Legislature(2017 - 2018)HOUSE FINANCE 519
04/11/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB26 | |
| Amendments | |
| HB115 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 26 | TELECONFERENCED | |
| += | HB 115 | 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."
1:38:34 PM
^AMENDMENTS
1:38:40 PM
Vice-Chair Gara MOVED to ADOPT Amendment 1, 30-GS1690\U.12
(Martin, 4/11/17) (copy on file):
Page 3, line 26, following "$1,400,000,000":
Insert ", adjusted annually for inflation based
on a formula provided by the Department of Labor
and Workforce Development, reflecting the change
from the previous year in the Consumer Price
Index for the Anchorage metropolitan area
compiled by the Bureau of Labor and Statistics,
United States Department of Labor, and rounded to
the nearest $10,000,000"
Representative Wilson OBJECTED for the purpose of
discussion.
Vice-Chair Gara explained the amendment. He thought that a
level of oil revenue should be established that would
trigger the decrease in the use of permanent fund earnings.
1:40:32 PM
Representative Kawasaki felt that the amendment did not say
anything specific about population growth. He queried the
nexus for inflation versus population growth.
Vice-Chair Gara agreed that the amendment only spoke to
inflation and not population growth. He said that there
would hopefully be a small annual increase in the amount of
available earnings reserve funds. He stated that by
allowing the trigger point to move with inflation some head
room to address population growth could be created.
Representative Wilson understood that the current bill
version would give less than $.80 on the dollar because of
inflation proofing.
Vice-Chair Gara explained that once the trigger point was
reached, 80 percent of the available earnings from the
permanent fund, which would otherwise be allowed by the 5
percent draw, would become unavailable for use. He said
that the trigger point would adjust with inflation and
would allow for more combined oil and permanent fund
revenue available for state services.
Representative Wilson surmised that the $1.4 million
trigger point would change and not the percentages.
Vice-Chair Gara replied in the affirmative.
Representative Pruitt was concerned the amendment would
dilute the value of the appropriation limit. He lamented
that the current appropriation limit in the State
Constitution had no value and was double of what was
currently being spent.
1:44:33 PM
Representative Thompson requested further explanation from
the Department of Revenue (DOR).
RANDALL HOFFBECK, COMMISSIONER, DEPARTMENT OF REVENUE,
offered a history of the progression of the bill through
the legislative process. He relayed that modeling of the
amendment had shown that eventually the cap would exceed
the revenue, which would kill the draw limit function. He
stated that the current bill accounted for both inflation
proofing and population adjustments in the combined
revenues from royalties, production tax, and the POMV draw,
out 10 years. He related that the growth was lesser 25
years out, and that the fund would be less protected from
overdraws in the intermediate years. He concluded that the
administration did not support the amendment.
Representative Thompson surmised that the inflation of the
draw limit would have a negative effect on the state's
financial health.
Commissioner Hoffbeck agreed.
1:48:48 PM
Representative Kawasaki spoke about a debate on the House
floor. He appreciated the history provided by Commissioner
Hoffbeck; however, he noted that the current legislature
was tasked with making decisions using the most current
information.
Representative Wilson wondered whether the amendment was
necessary to fund essential government.
Commissioner Hoffbeck answered that the administration
supported the current bill structure without the amendment.
1:50:03 PM
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki, Ortiz, Foster, Seaton
OPPOSED: Pruitt, Thompson, Tilton, Wilson, Grenn
The MOTION PASSED (6/5).
1:50:53 PM
Representative Thompson MOVED to ADOPT Amendment 2:
Page 8, lines 12 - 28:
Delete all material and insert:
"*Sec 19. Sections 17 and 18 of this Act take
effect immediately under AS Ol.10.070(c).
• Sec. 20. Section 6 of this Act takes effect
July 1, 2019.
• Sec. 21. Section 10 of this Act takes effect
June 30, 2020.
• Sec. 22 •• Except as provided in secs. 19 - 21,
this Act takes effect July 1, 2017."
Co-Chair Seaton OBJECTED for the purpose of discussion.
