Legislature(2017 - 2018)HOUSE FINANCE 519
04/10/2017 08:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB26 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 26 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR SENATE BILL NO. 26(FIN)
"An Act relating to an appropriation limit; relating
to the budget responsibilities of the governor;
relating to the Alaska permanent fund, the earnings of
the Alaska permanent fund, and the earnings reserve
account; relating to the mental health trust fund;
relating to deposits into the dividend fund; relating
to the calculation and payment of permanent fund
dividends; and providing for an effective date."
8:05:00 AM
Co-Chair Seaton MOVED to ADOPT the proposed committee
substitute for CSSB 26(FIN), Work Draft 30-GS1690\U
(Martin, 4/7/17).
Representative Wilson OBJECTED.
TANEEKA HANSEN, STAFF, REPRESENTATIVE PAUL SEATON,
addressed the changes in the CS with a document created by
the House Finance co-chairs titled "SB 26 - Comparison"
dated April 7, 2017 (copy on file). The comparison sheet
lists the provision, the provision under the CS for SB 26
Version D, and the provision under the House CS for SB
26(FIN)-Version U:
Provision: Intent
CS for SB 26 - Version D: Section 1 - Intent to
reevaluate earnings in three years
House CS for SB 26(FIN) - Version U: Deleted
Provision: Budget reserve fund SBR- Appropriation
limit AS 37.05.540(a)
CS for SB 26 - Version D: Section 2 - Deletes
reference to the appropriation limit created by AS
37.05.540(b), the existing appropriations limit, which
is repealed by this bill.
House CS for SB 26(FIN) - Version U: Deleted - AS
37.05.540(b) is not repealed; the existing Statutory
Budget Reserve appropriation limit remains in statute.
Provision: Appropriation Limit AS 37.05.545
CS for SB 26 - Version D: Section 3 - Creates a new
appropriation limit not to exceed $4.1 billion in
unrestricted general funds. Does not appropriations
for certain specific purposes.
House CS for SB 26(FIN) - Version U: Deleted
Provision: Marine Highway Fund AS 37.05.550
CS for SB 26 - Version D:
House CS for SB 26(FIN) - Version U: Section 1 -
Amends AS Sec. 37.05.055(b), relating to the marine
highway fund, to conform to the changes made in
section 6.
Provision: Responsibilities of the Governor AS
37.07.020
CS for SB 26 - Version D: Section 4 - Adds new
subsection (f) requiring a governor's report on how
the budget complies with the appropriation limit in
sec. 3
House CS for SB 26(FIN) - Version U: Section 2 - Adds
new subsection (f) requiring a governor's report on
how the budget complies with the appropriation limit
that exists in article IX section 16 of the
Constitution of the State of Alaska.
Provision: Alaska Permanent Fund AS 37.13.010(a)
CS for SB 26 - Version D: Section 5 - Deletes AS
37.13.010(a)(2). The resulting change means that the
Alaska Permanent fund will be filled by the
constitutionally required 25 percent of all mineral
lease rentals, royalties, royalty sale proceeds, and
net profit shares. The additional 25% of royalties
from leases issued after December 1, 1979, which are
above the constitutionally required 25%, will now
remain in the general fund and will not be deposited
into the permanent fund.
House CS for SB 26(FIN) - Version U: Section 3 - Same
Provision: Income AS 37.13.140
CS for SB 26 - Version D: Section 6 - Adds "and market
value" to section title. This section directs the
Permanent Fund Corporation to continue computing net
income of the fund in the same manner, excluding any
unrealized gains or losses but removes the calculation
for determining distributable income from the earnings
reserve.
House CS for SB 26(FIN) - Version U: Section 4 - Same
Provision: Income AS 37.13.140 (b)
CS for SB 26 - Version D: Section 7 - Adds new
subsection (b) describing the amount available for
distribution from the earnings reserve fund as 5.25%
of the average market value of the entire fund.
House CS for SB 26(FIN) - Version U: Section 5 - Same
Provision: AS 37.13.140(c)
CS for SB 26 - Version D: New subsection (c) reduces
the draw from the earnings reserve when oil revenues
are above $1.2 billion.
House CS for SB 26(FIN) - Version U: New subsection
(c) reduces the draw from the earnings reserve when
oil revenues are above $1.4 billion. The draw is
reduced by 80 cents on the dollar.
