Legislature(2019 - 2020)ADAMS ROOM 519

04/29/2019 01:30 PM FINANCE

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Audio Topic
01:30:11 PM Start
01:30:48 PM HB20
01:31:12 PM Presentation: a Look-back in Criminal Justice Reform
02:57:32 PM HB96
03:40:32 PM HB31
04:18:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Crime by John Skidmore, Director, TELECONFERENCED
Criminal Div., Dept. of Law
+ HB 31 APPROP: EARNINGS RESERVE TO PERM FUND TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 96 PIONEERS' HOME AND VETERANS' HOME RATES TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 49 CRIMES; SENTENCING;MENT. ILLNESS;EVIDENCE TELECONFERENCED
<Pending Referral>
+= HB 145 PROPERTY CRIME; MOTOR VEHICLE THEFT TOOLS TELECONFERENCED
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 20 SEXUAL ASSAULT EXAMINATION KITS TELECONFERENCED
Heard & Held
HOUSE BILL NO. 31                                                                                                             
                                                                                                                                
     "An Act making a special appropriation to the Alaska                                                                       
     permanent fund; and providing for an effective date."                                                                      
                                                                                                                                
3:40:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNATHAN   KREISS-TOMPKINS,  BILL  SPONSOR,                                                                    
indicated  that HB  31 was  a simple  bill that  transferred                                                                    
$5.5 billion from the Earnings  Reserve Account (ERA) to the                                                                    
corpus of the Alaska Permanent  Fund (PF). He introduced the                                                                    
PowerPoint presentation: "HB 31:  $5.5 billion transfer from                                                                    
the ERA  to the  Corpus." The presentation  had a  number of                                                                    
slides  that   would  contextualize   the  impacts   of  the                                                                    
legislation  or such  a  transfer  especially given  actions                                                                    
taken in  the other  body on the  previous Friday.  He would                                                                    
discuss  the impacts  of different  sizes  of transfers.  He                                                                    
noted that  the House was  interested in the  concept before                                                                    
the Senate.                                                                                                                     
                                                                                                                                
Representative Kreiss-Tompkins  turned to  slide 2:  "If the                                                                    
deficits  continue,  the  CBR   is  most  likely  gone."  He                                                                    
reported that since  he became a legislator in  2013, he had                                                                    
seen  the  legislature  collectively   spend  down  all  the                                                                    
state's  savings. He  found it  discouraging and  thought it                                                                    
was a collective  action problem. The genesis of  the ERA to                                                                    
principal  transfer reflected  his  grave  fear and  concern                                                                    
that  the legislature  might  soon regard  the  ERA as  just                                                                    
another savings account that was  available to spend down as                                                                    
opposed  to an  intergenerational asset  for the  benefit of                                                                    
future generations of Alaskans.                                                                                                 
                                                                                                                                
Representative  Kreiss-Tompkins  spoke  to slide  3:  "Other                                                                    
ERA-to-principal  transfer proposals."  He reported  that in                                                                    
the previous year in the  operating budget, Amendment 58 was                                                                    
considered but not voted on.  The amendment reflected a $5.5                                                                    
billion  transfer  from the  ERA  to  the principal  of  the                                                                    
Alaska  PF.  On  the  previous Friday,  the  Senate  Finance                                                                    
Committee dropped  a bomb  shell by  amending the  budget to                                                                    
reflect  a  $12  billion  transfer   from  the  ERA  to  the                                                                    
principal. The  amendment was passed without  objection from                                                                    
the minority Democrats to the  Mat-Su Republicans to the co-                                                                    
chair. He  thought the  action taken  by the  Senate Finance                                                                    
Committee made  his bill containing a  $5.5 billion transfer                                                                    
look like minor league baseball in comparison.                                                                                  
                                                                                                                                