Representative Thompson explained the amendment. He said
that the conditional language in the amendment would
require the enactment of HB 111 as passed by the house. He
said that by effectively combining three uniquely different
policy decisions into a "take it, or leave it" bill did not
serve the deliberative process. He believed that the
language in the section violated the legislature's
bicameral system.
Co-Chair Seaton spoke in opposition to the amendment. He
supported the conditional language included in the bill
that would provide a comprehensive fiscal plan. He lamented
that the section was necessary to negotiate with the other
chamber.
Representative Wilson remarked that the legislation was not
restructuring the dividend in the same way as previous
legislation had attempted to do. She spoke in support of
the amendment.
1:56:49 PM
Representative Tilton relayed she had spoken to the issue
on the House floor earlier in the day. She believed the
language in the bill violated the legislature's bicameral
structure. She believed the section inhibited the other
body's ability to act. She supported the amendment.
Representative Pruitt voiced support for the amendment. He
echoed the concerns of the pervious testifier. He thought
that agreement could have been reached between the two
bodies if it were not for Section 19 of the bill. He
thought that "add-ons" to the bill would force the
extension of the 90-day legislative process, and would lead
to no solution to the state's fiscal issues. He relayed a
story of the previous use of contingency language in a
budget bills.
2:02:40 PM
Co-Chair Foster recognized Representative Lora Reinbold in
the audience.
Vice-Chair Gara agreed that both chambers needed to come
together on order to do the people's business. He believed
that it was common knowledge, to both the majority and the
minority, that a fiscal plan was needed that was balanced
for every socioeconomic level; a plan that was fair to both
rich and poor. He felt that a plan that only involved the
permanent fund would put the burden on the poorest in the
state, which was why the bill included a higher dividend
than the original bill. He hoped that the two bodies could
come together to forge a solution to the state's fiscal
crisis.
Representative Guttenberg spoke out against the amendment.
He believed that without the section there would be no
possibility of a solution. He felt that the behavior of the
other body was counter to reaching a compromise and was
contributing to further gridlock. He asserted that the
permanent fund could not be expected to be the only
solution to the fiscal crisis.
2:07:40 PM
Representative Thompson provided a closing statement on the
amendment. He did not believe the language would improve
the behavior of the other body. He spoke to other
components of the fiscal plan under consideration by the
legislature. He spoke to the restrictive nature of the
language in the bill. He maintained his support of the
amendment.
Co-Chair Seaton MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Pruitt, Thompson, Tilton, Wilson
OPPOSED: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Seaton,
Foster
The MOTION FAILED (4/7).
2:09:57 PM
AT EASE
2:13:01 PM
RECONVENED
Representative Thompson WITHDREW Amendments 3, 4, and 5
(copy on file).
Representative Thompson MOVED to ADOPT Amendment 6
Page 3, lines 17 - 18:
Delete "80 cents for each dollar by which"
Insert "the difference between"
Page 3, line 26:
Delete "$1,400,000,000"
Insert "$1,200,000,000"
Co-Chair Seaton OBJECTED for the purpose of discussion.
Representative Thompson explained that the amendment would
restore the draw limit supported by the administration and
other parties. He believed that the amendment strengthened
the permanent fund, urged the committee to support the
amendment.
Co-Chair Seaton MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Thompson, Tilton, Wilson, Pruitt
OPPOSED: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Foster,
Seaton
The MOTION FAILED (7/4).
2:16:12 PM
Representative Thompson WITHDREW Amendments 7 and 8.
Vice-Chair Gara spoke to the fiscal note with the OMB
component number 2616.
Representative Wilson asked whether the bill version under
discussion should be reflected on the fiscal note.
2:18:03 PM
AT EASE
2:19:24 PM
RECONVENED
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, pointed to the identifier for the
fiscal note, which needed to be updated to reflect the
current bill version.
Co-Chair Foster clarified that the identifier could be
found on the top left hand of the first page of the fiscal
note.
Mr. Burnett lamented that there had been a typo on the
fiscal note.
Representative Guttenberg noted that the box titled, "Why
this fiscal note differs from previous version:" read that
the note had been updated to reflect changes in the house
finance CS.
2:22:11 PM
Vice-Chair Gara expressed confidence that the fiscal noted
were current to the bill version before the committee. He
addressed fiscal notes, OMB components 3121, 2726, 2310,
2952, and zero (copy on file).
