
money should be protected, he said. The state should not pay
dividends when it has bad years. He urged members to move the
resolution to the finance committee.
CHAIR REINBOLD agreed that the legislature must cut government.
She also agreed that Lower 48 fishermen not paying taxes should
be addressed. She said legislators need to work together to
determine budget cuts.
2:59:50 PM
JOE GELDHOF, Attorney; Member, Board of Directors, Permanent
Fund Defenders, Juneau, Alaska, stated he serves on the board
with Jack Hickel, Roselynn Cacy, Rick Halford, Juanita
Cassellius and Jim Sykes. The board keeps in touch with
economists throughout the state. The board's primary mission is
to protect the permanent fund, including protecting the
permanent fund dividend. He emphasized that the permanent fund
dividend ties every Alaskan to the funds in the permanent fund.
He expressed concern that the permanent fund would be
squandered.
3:00:56 PM
MR. GELDHOF characterized the permanent fund dividend as a
vexing problem that the legislature has grappled with resolving.
He supported allowing the people to vote on the permanent fund
dividend issue and resolve it. This will enable the legislators
to focus on the critical needs of cuts and revenue enhancement.
He said that if the legislature uses POMV, it will shift from a
permanent fund to an annuity or endowment. He said that the POMV
methodology must be prudent and conservative. Otherwise, the
state risks over harvesting on a percentage basis, which will
jeopardize the corpus of the fund. He suggested that members
listen to Callen & Associates who testified before the Senate
Finance Committee that using 5 percent POMV will put the
permanent fund in jeopardy. He said that the board prefers the
current statutory process in the constitution. However, the
legislature should use 4 percent and a 50:50 split if it moves
to a percentage of market value (POMV).
[SJR 1 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 9 ver B.pdf |
SJUD 3/29/2021 1:00:00 PM |
SB 9 SB9 Ver B |
| SB 9 Sponsor Statement ver B.pdf |
SFIN 5/3/2021 9:00:00 AM SJUD 3/29/2021 1:00:00 PM |
SB 9 SB9 Sponsor Statement |
| SB 9 Sectional Analysis version B 2.10.21.pdf |
SFIN 5/3/2021 9:00:00 AM SJUD 3/29/2021 1:00:00 PM |
SB 9 SB9 Sectional Analysis Version B |
| SB 9 Letters of Support 2.10.21 complete.pdf |
SJUD 3/29/2021 1:00:00 PM |
SB 9 |
| SB 9 Summary of previous support letters (SB52).pdf |
SJUD 3/29/2021 1:00:00 PM |
SB 9 SB 52 |
| SB 9 Title 4 Review Report 02.2019.pdf |
SJUD 3/29/2021 1:00:00 PM |
SB 9 |
| SB 9_Title4Pres_Senate_JUD_3.2021.1.pdf |
SJUD 3/29/2021 1:00:00 PM |
SB 9 |
| SJR001A.PDF |
SJUD 3/29/2021 1:00:00 PM |
SJR 1 SJR1 Version A |
| SJR 1 Sponsor Statement 2.8.21.pdf |
SJUD 3/29/2021 1:00:00 PM |
SJR 1 SJR1 Version A Sponsor Statement |
| SJR 1 Sectional Analysis 2.8.21.pdf |
SJUD 3/29/2021 1:00:00 PM |
SJR 1 SJR1 Version A Sectional Analysis |
| SJR 1 Leg History 1982 SB842 HFIN_Letter of Intent Al Adams 5-14-82 .pdf |
SJUD 3/29/2021 1:00:00 PM |
SB 842 SJR 1 |