Provision: Income AS 37.13.140 (b)
CS for SB 26 - Version D: Section 8 - Amends
subsection (b), created by this act, to change the
POMV draw from 5.25% to 5%. The change is effective
July 1, 2020.
House CS for SB 26(FIN) - Version U: Section 6 -
Amends subsection (b), created by this act, to change
the POMV draw from 5.25% to 5%. The change is
effective July 1, 2019.
Provision: Disposition of Income AS 37.13.145(b)
CS for SB 26 - Version D:
House CS for SB 26(FIN) - Version U: Section 7 -
Amends subsection (b) to annually direct income from
the earnings reserve. 0.25 percent of market value
(POMV) is directed to the principal of the fund.
Separately, 33% of POMV calculated under AS
37.13.140(b) is directed from the earnings reserve to
the dividend fund for dividends and 67% to the general
fund for state use.
Provision: Disposition of Income AS 37.13.145(d)
CS for SB 26 - Version D: Section 9 - conforming to
the distribution change in AS 37.13.140(b)
House CS for SB 26(FIN) - Version U: Section 8 -
conforming to the change to the dividend distribution
under 37.13.145(b). Same effect.
8:08:02 AM
Provision: Disposition of Income AS 37.13.145(e)CS for
SB 26 - Version D: Section 10 - Adds a new subsection
that provides that money from the earnings reserve may
be transferred to the principal of the permanent fund
for purposes of inflation proofing the fund when the
value of the earnings reserve account is four times
the annual amount calculated under AS 37.13.140(b).
House CS for SB 26(FIN) - Version U: Section 9 - Adds
a new subsection that provides that money from the
earnings reserve may be transferred to the principal
of the permanent fund for purposes of inflation
proofing the fund when the value of the earnings
reserve account is four times the annual amount
calculated under AS 37.13.140(b), up to the amount
necessary to make up for any past inflation proofing
that was not transferred. Subsection (f) directs an
additional appropriation, if necessary, to ensure
dividends of at least $1,250 for fiscal years 2018 and
2019.
Provision: Disposition of Income AS 37.13.145(e)(f)
CS for SB 26 - Version D:
House CS for SB 26(FIN) - Version U: Section 10 -
Deletes subsection (f), created in the previous
section, and amends (e) to conform to that deletion.
This section takes effect June 30, 2020, when the
dividend no longer has a minimum amount of $1,250.
8:10:37 AM
Provision: Appropriations to the dividend fund AS
37.13.146
CS for SB 26 - Version D: Section 11 - creates a new
section which allows the legislature to appropriate
25% of the POMV amount calculated in AS 37.13.140(b)
from the general fund to the dividend, for the purpose
of paying dividends
House CS for SB 26(FIN) - Version U:
Provision: Corporation Budget AS 37.13.150
CS for SB 26 - Version D:
House CS for SB 26(FIN) - Version U: Section 11 -
Includes the unexpended balance of the Alaska
Permanent Fund Corporation's budget in the calculation
of the fund's market value; this budget balance is
already calculated as a part of the net income of the
fund under current law.
Provision: Assets of the mental health trust AS
37.13.300(c)
CS for SB 26 - Version D: Section 12 - Clarifies that
income from mental health trust fund, which is managed
by the Alaska Permanent Fund Corporation, is not
included in the market value of the Permanent fund for
purposes of distribution
House CS for SB 26(FIN) - Version U: Section 12 - Same
8:13:16 AM
Provision: Amount of dividend AS 43.23.025 (a)
CS for SB 26 - Version D: Section 13 - Amends to state
that the dividend shall be calculated based on the
amount appropriated from the general fund under AS
37.13.146.
House CS for SB 26(FIN) - Version U:
Provision: Amount of dividend AS 43.23.025(c)
CS for SB 26 - Version D: Section 14 - States that the
dividend for fiscal year 2018, 2019, and 2020 shall be
$1000.
House CS for SB 26(FIN) - Version U: Section 13 - Adds
new subsection (c) to state that notwithstanding the
calculations outlined in (a), the dividend for fiscal
years 2018 and 2019 shall be at least $1250.
Provision: Dividend fund AS 43.23.045(a)
CS for SB 26 - Version D: Section 15 - Amends to
clarify that the dividend fund consists of money
appropriated under AS 47.13.146
House CS for SB 26(FIN) - Version U: Deleted.
Provision: Duties of the department AS 43.23.055
CS for SB 26 - Version D: Section 16 - Amends to
clarify that the amount to pay the annual dividend
moves from the dividend fund without need for further
appropriation
House CS for SB 26(FIN) - Version U: Section 14 - Same
8:15:23 AM
Provision: Repealed
CS for SB 26 - Version D: Section 17 - Repealed July
1, 2017 AS 37.05.540(b)(c) -Existing SBR appropriation
limit AS 37.13.145(b) - existing distribution of
income AS 37.13.145(c) - existing inflation proofing
mechanism Section 18 - Repealed June 30, 2021 AS
43.23.025(c), $1000 set dividend
House CS for SB 26(FIN) - Version U: Section 15 -
Repealed July 1, 2017 AS 37.13.145(c) - existing
inflation proofing mechanism Section 16 - Repealed
June 30, 2020 AS 37.13.145(f) - appropriation for
$1250 dividend AS 43.23.025(c) - minimum dividend of
$1250.
Provision: Uncodified law
CS for SB 26 - Version D: Section 19 - Provides the
commissioner of revenue with the transition authority
to implement regulations.
House CS for SB 26(FIN) - Version U: Section 17 -
states that for fiscal year 2017, the legislature may
appropriate from the earnings reserve 5.25% of the
market value of the fund (POMV), less the dividend
already paid out for fiscal year 2017.
Provision: Retroactivity
CS for SB 26 - Version D:
House CS for SB 26(FIN) - Version U: Section 18: The
previous section, section 17, is retroactively
effective on June 29, 2017 even if the act takes
effect later than that date.
Provision: Conditional language
CS for SB 26 - Version D:
House CS for SB 26(FIN) - Version U: Section 19 - This
act only takes effect if the legislature also passes
and signs into law a broad based revenue measure and
HB 111 as passed the House.
Provision: Effective dates
CS for SB 26 - Version D: Section 20 - section 19 is
effective immediately Section 21 - section 8, changing
the POMV rate, is effective July 1, 2020 Section 22 -
the rest of the act is effective July 1, 2017
House CS for SB 26(FIN) - Version U: Section 20 -
sections 17 and 18 take effective immediately Section
21 - section 6, amending the POMV rate, takes effect
July 1, 2019 Section 22 - section 10, relating to the
minimum dividend, takes effect June 30, 2020 Section
23 - the remainder of the act takes effect July 1,
2017
Representative Wilson asked whether SB 26 contained HB 115,
minus the income tax.
Ms. Hansen replied that the current bill was similar to HB
115.
Representative Wilson asked whether combining the two
pieces of legislation had been vetted by the legislative
legal division.
Ms. Hansen replied there had been no legal opinion attached
to the bill. She shared that the legal team had used
conditional language previously.
Representative Wilson asked whether conditional language
was the same as intent language.
Ms. Hansen replied that conditional language meant that the
bill would not be enacted as law unless the conditions
stipulated in the legislation had been met.
Representative Wilson probed the difference between intent
and conditional language. She was curious when conditional
language had been used previously.
Ms. Hansen replied that intent language did not have impact
on law. She furthered that conditional language stipulated
that a bill can only become law after conditions are met.
She added that there was a range of conditional language
commonly found in appropriation bills and bills related to
Medicaid reform.
8:19:20 AM
Co-Chair Foster noted that Representative Pruitt and
Representative Guttenberg had joined the meeting earlier.
Vice-Chair Gara wanted to ensure the dividend portions
remained the same in the bill. He summarized his
understanding of the dividend payout described in the
legislation.
Ms. Hansen replied in the affirmative.
Vice-Chair Gara referred to the senate's formula that had
been modeled in the Legislative Finance Division (LFD)
charts. He noted that the formula started at $1000, then
fell below $1000 in 2021. He said that past charts he had
seen predicted that the dividend would likely start out a
little above $1,250 and rise from there. He specified that
the formula he was discussing used the 67 percent general
fund and 33 percent dividend formula.
Ms. Hansen answered the formulas were the same as in HB
115. She relayed that the $1,250 guaranteed dividend would
end in FY 19, which was the same year that the POMV
calculation would transition from 5.25 percent to 5
percent. She believed that the projections hovered around
$1,250, growing at a modest rate thereafter.