2:25:48 PM
Representative Wilson asked about the fiscal note, OMB
Component 2952. She understood that the note reflected
taking $9,103,600, that did not exist without cutting the
permanent fund dividend, to find real money under the
Alaska Capital Fund. She wondered whether DOC would be
forced to have the funds available to cover the note in
perpetuity.
Vice-Chair Gara replied that the money would be directed
from the Alaska Capitol Income Fund to DOC each year.
Representative Wilson said that the intent of the fund was
to match federal funding in the Capital Budget. She
wondered what would happen all of $9.1 million were used to
match federal dollars, and whether the state would be
required to keep the amount of money in the fund from year
to year.
2:28:42 PM
Co-Chair Seaton answered there was about $26 million in the
fund and that the governor's budget had released using $9.1
as a funding source. He said that disputes over future
allocations would need to be worked out in conference
committee and by future legislatures.
Representative Wilson said that the normal method used
would be a fund switch, where the budget was decreased in
one area and increased in another. She asserted that note
should be indeterminate.
Vice-Chair Gara remarked that, historically, the state had
leveraged 90 percent funding from the federal government
for road projects using the general fund. He hoped that
this would be the continued method.
2:30:58 PM
Representative Ortiz asked about fiscal note, OMB Component
3121. He wondered why there was a gradual projected
increase from FY 18 to FY 23, except for a downfall from
2019 to 2020.
Representative Wilson noted that the fiscal note reflected
the decrease in the percentage draw from 5.25 to 5
beginning July 1, 2018.
Co-Chair Seaton MOVED to REPORT HCS SB 26(FIN) out of
committee as amended with individual recommendations and
the accompanying fiscal notes.
Representative Wilson OBJECTED. She asserted that she did
not support tying the hands of the other body.
2:33:14 PM
Representative Tilton echoed the comments of her colleague.
Representative Pruitt felt that the bill had been hijacked
by the majority. He appreciated that the income tax had
been removed from the legislation. He lamented that it took
a threat from Bob Gillam for the income takes to be
separated from the bill.
Vice-Chair Gara called for a point of order. He suggested
that Representative Pruitt was misinformed of the
situation.
Representative Pruitt remarked that the information had
been in the Alaska Dispatch News. He spoke to the
conditional effect of the legislation. He thought that it
was unclear whether legislation had to be passed by January
1, 2019, or must the legislation be in place by January 1,
2019. He wondered whether the legislation could be halted
through a referendum. He agreed with choosing $1250 as the
permanent fund dividend amount, but he could not support
the legislation. He hoped that agreement could be reached
on the House Floor.
2:38:17 PM
Vice-Chair Gara agreed that the issue was challenging. He
said that touching the permanent fund should be considered
only after the state got a fair share for its oil. He
stated that the bill was intended to be fair to all
parties; that the miserable price of oil had been
unexpected, but action needed to be taken to address the
fiscal crisis. He noted that the bill contained inflation
proofing provisions. He believed that many people relied on
the dividend and supported the increased amount reflected
in the bill. He worried that without the legislation the
state would not be able to support basic and necessary
government spending.
Representative Thompson did not support the legislation. He
believed that language would be detrimental to the intent
of the bill.
Representative Guttenberg spoke in support of the bill. He
felt that the language in the amendment highlighted the
need for further dialogue.
2:45:09 PM
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Seaton,
Foster
OPPOSED: Tilton, Wilson, Pruitt, Thompson
The MOTION PASSED (7/4).
There being NO OBJECTION, HCS SB 26(FIN) was REPORTED out
of committee with a "do pass" recommendation and with
attached fiscal notes.
2:46:02 PM
AT EASE
2:52:19 PM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 115 CS WORK DRAFT v K_4.7.2017.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| HB 115_Sectional version K_long form_4.11.2017.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| SB 26 v.U Amendments 1-8.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| SB 26 Fiscal Note PKT v.U.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| HB 115 Fiscal Note PKT. v.K.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| SB26_Oppose_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| SB26_Support_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| HB115_Oppose_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| HB115_Support_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| SB 26 Support Letter.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |