Legislature(2015 - 2016)HOUSE FINANCE 519

04/16/2016 08:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 7:00 p.m. Today --
+= SB 196 POWER COST EQ FUND: RESERVE ACCT;DIVIDEND TELECONFERENCED
Moved HCS CSSB 196(FIN) Out of Committee
+= SB 210 COMMUNITY REVENUE SHARING/ASSISTANCE TELECONFERENCED
Moved HCS CSSB 210(FIN) AM Out of Committee
+= HB 245 PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS TELECONFERENCED
Scheduled but Not Heard
+= HB 250 INDIV. INCOME TAX: CREDITS; RETURNS TELECONFERENCED
Scheduled but Not Heard
+= HB 249 ELECTRONIC TAX RETURNS & MOTOR FUEL TAX TELECONFERENCED
Scheduled but Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 16, 2016                                                                                            
                         9:14 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:14:02 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Thompson called the House Finance Committee                                                                            
meeting to order at 9:14 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
[Note: Representative Guttenberg and Representative Pruitt                                                                      
were absent for the morning portion of the meeting.]                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Pete  Ecklund,  Staff,  Representative  Mark  Neuman;  David                                                                    
Teal,   Director,   Legislative  Finance   Division;   Alexi                                                                    
Painter,  Analyst,  Legislative   Finance  Division,  Alaska                                                                    
State  Legislature; Adam  Berg, Staff,  Representative Bryce                                                                    
Edgmon.                                                                                                                         
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 245    PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS                                                                                 
                                                                                                                                
          HB 245 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
HB 249    ELECTRONIC TAX RETURNS & MOTOR FUEL TAX                                                                               
                                                                                                                                
          HB 249 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
HB 250    INDIV. INCOME TAX: CREDITS; RETURNS                                                                                   
                                                                                                                                
          HB 250 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
CSSB 196(FIN)                                                                                                                   
          POWER COST EQ FUND: RESERVE ACCT;DIVIDEND                                                                             
                                                                                                                                
          HCS CSSB  196(FIN) was  REPORTED out  of committee                                                                    
          with  a  "do  pass" recommendation  and  with  one                                                                    
          previously published zero  fiscal note: FN2 (CED);                                                                    
          and  one  previously  published fiscal  note:  FN1                                                                    
          (SFC for Various).                                                                                                    
                                                                                                                                
CSSB 210(FIN) am                                                                                                                
          COMMUNITY REVENUE SHARING/ASSISTANCE                                                                                  
                                                                                                                                
          HCS CSSB  210(FIN) was  REPORTED out  of committee                                                                    
          with a  "do pass" recommendation and  with one new                                                                    
          fiscal note  from the House Finance  Committee for                                                                    
          Fund  Cap;  and   one  previously  published  zero                                                                    
          fiscal note: FN1 (SFC for CED).                                                                                       
                                                                                                                                
Co-Chair Thompson reviewed the agenda for the day.                                                                              
                                                                                                                                
9:14:50 AM                                                                                                                    
                                                                                                                                
CS FOR SENATE BILL NO. 196(FIN)                                                                                               
                                                                                                                                
     "An Act  relating to the amount  appropriated for power                                                                    
     cost  equalization;  relating  to the  use  of  certain                                                                    
     unexpended  earnings from  the power  cost equalization                                                                    
     endowment fund; and providing for an effective date."                                                                      
                                                                                                                                
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for   CSSB  196(FIN),  Work   Draft  29-LS1383\R                                                                    
(Nauman,  4/16/16).  There being  NO  OBJECTION,  it was  so                                                                    
ordered.                                                                                                                        
                                                                                                                                
9:15:46 AM                                                                                                                    
                                                                                                                                
PETE  ECKLUND, STAFF,  REPRESENTATIVE  MARK NEUMAN,  relayed                                                                    
that after the  cost of the power  cost equalization program                                                                    
(PCE) was paid, the current  version would allow that excess                                                                    
earnings  to be  used  in  3 ways:  $30  million would  fund                                                                    
renewable energy grants, bulk  fuel revolving loan fund, and                                                                    
the rural  system power upgrades, any  remaining funds would                                                                    
flow back to the PCE fund.                                                                                                      
                                                                                                                                
9:17:11 AM                                                                                                                    
                                                                                                                                
Representative Edgmon  believed that he understood  what was                                                                    
being proposed in the legislation.                                                                                              
                                                                                                                                
Representative  Munoz   requested  another  review   of  the                                                                    
changes to the  legislation found in the  current version of                                                                    
the bill.                                                                                                                       
                                                                                                                                
