Legislature(2017 - 2018)HOUSE FINANCE 519

03/20/2017 01:30 PM FINANCE

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Audio Topic
02:23:49 PM Start
02:24:37 PM HB115
04:56:20 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 2:15 PM --
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
HOUSE BILL NO. 115                                                                                                            
     "An  Act  relating  to  the  permanent  fund  dividend;                                                                    
     relating  to the  appropriation of  certain amounts  of                                                                    
     the earnings reserve account;  relating to the taxation                                                                    
     of  income  of  individuals;   relating  to  a  payment                                                                    
     against the  individual income  tax from  the permanent                                                                    
     fund  dividend  disbursement;   repealing  tax  credits                                                                    
     applied  against  the  tax  on  individuals  under  the                                                                    
     Alaska  Net  Income  Tax  Act;  and  providing  for  an                                                                    
     effective date."                                                                                                           
2:24:37 PM                                                                                                                    
Representative Thompson MOVED to ADOPT Amendment 13 (copy                                                                       
on file):                                                                                                                       
     Page 2, line 9:                                                                                                            
          Delete "a new subsection"                                                                                             
          Insert "new subsections"                                                                                              
     Page 2, following line 18:                                                                                                 
          Insert a new subsection to read:                                                                                      
                    "(c)     In    accordance     with    AS                                                                    
               37.13.145(b)(1),      and     subject      to                                                                    
               appropriation,  33  percent   of  the  amount                                                                    
               available for distribution  under (b) of this                                                                    
               section shall be  reserved for dividends. The                                                                    
               remainder  of  the  amount  calculate  to  be                                                                    
               available for distribution  under (b) of this                                                                    
               section  shall be  reduced by  the difference                                                                    
               between  the amount  calculated under  (1) of                                                                    
               this subsection  and the amount under  (2) of                                                                    
               this  subsection  if  the  amount  calculated                                                                    
               under  (1)  of  this subsection  exceeds  the                                                                    
               amount under (2) of this subsection:                                                                             
                         (1) the total amount of oil and                                                                        
                    gas production taxes  under AS 43.55.011                                                                    
                    -  43.55.180,   mineral  lease  rentals,                                                                    
                    royalties,  royalty  sale proceeds,  net                                                                    
                    profit shares under  AS 38.05.180(f) and                                                                    
                    (g),   and   federal   mineral   revenue                                                                    
                    sharing  payments  and bonuses  received                                                                    
                    by  the state  from mineral  leases that                                                                    
                    are deposited  into the general  fund in                                                                    
                    the current fiscal year;                                                                                    
                         (2) the sum of $1,200,000,000."                                                                        
Co-Chair Seaton OBJECTED for discussion.                                                                                        
Representative Thompson read from a prepared statement:                                                                         
     In  times of  higher  revenue, we  reduce  how much  is                                                                    
     spent  from  the Permanent  Fund.  This  concept is  no                                                                    
     different then from a family  manages their money: when                                                                    
     they  make more  money,  they quit  drawing from  their                                                                    
     savings  account. The  draw limit  was  modeled by  the                                                                    
     administration.  The  $1.2  billion  threshold  is  not                                                                    
     arbitrary. The administration  vetted this number using                                                                    
     their model,  a model that  was vetted by  Mackenzie, a                                                                    
     very   reputable   financial   consulting   firm.   The                                                                    
     administration  determined that  the  draw  limit is  a                                                                    
     critical  addition  to   protecting  the  dividend  and                                                                    
     preserving the  Permanent Fund value.  The commissioner                                                                    
     of  revenue  last year  in  May  signed a  letter  that                                                                    
     states,  "In  preserving the  value  of  the fund,  the                                                                    
     revenue limit also protects the  divided. In short, the                                                                    
     revenue  limit is  a critical  addition  to the  bill."                                                                    
     Members who  say the draw limit  is unnecessary because                                                                    
     the  forecasts  are  low  need  to  consider  that  the                                                                    
     forecasts  have  consistently  been  inaccurate.  Their                                                                    
     forecasts only go  forward 5 years. When  you look over                                                                    
     the last 10 years the  forecasts have not been correct.                                                                    
     They  have been  way off.  Without the  draw limit  the                                                                    
     state  will have  a smaller  Permanent Fund,  a smaller                                                                    
     percent POMV, and a smaller PFD.                                                                                           
Representative Thompson pointed out that the commissioner                                                                       
was in the room if anyone wanted to hear from him.                                                                              
Co-Chair Foster invited the commissioner to come up to                                                                          
provide a statement.                                                                                                            
RANDALL  HOFFBECK,  COMMISSIONER,   DEPARTMENT  OF  REVENUE,                                                                    
concurred  with   the  statements  made   by  Representative                                                                    
Thompson. The  administration had always felt  that the draw                                                                    
limit was an important component  within the bill to protect                                                                    
the  durability of  the fund  and the  dividend and  to take                                                                    
volatility out of  the State of Alaska's  revenue stream. He                                                                    
reiterated  that it  was one  of  five "must  haves" in  the                                                                    
bill. The administration supported the amendment.                                                                               
Co-Chair  Seaton  continued to  have  some  interest in  the                                                                    
amendment. He  had looked at  a draw point of  $1.5 billion.                                                                    
He also looked  at different levels, but had  not decided on                                                                    
an  appropriate  amount.  He   was  concerned  that  if  the                                                                    
proposal  was enacted  at $90  per barrel  of oil  the state                                                                    
would still  be in a  deficit. He opposed the  amendment. He                                                                    
suggested  that perhaps  it would  be  appropriate down  the                                                                    
Co-Chair Seaton MAINTAINED his OBJECTION.                                                                                       
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Tilton, Wilson, Pruitt, Thompson                                                                                      
OPPOSED: Gara, Grenn, Guttenberg, Kawasaki, Seaton, Foster                                                                      
The MOTION to ADOPT Amendment 13 FAILED (4/7).                                                                                  
Co-Chair  Seaton  indicated a  CS  would  be drawn  up  that                                                                    
reflected the adopted amendments.                                                                                               
Co-Chair Foster  reported the amendment would  be set aside.                                                                    
The committee would bring back a clean CS for review.                                                                           
HB  115  was  HEARD  and   HELD  in  committee  for  further                                                                    
2:30:48 PM                                                                                                                    
AT EASE                                                                                                                         
2:37:50 PM