Vice-Chair Gara recalled that the dividend under the house
formula had been projected to start higher than $1250 and
had been projected to grow. He hoped to get the actual
numbers from LFD at another time.
8:21:44 AM
Representative Thompson called to mind that the POMV in the
current legislation had been likened to the POMV found in
HB 115. He argued that the two were not alike because the
$1.2 billion dollar draw limit that had been written into
HB 115 [by a vote of 9 to 1 by the committee] would be
changed to $1.4 billion and $.80 on the dollar. He felt
that the committee had voted, with good reason, on the $1.2
million draw limit and dollar per dollar thereafter -
because it would grow the fund and would make more money
available for future dividends and government expenses.
Ms. Hansen replied that some members had hoped that any
additional revenue in the out years could be available for
deferred maintenance or certain one-time projects.
Representative Thompson felt that HB 111 [oil and gas tax
legislation currently under consideration by the
legislature] would stunt revenue growth and would result in
the threshold in SB 26 ultimately never being reached.
Representative Pruitt cited conditional language in the
bill; Page 8, line 10:
CONDITIONAL EFFECT. This Act takes effect only if the
Thirtieth Alaska State Legislature passes and enacts
into law in 2017
(1) legislation relating to a broad-based tax,
directed to education, that is estimated by the
Department of Revenue to generate annually at least
$650,000,000, once fully implemented, and that has an
effective date not later than January 1, 2019; and
(2) the version of House Bill 111 that passes out of
the House of Representatives.
Representative Pruitt suggested that the language could be
illegal. He testified that the conditional language scared
him and was dangerous and outrageous.
8:25:59 AM
Vice-Chair Gara disagreed. He explained that there had been
attempts by some current lawmakers to use the permanent
fund to fund the deficit, without raising other revenue,
while paying oil companies credits and failing to expect
those with the greatest financial privilege to contribute
to a solution. He felt that a shrinking permanent fund
would disproportionately affect the poorest in the state.
He stressed that the fiscal plan should be fair for all
Alaskans. He argued that the conditional language in the
bill supported a balanced fiscal plan that would ensure
those with privilege and wealth contributed equally to
those that rely on their dividends for significant income.
8:28:15 AM
Representative Wilson disagreed. She believed that the
language took away the ability of the other body to
represent their constituents by vetting the bill. She
argued that the broad-based tax would not be spent on
education but could be used for anything. She thought that
the language in (2) was unconstitutional. She lamented that
the bill did not contain language to reduce the budget,
rather continued to let it expand.
8:30:51 AM
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Kawasaki, Ortiz, Gara, Grenn, Guttenberg, Seaton,
Foster
OPPOSED: Pruitt, Thompson, Tilton, Wilson
The MOTION PASSED (7/4). There being NO further OBJECTION,
Work Draft 30-GS1690\U was ADOPTED.
8:31:25 AM
RANDALL HOFFBECK, COMMISSIONER, DEPARTMENT OF REVENUE,
expressed appreciation that the legislation was advancing
through the legislative process.
Representative Thompson queried whether the legislation
weakened the permanent fund and asked for a comparison of
the current version to past versions.
Commissioner Hoffbeck answered that all of the bills that
had POMV based versions and had contained similar draw
components. He explained that the current bill reduced the
draw from 5.25 percent to 5 percent one year earlier that
the senate version and included the secondary provision of
.25 percent inflation proofing on an annual basis.
Representative Thompson thought that the draw limit in the
bill would impact the overall health of the fund.
Commissioner Hoffbeck replied that the bill did increase
the chance of failure, but not significantly.
8:34:48 AM
Vice-Chair Gara offered a brief history of the conversation
surrounding the draw limit. He understood that the draw
limit could be written into statute but that other
legislatures could not be constitutionally bound to follow
suit.
Commissioner Hoffbeck agreed that anything in statute could
be changed by future legislatures. He thought that the idea
behind putting the formula into statute was to provide
guidance to future legislature in no over-drawing the
permanent fund.
Vice-Chair Gara surmised that everything in statute would
be subject to appropriation and so, would be unenforceable.
Commissioner Hoffbeck replied in the affirmative.