Mr.  Ecklund responded  that the  changes included  that the                                                                    
excess  earning  of  the  PCE fund,  after  paying  out  the                                                                    
program costs,  would go  toward the  $30 million  fund that                                                                    
would pay  for the new  community assistance program,  a $25                                                                    
million  fund   for  renewable  energy  grants,   bulk  fuel                                                                    
revolving loan  fund, and the  rural system  power upgrades,                                                                    
any remaining funds would flow back to the PCE fund.                                                                            
                                                                                                                                
Representative Munoz asked how  this version compared to the                                                                    
original bill.                                                                                                                  
                                                                                                                                
Mr. Ecklund  explained that the original  bill had contained                                                                    
a mechanism  that allowed for  50 percent of the  excess PCE                                                                    
funds  to  be  placed  in  the  $30  million  fund  for  the                                                                    
community assistance  program. The  current version  did not                                                                    
split  out  the percentages,  but  stipulated  that the  $30                                                                    
million be honored first with any additional PCE funds.                                                                         
                                                                                                                                
9:19:21 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Saddler asked  about the  change in  the assumed                                                                    
return on the fund from 7 percent to 5 percent.                                                                                 
                                                                                                                                
Mr. Ecklund  suggested that 5  percent was a  more realistic                                                                    
number,  while  the  7  percent   was  more  aggressive  and                                                                    
volatile.                                                                                                                       
                                                                                                                                
Representative  Kawasaki asked  whether  the overflow  funds                                                                    
would be replenished annually.                                                                                                  
                                                                                                                                
Mr. Ecklund responded that it  would dependent on the actual                                                                    
returns. He stated that if there  was a return of 6 percent,                                                                    
$17 million  would be  given to  community assistance  in FY                                                                    
18, with  no funds flowing to  rural energy or back  to PCE.                                                                    
He said  that the money  flow would be determined  by future                                                                    
returns.                                                                                                                        
                                                                                                                                
9:21:02 AM                                                                                                                    
                                                                                                                                
Representative  Kawasaki understood  that  any  excess in  a                                                                    
calculated  year  would  first  flow  to  community  revenue                                                                    
sharing, up to $30 million.                                                                                                     
                                                                                                                                
Mr.   Ecklund  stated   that  Representative   Kawasaki  was                                                                    
correct.                                                                                                                        
                                                                                                                                
Representative Kawasaki  understood that if the  PCE in 2017                                                                    
generated $44 million, the balance  going into the community                                                                    
revenue sharing account would be approximately $5 million.                                                                      
                                                                                                                                
Co-Chair Thompson  remarked that  Mr. Teal was  available to                                                                    
answer questions.                                                                                                               
                                                                                                                                
Representative  Kawasaki  spoke  to  fiscal  note  2,  which                                                                    
estimated the  cost of funding  the PCE program for  FY17 at                                                                    
approximately $40 million.                                                                                                      
                                                                                                                                
9:23:14 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:25:28 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Representative  Kawasaki   noted  the  change   between  the                                                                    
previous and current bill versions.                                                                                             
                                                                                                                                
9:26:25 AM                                                                                                                    
                                                                                                                                
Co-Chair Neuman stated that because  the state no longer had                                                                    
revenue to "share" the community  revenue sharing should now                                                                    
be called the community  assistance program. He thought that                                                                    
the  highest  priority  for  the state  should  be  to  help                                                                    
communities across Alaska, particularly  in rural Alaska, to                                                                    
support basic  government services. He felt  the formulation                                                                    
of the fund distribution was equitable.                                                                                         
                                                                                                                                
9:28:52 AM                                                                                                                    
                                                                                                                                
Representative Edgmon  wanted assurances that  the endowment                                                                    
would be protected with the fund.                                                                                               
                                                                                                                                
9:29:10 AM                                                                                                                    
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
explained that the first priority  of the program was to pay                                                                    
PCE.  He relayed  that  in  order to  protect  the fund  the                                                                    
senate  version of  the bill  would always  put some  of the                                                                    
excess earnings back  into the fund. He said  that the house                                                                    
version was exactly the same  as the senate version, as long                                                                    
as excess  earning exceeded $55  million. He  furthered that                                                                    
if  the excess  earnings  were less  than  $55 million,  the                                                                    
house  version  favored  community   assistance  up  to  $30                                                                    
million.  He  stated  that  the   current  version  did  not                                                                    
strongly protect the endowment  because in years with excess                                                                    
earnings  between $0  and  $55 million,  no  money would  be                                                                    
returned to the endowment.                                                                                                      
                                                                                                                                