3:44:35 PM                                                                                                                    
                                                                                                                                
Representative Kreiss-Tompkins  discussed slide  4: "History                                                                    
of Legislative Appropriations to  the Principal." He relayed                                                                    
that it was  not out of the ordinary for  the legislature to                                                                    
have transferred funds from the  ERA to the principal of the                                                                    
PF. The legislature had  an inflation-proofing transfer most                                                                    
years.  There  were  a  couple of  missed  years  in  recent                                                                    
history. Most years the legislature  abided by the operating                                                                    
budget. The  current year  included the  inflation transfer.                                                                    
The slide  showed an inventory  or summary of all  the other                                                                    
ERA-to-Principal  transfers   above  and   beyond  inflation                                                                    
proofing. The high-water  mark was $1.3 billion  even if the                                                                    
figure  was inflation  adjusted. The  numbers that  had been                                                                    
proposed, $5.5 billion  or $12 billion, were  well in excess                                                                    
of the  highest recorded number.  He noted that  the balance                                                                    
of the ERA was at an all-time historic high.                                                                                    
                                                                                                                                
Representative Kreiss-Tompkins moved  to slide 5: "Permanent                                                                    
Fund  Account   Structure."  He  reported  that   the  slide                                                                    
reflected the  year-end projections of the  account balances                                                                    
for the PF.  He noted that there were large  amounts in both                                                                    
the principal and the ERA.                                                                                                      
                                                                                                                                
Representative Kreiss-Tompkins turned  to slide 6: "Earnings                                                                    
Reserve Account:  $18.9 billion  balance." He  reported that                                                                    
HB 31 called  for a $5.5 billion transfer. The  number was a                                                                    
carryover from  the operating budget  in the  previous year.                                                                    
The  number in  the previous  year  was not  random. It  was                                                                    
based  on an  analysis of  prudence and  conservatism. Under                                                                    
SB 26   [Legislation   passed    in   2018:   Short   Title:                                                                    
Appropriations  Limit   and  Permanent  Fund   Dividend  and                                                                    
Earnings], there  was a structure  and framework  to sustain                                                                    
and  properly  manage  the  PF  and  manage  it  for  future                                                                    
generations.  He indicated  that the  legislature would  not                                                                    
want to  take more than 5  percent of market value  in any 1                                                                    
year after  the first  3 years. He  continued that  the $5.5                                                                    
billion figure, as  proposed in the operating  budget in the                                                                    
previous year,  would have  drawn down all  of the  money in                                                                    
the ERA until an amount equal  to 4 times the 5 percent draw                                                                    
was left  in the  account. If the  math was  calculated with                                                                    
the numbers in the PF in  the prior year, the pink number on                                                                    
the slide  would have  been $5.5  billion. Moving  forward a                                                                    
year, the  ERA accumulated more earnings.  Applying the same                                                                    
analysis  would  lead  to  about   an  $8  billion  transfer                                                                    
presently.  He indicated  that the  $8 billion was  a number                                                                    
that  should be  considered by  the committee.  He suggested                                                                    
that transferring  $8 billion for  the ERA to  the principle                                                                    
would still  leave 4  times the 5  percent POMV  [Percent of                                                                    
Market  Value] draw  amount in  the ERA  while protecting  a                                                                    
huge  amount of  money permanently  and for  the benefit  of                                                                    
future generations.                                                                                                             
                                                                                                                                
3:48:05 PM                                                                                                                    
                                                                                                                                
Representative   Kreiss-Tompkins   turned    to   slide   7:                                                                    
"Scenario:  Moderate bear  market  from FY  21-  FY 23."  He                                                                    
suggested that  when the  legislature considered  the amount                                                                    
of money to  transfer from the ERA to the  principal, it was                                                                    
a  balance  and a  legitimate  conversation  that needed  to                                                                    
happen. The  transfer amount needed  to be  balanced against                                                                    
the  function  of  the  ERA  - the  only  pot  of  cash  the                                                                    
legislature had to pay for  dividends and state services. He                                                                    
added  that  the ERA  could  fluctuate  depending on  market                                                                    
conditions. If  the state  had poor  returns, the  ERA would                                                                    
get smaller  which could happen  quickly. He  indicated that                                                                    
the scenario on the slide,  as worked out by the Legislative                                                                    
Finance  Division,  projected  3   consecutive  years  of  3                                                                    
percent returns. He noted it wound  not be that bearish of a                                                                    
market.                                                                                                                         
                                                                                                                                