Vice-Chair Gara believed the administration's concern was
valid. He spoke to low capital budgets in recent years. He
spoke to the draw limit and the validity of the concerns of
the administration. He understood that the draw limit
applied to production taxes and earnings reserve draws,
combined.
Commissioner Hoffbeck replied that the trigger was the
growth of production tax and royalties; oil and gas
revenues.
Vice-Chair Gara probed the royalty figures.
Commissioner Hoffbeck replied he would have to run the
numbers. He guessed that they stood at approximately half
of $1.2 billion.
Vice-Chair Gara surmised that the largest portion of the
state's revenue would be the POMV draw, plus royalties,
plus production tax.
Commissioner Hoffbeck replied in the affirmative.
Vice-Chair Gara expressed concern that the draw limit could
result in a flat revenue situation over the next decade,
leaving the state unable to keep up with inflation and
population growth and could result in additional internal
budget cuts. He wondered whether there was a way to craft
the draw limit to allow it to adjust for population and
inflation growth.
8:41:34 AM
Commissioner Hoffbeck replied the other large component to
consider was other revenues, which was not included in the
draw limit - about $400 million per year - the biggest
component being oil and gas corporate income tax. He stated
that there would be growth in the general economy that
would not be caught under the cap. He relayed that a broad-
based tax would be captured outside of the cap as well,
which would allow for growing expenditures overtime. He
noted that the cap had been included in the bill as a way
to balance the amount of revenues available for government
services in high revenue years, with the amount available
in low revenue years. He related that if the intent of the
legislature was to have more room on the higher end, the
start would need to be at a lower base to assure that the
fund was not overdrawn. He stressed that all the components
needed to maintain balance.
Vice-Chair Gara understood that some of the revenue may
increase with inflation, but the bulk of the revenue would
be subject to the flat limit, approximately $3.5 billion.
He thought that revenue would remain flat and could fall
behind inflation every year. He wondered whether the limit
could be written to ensure that the reality of inflation
and population growth were reflected realistically.
Commissioner Hoffbeck clarified that the oil and gas taxes
and royalties were not limited and would grow. He said that
the only number that would go down would be the permanent
fund draw. He shared that the permanent fund was now being
added to the equation because there were insufficient
revenues, under the current system, to pay the state's
bills. He held that as oil and gas tax revenues, and other
revenues grew, the sate would have sufficient funds to pay
bills. He furthered that if the threshold point were
reached where the state had enough in revenue from oil and
gas taxes and other revenues to pay the bills, it would
make sense to cease drawing from the permanent fund.
8:46:36 AM
Vice-Chair Gara maintained his concern that the overall
revenue would not grow within the draw limit set in the
legislation.
Commissioner Hoffbeck replied that the reason for the draw
limit was to recognize that the earnings reserve needed to
be used in the immediate but might not be necessary into
the future. He stressed that the draw would cease once the
need subsided and was not intended to be a permanent source
of income for the state.
Vice-Chair Gara agreed that the state should find a way to
limit the draw from the earnings reserve. He reiterated his
question about inflation and population growth. He wanted
to use some portion of funds to keep up with those items.
8:49:33 AM
Commissioner Hoffbeck replied that the CS allowed for
headroom by going $.80 on the dollar. He reminded the
committee that under current revenues there was $600
million in headroom for growth before the limit was
reached.
Representative Wilson relayed that the committee had heard
from Ken Alper, Director, Tax Division, Department of
Revenue that HB 111 did constitute a substantial tax change
on the oil and gas industry. She wondered whether the
change could have negative repercussions.
Commissioner Hoffbeck cited the immediate fiscal deficit
necessitated that all things should be on the table for
consideration. He stated that everything that the state did
would have an impact somewhere. He said that HB 111 still
needed to work its way thorough the senate and could look
different after it traveled through the legislative
process.
Representative Wilson argued that the conditional language
did not allow for the senate to make changes to HB 111 She
asked if the administration had a position on the current
version of HB 111.
8:52:31 AM
Commissioner Hoffbeck replied that the legislation was a
strong statement from the house majority. He felt that the
bill would ultimately end up in a conference committee. He
believed that that committee would weigh all iterations of
the legislation, including the conditional language in the
current version.