Co-Chair Thompson  queried how  many times  in the  past the                                                                    
earnings had not exceeded $55 million.                                                                                          
                                                                                                                                
Mr. Teal  replied that the  earnings had  fluctuated between                                                                    
negative 13  percent, to  plus 24 percent.  He said  that he                                                                    
could not  speculate what the  earnings in the  future would                                                                    
be,  but  pointed to  the  document  titled, "PCE  Endowment                                                                    
Analysis of  SB 196  for CS"  pages 1  and 2(copy  on file),                                                                    
which offered a sampling of  high positive, medium, low, and                                                                    
negative rates.  He said  that when there  was an  excess of                                                                    
$55  million, the  fund  would be  protected,  and that  the                                                                    
historical  numbers would  be of  better  use in  predicting                                                                    
future income than the constant 6 percent.                                                                                      
                                                                                                                                
9:32:29 AM                                                                                                                    
                                                                                                                                
Co-Chair  Thompson understood  that the  second page  of the                                                                    
document used an average of 6 percent.                                                                                          
                                                                                                                                
Mr. Teal stated that he was correct.                                                                                            
                                                                                                                                
Representative Edgmon  stated that previous  legislation had                                                                    
changed the  earning threshold of  the fund from  7 percent,                                                                    
to achieve  at least a  4 percent  nominal return over  a 5-                                                                    
year  period. He  felt that  if the  fund were  managed less                                                                    
aggressively, reaching the $55  million threshold would be a                                                                    
challenge.  He asserted  that speculation  on reaching  a 10                                                                    
percent rate of return would be an academic argument.                                                                           
9:34:16 AM                                                                                                                    
                                                                                                                                
Mr.  Teal stated  that there  were 2  things that  should be                                                                    
considered in order to address  the concerns. He referred to                                                                    
the change  from 7 percent,  to 5  percent, in Section  2 of                                                                    
the bill. He related that the  change had nothing to do with                                                                    
the return on the fund, but  was related to the payout rate.                                                                    
He  said that  even  with negative  returns,  the 5  percent                                                                    
payout would go  to PCE. He explained that  bad return years                                                                    
would result in the PCE program being prorated.                                                                                 
                                                                                                                                
9:35:26 AM                                                                                                                    
                                                                                                                                
Representative  Edgmon contended  that  the current  version                                                                    
offered  more  protection to  the  PCE  program because  the                                                                    
excess was guaranteed to be put  back into the corpus of the                                                                    
fund.                                                                                                                           
                                                                                                                                
9:35:59 AM                                                                                                                    
                                                                                                                                
Mr.  Ecklund  interjected  that regardless  of  the  assumed                                                                    
percentage of return, as long  as the percentage was under 5                                                                    
percent, the  PCE program would  receive a payout.  He added                                                                    
that  there  were  no  guarantees  in  life;  if  the  state                                                                    
experienced negative returns the  legislature would face the                                                                    
choice of short funding the  PCE program, taking more out of                                                                    
the PCE  fund to  fully fund the  program, or  using general                                                                    
funds to pay the PCE program.                                                                                                   
                                                                                                                                
9:36:47 AM                                                                                                                    
                                                                                                                                
Representative  Edgmon  disputed   that  the  original  bill                                                                    
offered 4  steps that  the money would  have to  take before                                                                    
being put  back in the  fund, the current bill  version only                                                                    
offered 2 steps.                                                                                                                
                                                                                                                                
Mr. Teal  thought the issue  could be resolved  by inflation                                                                    
proofing  the fund.  He  agreed  with Representative  Edgmon                                                                    
that if  there was  less than  $55 million  now, none  of it                                                                    
went back to protect the PCE fund.                                                                                              
                                                                                                                                
9:38:28 AM                                                                                                                    
                                                                                                                                
Representative Gara  surmised that the argument  was whether                                                                    
the PCE  fund would  be used to  primarily fund  and protect                                                                    
the PCE fund,  or whether the fund became  primarily used to                                                                    
fund revenue  sharing before protecting  the fund.  He asked                                                                    
whether  the  fifth column  of  the  chart reflected  excess                                                                    
earnings above the PCE payment.                                                                                                 
                                                                                                                                
Mr. Ecklund responded in the affirmative.                                                                                       
                                                                                                                                