Representative  Kreiss-Tompkins mentioned  the recession  in                                                                    
2008 and  2009 the  state had -17.9  percent return  and the                                                                    
year preceding there  was a -3.6 return. He  admitted it was                                                                    
a severe  recession, but  it helped  to provide  context. If                                                                    
the stock market  was not doing well,  the legislature would                                                                    
be  starting   to  play   with  fire   the  more   money  it                                                                    
transferred. Some  liquidity needed to be  maintained in the                                                                    
account - a shock absorber  for bad market years. He pointed                                                                    
out  that  the  3  graphs demonstrated  how  the  ERA  would                                                                    
perform  in a  moderate bear  market. He  noted that  with a                                                                    
transfer  of  $5.5  billion there  would  be  a  significant                                                                    
amount  of  shock  absorption  left   in  the  ERA  after  3                                                                    
consecutive  bear market  years.  A transfer  of $8  billion                                                                    
would  leave  slightly less  of  a  cushion. A  transfer  of                                                                    
$12 billion  would  leave just  enough  in  the account  but                                                                    
would be riskier. He noted  that a $13 billion transfer when                                                                    
the bear market  was slightly worse would  leave the balance                                                                    
at zero.  There would be  no money  to pay for  dividends or                                                                    
public services. At  such a point, the  legislature would be                                                                    
up against a hard wall.                                                                                                         
                                                                                                                                
Representative Merrick  asked where  the other body  got the                                                                    
$12 billion and $14  billion figures. Representative Kreiss-                                                                    
Tompkins did not know.                                                                                                          
                                                                                                                                
Co-Chair Wilson  thought it was  not appropriate  to comment                                                                    
on the reasoning of the other body.                                                                                             
                                                                                                                                
Representative  Kreiss-Tompkins  commented   that  a  person                                                                    
could consider  the ERA in  isolation and what  amount might                                                                    
make  sense  to  transfer  to   the  principal.  There  were                                                                    
constitutional  amendments  moving through  the  legislature                                                                    
currently. He  was a sponsor  of a  constitutional amendment                                                                    
that  would create  a constitutional  POMV  and combine  the                                                                    
earnings  reserves  and  the  principal.  If  and  when  the                                                                    
combination were  to happen, it would  eliminate the problem                                                                    
of  the  ERA  hitting  zero because  of  a  simpler  classic                                                                    
endowment  model. There  could  be some  merit  in moving  a                                                                    
large amount  of cash  to the  principal if  it was  done in                                                                    
tandem with  restructuring the PF  to have  a constitutional                                                                    
cap and combine the ERA and the principal.                                                                                      
                                                                                                                                
Representative  Sullivan-Leonard asked  if  the Director  of                                                                    
the Alaska Permanent Fund Corporation  offered an opinion on                                                                    
the   transfer  of   $12   billion   versus  $5.5   billion.                                                                    
Representative  Kreiss-Tompkins responded  that  he had  not                                                                    
spoken  directly  with  her,  though,  he  thought  she  was                                                                    
online.                                                                                                                         
                                                                                                                                
3:52:40 PM                                                                                                                    
                                                                                                                                
ANGELA  RODELL, EXECUTIVE  DIRECTOR,  ALASKA PERMANENT  FUND                                                                    
CORPORATION (via teleconference),  responded that the Alaska                                                                    
Permanent Fund  Corporation (APFC)  did not take  a position                                                                    
on the amount.                                                                                                                  
                                                                                                                                
Vice-Chair Ortiz indicated that  the slide showed what might                                                                    
happen if a bear market were to  start in FY 21. He asked if                                                                    
Representative Kreiss-Tompkins agreed that  if a bear market                                                                    
were to  begin in  FY 20, the  model would  potentially look                                                                    
significantly    worse.    Representative    Kreiss-Tompkins                                                                    
responded in  the positive.  He suggested  that if  the bear                                                                    
market were 4 years instead of  3 years or 1 percent instead                                                                    
of 3 percent, all of the  charts would look worse. He eluded                                                                    
to his previous reference of playing with fire.                                                                                 
                                                                                                                                
