Legislature(2003 - 2004)

03/22/2004 01:42 PM House FIN

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

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