Mr. Teal added that  the column labeled "earnings" reflected                                                                    
the earnings that the earnings  rate would produce. He noted                                                                    
that the  next column listed  program costs, which  were not                                                                    
paid for  out of earnings, but  out of a 5  percent POMV. He                                                                    
stated  that if  earnings were  negative  in a  year, the  5                                                                    
percent payout  would cover program  costs. He felt  that it                                                                    
was important  to examine  the last column  on the  chart in                                                                    
order to  be sure that the  payout did not exceed  5 percent                                                                    
because if it did PCE would  be prorated. He stated that the                                                                    
negative 7.2 in the column,  "2nd Prior Fiscal Year Earnings                                                                    
in  Excess  of  Program  Costs" was  subtracted  from  $33.2                                                                    
million in earnings from FY15,  meaning that there was be no                                                                    
excess earnings in that year and  no money would flow to any                                                                    
other  accounts. He  furthered  that in  FY  18, there  were                                                                    
excess  earnings of  17  million, which  was  the result  of                                                                    
taking the $58 million earned  in FY 16, subtracting the $41                                                                    
million  in program  costs in  FY  18 from  the $58  million                                                                    
earned in  FY 16, which left  $17 million in earnings  to be                                                                    
distributed. He noted  that the entire $17  million could go                                                                    
into community  assistance, and if  the number  were larger,                                                                    
it would  continue to go  into community assistance -  up to                                                                    
$30 million.  He relayed  that if there  were more  than $55                                                                    
million  total, the  excess after  community assistance  and                                                                    
rural energy programs  would be used to  inflation proof the                                                                    
fund.                                                                                                                           
                                                                                                                                
9:42:09 AM                                                                                                                    
                                                                                                                                
CSSB 196(FIN)  was HEARD and  HELD in committee  for further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Neuman asserted  that there was not  extra money in                                                                    
FY 17  for the  renewable energy fund,  bulk fuel  fund, and                                                                    
rural power system upgrades.   He contended that the highest                                                                    
priority  should  be  community  assistance,  and  that  the                                                                    
solution  should be  that any  excess funds  after community                                                                    
assistance should be rolled directly back into the PCE.                                                                         
                                                                                                                                
Representative Edgmon hoped a resolution could be reached.                                                                      
                                                                                                                                
CS FOR SENATE BILL NO. 210(FIN) am                                                                                            
     "An  Act  relating  to the  community  revenue  sharing                                                                    
     program;  and  changing  the   name  of  the  community                                                                    
     revenue  sharing program  to  the community  assistance                                                                    
     program."                                                                                                                  
                                                                                                                                
9:43:39 AM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for HCS  CSSB 210(FIN),  Work Draft  29-LS1593\N                                                                    
(Shutts,  4/14/16).  There being  NO  OBJECTION,  it was  so                                                                    
ordered.                                                                                                                        
                                                                                                                                
PETE ECKLUND,  STAFF, REPRESENTATIVE MARK  NEUMAN, explained                                                                    
that the  only change  to the bill  was the  effective date,                                                                    
which  would leave  the current  revenue sharing  formula in                                                                    
place for  FY 17. He stated  that when the bill  took effect                                                                    
in  FY  18,  $30  million  would be  distributed  as  a  new                                                                    
community  assistance  program,   as  opposed  to  community                                                                    
revenue sharing.  He noted the  document in  member packets,                                                                    
"SB  210: Community  Assistance Payments  FY 18-19"(copy  on                                                                    
file).                                                                                                                          
                                                                                                                                
9:46:04 AM                                                                                                                    
                                                                                                                                
Representative  Gara  understood  that  the  fund  had  been                                                                    
capitalized so that the annual payout would not disappear.                                                                      
                                                                                                                                
Mr.   Ecklund  responded   that  the   fund  had   not  been                                                                    
capitalized in the FY 17  operating budget, which meant that                                                                    
one-third, or  $38 million,  of the  $115 million,  would be                                                                    
distributed in FY 17 as community revenue sharing.                                                                              
                                                                                                                                
9:46:50 AM                                                                                                                    
                                                                                                                                
Representative Gara queried  the capitalization formula that                                                                    
had been used in the past.                                                                                                      
                                                                                                                                
Mr.  Ecklund  replied  that   current  statute  stated  that                                                                    
whatever  the  balance of  the  fund,  one-third had  to  be                                                                    
distributed until  there was  less than  $60 million  in the                                                                    
fund. He  stressed that under  the current program,  with no                                                                    
further capitalizations, the  last community revenue sharing                                                                    
would be distributed in FY 18.                                                                                                  
                                                                                                                                
9:47:50 AM                                                                                                                    
                                                                                                                                
Representative Gara  asked what was being  use to capitalize                                                                    
the fund in the past.                                                                                                           
                                                                                                                                
Co-Chair Thompson stated that general funds had been used.                                                                      
                                                                                                                                