Representative Wilson thought that that administration
would want to be involved in the crafting of the
legislation. She asked whether the administration believed
that SB 21 was helping to increase oil production.
Commissioner Hoffbeck replied the department had answered
the question many times. He said that it was not possible
to say definitively whether SB 21 was responsible for
additional oil production in the state. He stated that most
of the fields that were currently online had been in the
works before the passage of SB 21.
Representative Wilson asked whether the administration was
confident companies would continue work on new fields, or
pursue other options elsewhere, if the tax system changed.
Commissioner Hoffbeck answered that as long as the
legislature was split 50/50 on whether the current tax
structure was the appropriate tax structure, there would
always be a large amount of uncertainty in the underlying
tax structure. He believed that the state needed to get to
a tax structure that enough people supported to let it stay
in place for a significant period of time. He stressed the
need to create a fiscal plan that included a stable oil and
gas tax policy. He contended that industry could not make
investment decisions if the rules continually changed.
8:56:31 AM
Representative Wilson did not believe there was anyone on
the committee who believed the tax credits did not need to
be dealt with. She contended that HB 111 would increase
taxes for industry, which would result in a decrease of
industry investment and activity in the state.
Commissioner Hoffbeck replied that when oil prices
collapsed the state lost 90 percent of its revenue. He
shared that the next largest loss in revenue was in North
Dakota, while Texas lost less than 1 percent of their
revenue. He said that the compounding effect of the state
reliance on oil and gas, plus a net tax system that
exaggerated the impact of lower prices, had brought the
state to a point where the tax needed to be reexamined. He
said that the state had taken a hit in its tax revenue that
had far exceeded hits taken by other tax regimes.
Representative Wilson countered that Alaska could not be
compared to Texas because of the costs and regulation faced
by industry to do business in the state. She felt that the
state already took too much from the oil industry in the
way of taxes. She warned that an increase in taxes would
yield poor results for the state.
8:59:22 AM
Representative Pruitt asked whether it could be expected
for the governor to weigh in on his opinion of HB 111,
should the bill pass the house.
Commissioner Hoffbeck replied that the administration would
weigh in on components of the bill during future testimony
before the senate.
Representative Pruitt felt that the conditional language
negated the administration having specific opinion on
certain bill components; the administration would have to
say "yes" or "no" to the bill as an entire package.
Commissioner Hoffbeck responded that the conditional
language in the bill was strong statement by much of the
committee of their intent to pass a full fiscal plan,
including oil and gas tax reform and a broad-based tax. He
thought that conference-able provisions of the legislation
would be considered in a conference committee on the bill.
Representative Pruitt asked why the administration had
introduced SB 26 and why it was needed.
Commissioner Hoffbeck answered that the state was in
immediate need of a plan that offered a certain amount of
revenue, while protecting savings from total depletion.
9:01:41 AM
Representative Pruitt understood that the administration
felt structure was necessary.
Representative Pruitt recalled testimony that said that the
legislature could act under its own direction and did not
need a revenue limit.
Commissioner Hoffbeck replied that the administration would
always assume the legislature would follow its own rules.
Representative Pruitt asked whether the governor had a
statement about whether the state should have a bicameral
or unicameral legislature.
Commissioner Hoffbeck replied that he had no knowledge of
the governor's opinion on the matter.
Representative Ortiz asked whether the potential payback
amount for earned tax credits had any impact on the $1.2
billion to $1.4 billion draw limit.
Commissioner Hoffbeck responded it would not have an impact
on the draw limit.
Vice-Chair Gara queried the commissioner's opinion as to
whether the legislation would provide a fiscal plan that
protected the state's economy.
9:05:10 AM
Commissioner Hoffbeck answered that the bill would not get
the state to the finish line on its own. He said that a
broader fiscal plan that accompanied the use of the
permanent fund would be necessary in order to not deplete
the funds savings. He relayed that this was the largest
component of the fiscal solution, but without substantial
expenditure reductions or a broad-based tax that would
generate $600 million to $700 million the budget gap would
not be filled.
Vice-Chair Gara expressed concern for the future of the
state's economy if the budget gap was not solved. He asked
if a partial plan would be dangerous to the economy.
Commissioner Hoffbeck answered that a partial plan did not
take the uncertainty out of the equation. He stated that it
would be necessary to achieve a full plan. He clarified
that the entire plan did not have to be implemented in the
current year, but a plan needed to be made and communicated
to the public.