Mr.  Teal added  that the  capitalization of  the fund  came                                                                    
from progressive oil tax proceeds,  and when oil prices fell                                                                    
and progressivity went away there  was no funding source for                                                                    
the program. He  furthered that if the price of  oil did not                                                                    
increase the  program would  falter until  prices increased;                                                                    
at  the restart  the program  funding  would be  at the  $60                                                                    
million distribution level.                                                                                                     
                                                                                                                                
Representative Gara wondered whether  general funds had been                                                                    
used to capitalize progressivity after ACES.                                                                                    
                                                                                                                                
Mr.  Teal  replied in  the  affirmative.  He clarified  that                                                                    
unrestricted  general funds  had been  used under  ACES, and                                                                    
were still being used, it was  a matter of naming the source                                                                    
of  the revenue.  He  added that  the  named revenue  stream                                                                    
would be well  in access of the funding for  the program and                                                                    
would  not  contain  phase   out  provisions  for  community                                                                    
assistance.                                                                                                                     
                                                                                                                                
Representative   Kawasaki  queried   the   version  of   the                                                                    
Community   Assistance   Payments  FY   16-18,   Non-Unified                                                                    
Boroughs by  Community, prepared by the  Legislative Finance                                                                    
Division.                                                                                                                       
                                                                                                                                
9:51:15 AM                                                                                                                    
                                                                                                                                
ALEXI  PAINTER,   ANALYST,  LEGISLATIVE   FINANCE  DIVISION,                                                                    
ALASKA STATE LEGISLATURE, clarified  that the document dated                                                                    
April 15,  2017 included  incorporated boroughs,  which were                                                                    
eligible at  an amount that  was one-nineteenth the  base of                                                                    
the program.  He said  that it had  been requested  that the                                                                    
committee  see all  communities that  received distribution,                                                                    
some of which were unincorporated.                                                                                              
                                                                                                                                
Representative  Kawasaki   understood  that   the  Fairbanks                                                                    
Northstar Borough  would receive  $1.93 million  in addition                                                                    
to  what  Chena Hot  Springs,  Ester,  Ester Dom,  Fox,  and                                                                    
Golstream combined would receive.                                                                                               
                                                                                                                                
Alexi responded in the affirmative.                                                                                             
                                                                                                                                
Vice-Chair Saddler asked  Mr. Painter read the  title of the                                                                    
document he was  referring to, and then to  explain what the                                                                    
document represented.                                                                                                           
                                                                                                                                
9:53:00 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:55:15 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Thompson clarified  that  the title  of the  chart                                                                    
being referred to was "SB  210 Community Assistance Payments                                                                    
FY 18-19."                                                                                                                      
                                                                                                                                
Representative  Kawasaki requested  a  chart that  reflected                                                                    
the percentages side-by-side, year-by-year.                                                                                     
                                                                                                                                
Vice-Chair  Saddler  asked what  the  second  column on  the                                                                    
chart, "SB 210 Distribution: $30 million' represented.                                                                          
                                                                                                                                
Mr. Ecklund  responded that the column  represented the bill                                                                    
before the committee,  with an effective date  of January 1,                                                                    
2017; the  new community assistance program  would come into                                                                    
effect in FY 18.                                                                                                                
                                                                                                                                
9:57:37 AM                                                                                                                    
                                                                                                                                
Representative Gara expressed concerned  about too deep of a                                                                    
cut to revenue sharing program.                                                                                                 
                                                                                                                                
Co-Chair  Thompson purported  that if  action was  not taken                                                                    
now, in two years revenue sharing would be zero.                                                                                
                                                                                                                                
Mr. Ecklund agreed.                                                                                                             
                                                                                                                                
Representative  Gattis  believed  that   the  state  had  no                                                                    
revenue to share to support community assistance.                                                                               
                                                                                                                                
Representative  Kawasaki   stated  that   community  revenue                                                                    
sharing  had been  established to  support communities  that                                                                    
were not  directly involved in  oil and gas  development, or                                                                    
other  resource  development,  to  receive a  share  of  the                                                                    
state's  common  interest  resources. He  expressed  concern                                                                    
that the  City of Fairbanks would  receive public assistance                                                                    
when  the   revenue  sharing  had  been   intended  for  the                                                                    
aforementioned communities.  He contended  that many  of the                                                                    
communities that  participated in revenue sharing  could not                                                                    
institute and income tax, and might  not have a tax base. He                                                                    
added that many of  those communities raised revenue through                                                                    
sales taxes.  He rejected the characterization  that revenue                                                                    
sharing was public assistance  for communities, and believed                                                                    
that the  revenue sharing should continue  even during times                                                                    
of fiscal uncertainty.                                                                                                          
                                                                                                                                
10:01:03 AM                                                                                                                   
                                                                                                                                
Vice-Chair Saddler thought that  those same communities that                                                                    
received  extra petroleum  dollars  through revenue  sharing                                                                    
during positive times  should also be responsible  to pay to                                                                    
make up for any deficit in  revenues during times of low oil                                                                    
prices.                                                                                                                         
                                                                                                                                
Representative  Gara spoke  to  Anchorage's "weirdly  worded                                                                    
tax cap."  He said  that a 67  percent reduction  in revenue                                                                    
sharing would  drive the need  for other sources  of revenue                                                                    
or cuts in Anchorage services equaling $2.7 million.                                                                            
                                                                                                                                
Co-Chair Thompson  wondered whether Representative  Gara was                                                                    
referencing the numbers off of the correct chart.                                                                               
                                                                                                                                
Mr. Ecklund  replied that  he did not  believe so.  He added                                                                    
that  the  chart  he  was  looking  at  reflected  that  the                                                                    
distribution for Anchorage under SB  210, in FY 18, would be                                                                    
$4.473 million.                                                                                                                 
                                                                                                                                
Representative  Gara stated  that he  was referring  to both                                                                    
charts.  He  apologized that  he  had  been looking  at  the                                                                    
numbers for the Mat-Su. He  noted that the current chart did                                                                    
not include historical comparisons.                                                                                             
                                                                                                                                
10:04:03 AM                                                                                                                   
                                                                                                                                
Co-Chair Neuman noted that the price  of oil had been on the                                                                    
rise  when revenue  sharing had  first been  introduced, and                                                                    
the  price for  municipalities to  heat homes  and buildings                                                                    
had increased rapidly.  He said that in the event  of a drop                                                                    
in  oil  prices the  intention  had  been to  ramp-down  the                                                                    
program.  He stated  that many  communities in  rural Alaska                                                                    
would not be able to  survive without revenue sharing, which                                                                    
could end up costing more money  if the state has to step in                                                                    
an  manage   those  communities.   He  explained   that  the                                                                    
legislation would  "lock-in" a community  assistance program                                                                    
that would  help communities plan  their yearly  budgets. He                                                                    
stressed that  the state did  not currently have  any excess                                                                    
revenue, which made it essential  to make adjustments to the                                                                    
program.  He expressed  support for  the current  version of                                                                    
the bill.                                                                                                                       
                                                                                                                                
Co-Chair  Thompson expressed  support for  the current  bill                                                                    
version. He reiterated that without  the legislation, in two                                                                    
years the revenue sharing would  end altogether. He stressed                                                                    
that  the program  supported the  operating budgets  of over                                                                    
100 rural communities in the  state. He lamented that if the                                                                    
program  shut down  the  state would  end  up funding  those                                                                    
budgets, or that the affected communities would shut down.                                                                      
                                                                                                                                
10:08:41 AM                                                                                                                   
                                                                                                                                
Representative  Gara relayed  that he  was not  debating the                                                                    
legislation. He  wondered whether Anchorage would  be forced                                                                    
to raise property  taxes in order to absorb the  cuts to the                                                                    
program by  FY 18.  He thought  that it  would be  useful to                                                                    
know  that the  community revenue  sharing amounts  were for                                                                    
all communities during previous time of low oil prices.                                                                         
                                                                                                                                
10:10:13 AM                                                                                                                   
                                                                                                                                
Co-Chair  Neuman   admitted  that  he  did   not  know  what                                                                    
communities would do. He  disagreed with Representative Gara                                                                    
about needing  the information concerning what  had happened                                                                    
in the past in order to move the bill.                                                                                          
                                                                                                                                
10:10:45 AM                                                                                                                   
                                                                                                                                
Representative Edgmon favored the approach  of the bill.  He                                                                    
did not  believe that the  distribution was equal  for every                                                                    
community involved,  but noted that the  legislation had the                                                                    
support of the Alaska Municipal League.                                                                                         
                                                                                                                                
Co-Chair  Thompson expressed  the  desire to  move the  bill                                                                    
from committee.                                                                                                                 
                                                                                                                                
Vice-Chair Saddler reviewed the fiscal note.                                                                                    
                                                                                                                                
10:12:08 AM                                                                                                                   
                                                                                                                                
Co-Chair Neuman  MOVED to  REPORT HCS  CSSB 210(FIN)  out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
HCS CSSB 210(FIN)  was REPORTED out of committee  with a "do                                                                    
pass" recommendation and  with one new fiscal  note from the                                                                    
House  Finance Committee  for Fund  Cap; and  one previously                                                                    
published zero fiscal note: FN1 (SFC for CED).                                                                                  
                                                                                                                                