9:07:35 AM
Representative Wilson stated the bill anticipated $650
million from Alaskans in the form of a broad-based tax. She
thought that the people in support of the bill wanted to
would kill the oil industry. She asked whether the
legislature was looking at other taxes that were not in the
bill.
Co-Chair Seaton believed there was confusion about the
topics included in the bill. He clarified that the
conditional language in the CS instituted a full fiscal
plan, including: oil and gas taxes and credits, permanent
fund draw, an income tax, and a motor fuel tax was included
in the budget as well. He noted that the bill contained
delayed effective dates in order to implement each
component according to timed intervals. He believed that
all of the components passed together would balance the
state budget by 2021.
9:11:02 AM
Representative Wilson expressed confusion on the topic of
discussion.
Representative Pruitt wondered whether public opinion would
influence the committee's decisions concerning the state's
fiscal crisis.
Co-Chair Seaton replied that the committee had heard public
testimony on all the elements contained in the legislation.
He noted that changes had been made in the bill concerning
an income tax, based on the public testimony that had been
received. He added that testimony on the draw limit had
influenced the current bill version. He stressed that
further public testimony for the bill would be taken and
was a critical part of the legislative process.
Representative Pruitt referred to a survey put out by Co-
Chair Seaton's office that resulted in 67 percent
responding in opposition of an increase of oil and gas
production taxes for companies in Alaska. He added that a
follow up with Mr. Ruggiero had indicated that HB 111 would
result in a substantial increase in those taxes. He thought
that the majority of public opinion clearly opposed HB 111
and queried why HB 111 had ended up a key component of SB
26.
Co-Chair Seaton rebutted that public opinion had been taken
into consideration. He stressed that the legislation had
been crafted based on decisions grounded in the reality of
the fiscal situation. He argued that the problems of the
state could not be solved by simple surveys and he noted
that on the senate side the majority of public opinion had
favored a broad-based tax of some kind. He clarified that
public testimony could inform the conversation, but that
legislation was ultimately crafted by elected officials and
not the public.
9:15:26 AM
Representative Guttenberg had a different opinion than the
legislative consultant Rich Ruggiero. He felt that public
opinion had not weighed in heavily on one side or the
other. He felt that the fiscal crisis had been looming for
many years. He recalled the economists that had testified
before legislature of the fiscal cliff it was approaching
and how it could be handled. He believed that action needed
to be taken in order to stabilize the economy and that the
tools were available for immediate action. He stressed that
there was a difference between what oil company
representatives said at the testifier table and what they
said around the world. He believed that they were paid to
put pressure on the legislature to hold oil companies
harmless in the process of righting the state's economy.
9:20:30 AM
Vice-Chair Gara asked for verification the committee was
not in final debate on the bill and that amendments would
still be accepted.
Co-Chair Foster agreed.
Vice-Chair Gara expressed concern over additional budget
cuts and the effect it would have on jobs in the state. He
thought that passing a budget that resulted in further job
losses to the state would destroy the economy.
9:22:27 AM
Representative Pruitt asked whether the committee would
support any of the amendments offered by the minority. He
lamented that the committee had no accepted any of his
amendments during the current legislative session.
Co-Chair Seaton believed that the statement was untrue. He
recalled that an amendment had been removed from
consideration because it violated the single subject rule.
He said that well crafted amendments would be considered by
the committee.
Representative Pruitt wanted assurances that his amendments
would be considered. He suggested removing Section 19 of
the bill and doubted that the idea carried much support
from the committee. He wondered whether the amendment
process would be a waste of time.
Co-Chair Foster wanted to ensure the public had an
opportunity to weigh in. He relayed that amendments would
be due the following day at 11:00 am. He recessed the
meeting to a call of the chair [note: the meeting never
reconvened].
Representative Wilson clarified the bill version.
Co-Chair Foster restated the version before the committee.
Co-Chair Foster recessed the meeting to a call of the
chair. [Note: the meeting never reconvened].
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 26 CS version U.pdf |
HFIN 4/10/2017 8:00:00 AM |
SB 26 |
| SB 26 Comparision_Senate to House Finance CS_4.7.2017.pdf |
HFIN 4/10/2017 8:00:00 AM |
SB 26 |