10:12:34 AM                                                                                                                   
RECESSED                                                                                                                        
                                                                                                                                
6:54:17 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
CS FOR SENATE BILL NO. 196(FIN)                                                                                               
                                                                                                                                
     "An Act  relating to the amount  appropriated for power                                                                    
     cost  equalization;  relating  to the  use  of  certain                                                                    
     unexpended  earnings from  the power  cost equalization                                                                    
     endowment fund; and providing for an effective date."                                                                      
                                                                                                                                
6:54:17 PM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for   CSSB  196(FIN),  Work   Draft  29-LS1383\R                                                                    
(Nauman,  4/16/16).  There being  NO  OBJECTION,  it was  so                                                                    
ordered.                                                                                                                        
                                                                                                                                
6:55:17 PM                                                                                                                    
                                                                                                                                
ADAM BERG, STAFF, REPRESENTATIVE  BRYCE EDGMON, spoke to the                                                                    
changes in  the work  draft. He noted  that the  only change                                                                    
was the  reorder of  the flow of  how surplus  earnings from                                                                    
the endowment  would be spent.  He said that the  intent was                                                                    
to split  the $50  million, after the  $30 million  had been                                                                    
paid  out, and  put  half  in the  endowment  and half  into                                                                    
either the  renewable energy fund,  the bulk  fuel revolving                                                                    
loan fund, or rural power system upgrades.                                                                                      
                                                                                                                                
6:56:32 PM                                                                                                                    
                                                                                                                                
Representative  Edgmon  relayed   that  the  latest  version                                                                    
addressed  his  concern about  having  some  of the  surplus                                                                    
money flow back to the endowment for inflationary purposes.                                                                     
                                                                                                                                
Co-Chair Thompson  noted that many people  had come together                                                                    
to craft a workable bill.                                                                                                       
                                                                                                                                
Representative Wilson  queried the  $25 million  cap written                                                                    
into the legislation.                                                                                                           
                                                                                                                                
Mr. Berg replied  that the previous version  allowed for $25                                                                    
million to  flow to the  renewable energy grant  fund, among                                                                    
other funds, and  the current version split  the funds 50/50                                                                    
between the  endowment and the renewable  energy grant fund;                                                                    
the  renewable energy  grant  fund would  be  capped at  $25                                                                    
million.                                                                                                                        
                                                                                                                                
Representative   Wilson   offered    an   example   of   her                                                                    
understanding of how the fund functioned.                                                                                       
                                                                                                                                
Mr. Berg  offered the example  that out of $60  million, $30                                                                    
million would go to the  community revenue sharing fund, $15                                                                    
million would  go back into  the endowment, and  $15 million                                                                    
would go to the renewable energy grant fund.                                                                                    
                                                                                                                                
Representative   Wilson  hypothesized   that  out   of  $100                                                                    
million,  $30   million  would   automatically  go   to  the                                                                    
community  revenue sharing  fund, leaving  $70 million  left                                                                    
over, of  which no more than  $25 million could be  put back                                                                    
into the extra  funds, and the remainder would  go back into                                                                    
the PCE program.                                                                                                                
                                                                                                                                
Mr. Berg answered that she was correct in her hypothetical.                                                                     
                                                                                                                                
Representative Kawasaki  pointed to  the $55 million  to $80                                                                    
million change in the current bill version.                                                                                     
                                                                                                                                
Mr. Berg replied  that earlier version had used  $30 and $25                                                                    
million in  order to  get a  total of  $55 million.  He said                                                                    
that because  the funds  were now going  to be  split 50/50,                                                                    
the $25 million  would become $50 million:  $50 million plus                                                                    
$30 million is equal to $80 million.                                                                                            
                                                                                                                                
Representative  Kawasaki surmised  that  those numbers  were                                                                    
unlikely in a  single year. He asked whether  the 50 percent                                                                    
number had been modeled.                                                                                                        
                                                                                                                                
Mr.  Berg responded  that it  had not  been tested,  but the                                                                    
outlook seemed  positive after reviewing the  history of the                                                                    
earnings  of  the  fund,  the bill  would  assure  that  the                                                                    
endowment  was replenished  at 2.5  percent interest  on the                                                                    
fund's current balance.                                                                                                         
                                                                                                                                
6:59:58 PM                                                                                                                    
                                                                                                                                
Representative Gattis wondered about  years when there could                                                                    
be no earnings on the fund.                                                                                                     
                                                                                                                                
Mr. Berg replied  that the worst case  scenario would mirror                                                                    
the current situation; if enough  earnings were not spun off                                                                    
to fully  fund PCE  payments then  money from  the endowment                                                                    
would  be used,  or the  payments could  be supplanted  with                                                                    
general funds.                                                                                                                  
                                                                                                                                
Representative  Gattis  asked  whether  the  bill  contained                                                                    
sideboards.                                                                                                                     
                                                                                                                                
Mr.  Berg responded  that the  bill only  addressed the  PCE                                                                    
payout. He  added that  the legislation  would not  stop the                                                                    
legislature from using the PCE fund at their discretion.                                                                        
                                                                                                                                
Representative Gara  asked whether  the sponsor of  the bill                                                                    
supported the current bill version.                                                                                             
                                                                                                                                
Mr. Berg  responded that he  could not speak to  whether the                                                                    
sponsor supported the current version of the bill.                                                                              
                                                                                                                                
Vice-Chair Saddler addressed the  2 fiscal notes attached to                                                                    
the bill.                                                                                                                       
                                                                                                                                
7:02:46 PM                                                                                                                    
                                                                                                                                
Representative Wilson  asked how the $17  million, reflected                                                                    
in FN 1, had been estimated.                                                                                                    
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
explained that FN  1 was for illustrative  purposes only. He                                                                    
stressed  that there  was no  way  to know  what the  excess                                                                    
earnings  would be.  He  noted that  $17  million would  not                                                                    
fully fund  the community  assistance program. He  said that                                                                    
the numbers  could range from  $30 to $80 million,  and that                                                                    
the fiscal impact for FY17 would be zero either way.                                                                            
                                                                                                                                
Representative Wilson  asked whether  the $17  million would                                                                    
have originally been paid out of the general fund.                                                                              
                                                                                                                                
Mr.  Teal replied  in the  affirmative. He  said that  there                                                                    
would be a  reduction of general funds for up  to $0 million                                                                    
for community  assistance and  up to  $25 million  for rural                                                                    
energy programs. He  stated that the fiscal  note could show                                                                    
a  fund change  of anywhere  from  zero to  $55 million.  He                                                                    
stated that the $17 million was likely a low estimate.                                                                          
                                                                                                                                
Mr.  Teal  furthered that  if  the  earnings were  zero,  or                                                                    
negative,  there would  be  no  replacement of  unrestricted                                                                    
general  funds with  excess earning  from the  PCE fund.  He                                                                    
said  that there  would be  budget variations  from year-to-                                                                    
year,  some years  could  have no  excess  earnings and  the                                                                    
state may  decide to appropriate undesignated  general funds                                                                    
to the community assistance program,  or not fund it in that                                                                    
year; the appropriation process was up to the legislature.                                                                      
                                                                                                                                
7:06:40 PM                                                                                                                    
                                                                                                                                
Co-Chair Neuman  MOVED to  REPORT HCS  CSSB 196(FIN)  out of                                                                    
Committee with  the accompanying  fiscal notes.  There being                                                                    
NO OBJECTION, it was so ordered.                                                                                                
                                                                                                                                
HCS CSSB 196(FIN)  was REPORTED out of committee  with a "do                                                                    
pass" recommendation and with  one previously published zero                                                                    
fiscal note: FN2 (CED); and  one previously published fiscal                                                                    
note: FN1 (SFC for Various).                                                                                                    
                                                                                                                                
7:07:10 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
7:08:30 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Thompson discussed  housekeeping  and RECESSED  to                                                                    
the   Call  of   the   Chair.  [Note:   the  meeting   never                                                                    
reconvened].                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
7:09:20 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 7:10 p.m.                                                                                          

Document Name Date/Time Subjects
SB 196 CS WORKDRAFT HFIN vT.pdf HFIN 4/16/2016 8:30:00 AM
SB 196
CS SB 210 HFIN WORKDRAFT vN.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
4 14 16 SB 210 to status quo FY18-19.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
Copy of 4 15 16 PCE Endowment Analysis of SB 196 for CS.pdf HFIN 4/16/2016 8:30:00 AM
SB 196
PAGE 2 of 4 15 16 PCE Endowment Analysis of SB 196 for CS.pdf HFIN 4/16/2016 8:30:00 AM
SB 196
SB 210 HCS FIN NEW FN FUND CAP.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
4-14-16 SB210 Letter to House Finance w-attach.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
SB 196 HCS WORKDRAFT FIN vR.pdf HFIN 4/16/2016 8:30:00 AM
SB 196