Vice-Chair Johnston understood why  2.72 percent was used in                                                                    
the prior year.  She asked if the draw should  have been 2.9                                                                    
percent in the current year.                                                                                                    
                                                                                                                                
3:54:39 PM                                                                                                                    
                                                                                                                                
KEVIN  MCGOWAN,   STAFF,  REPRESENTATIVE   JONATHAN  KREISS-                                                                    
TOMPKINS, responded that the percentage  was used because of                                                                    
the effective date  was immediate. If the bill  were to pass                                                                    
in the current  year, it would be  effective immediately. If                                                                    
it  did not  pass until  the following  year, it  would make                                                                    
sense to adjust it.                                                                                                             
                                                                                                                                
Vice-Chair Johnston referred  to the charts on  slide 7. She                                                                    
had been reminded that in 2008,  when the ERA went under, it                                                                    
was  the first  time the  legislature looked  at paying  the                                                                    
dividend with general fund dollars.  She was a firm believer                                                                    
in putting funds into the corpus  but wanted to bring up the                                                                    
issue.                                                                                                                          
                                                                                                                                
Representative Josephson asked if  the other proposal, where                                                                    
all funds would  be placed in the corpus,  would be workable                                                                    
because it  would have  to be  accompanied by  the allowance                                                                    
for the  legislature to use  the corpus in a  sustained way.                                                                    
Representative Kreiss-Tompkins  did not  want to  respond to                                                                    
what the  other body might  be thinking. He thought  it made                                                                    
sense  if the  legislature moved  all or  almost all  of the                                                                    
funds (about  $14 billion)  into the  corpus in  tandem with                                                                    
restructuring the fund to  be all constitutionally protected                                                                    
and  combining the  ERA with  the  principal. His  suggested                                                                    
scenario would eliminate  risk of a bad market  year and not                                                                    
having  enough   money  to  pay  for   dividends  or  public                                                                    
services.                                                                                                                       
                                                                                                                                
Representative Josephson  had some concerns relative  to the                                                                    
2007-2009    period.    He     asked    if    Representative                                                                    
Kreiss-Tompkins  used 3  percent  in a  bear  market in  his                                                                    
hypothetical   scenario.  He   noted  it   was  not   a  bad                                                                    
experience,  not like  presently. He  thought Representative                                                                    
Kreiss-Tompkins  had mentioned  -17  percent  in a  calendar                                                                    
year.  He   asked  if  he   had  heard   the  representative                                                                    
correctly.                                                                                                                      
                                                                                                                                
Representative   Kreiss-Tompkins   replied   that   he   was                                                                    
accurate. He emphasized  that it was a  moderate bear market                                                                    
rather than  a severe  market. In 2008  and 2009  the market                                                                    
returns were -18 percent and  -3.5 percent. In 2001 and 2002                                                                    
immediately  following September  11th, the  market turndown                                                                    
was  -3.25  percent and  -2.25  percent  respectively for  2                                                                    
consecutive   years.   All   of  the   graphs   would   look                                                                    
substantially  worse   if  they  were  modeled   over  those                                                                    
scenarios  which had  happened  before  and would  certainly                                                                    
happen again.                                                                                                                   
                                                                                                                                
3:58:25 PM                                                                                                                    
                                                                                                                                
Representative Josephson  shared the concern of  the history                                                                    
of postponement of fiscal planning  and that the legislature                                                                    
might  draw down  all  of its  earnings.  He wondered  about                                                                    
undermining the use  of a POMV or  devastating the dividend.                                                                    
Representative    Kreiss-Tompkins    asked    Representative                                                                    
Josephson to repeat his question.                                                                                               
                                                                                                                                
Representative  Josephson suggested  that  even  with the  2                                                                    
deterrents  from an  overdraw  and reckless  spending -  the                                                                    
lack of a dividend and the  lack of sustainability of a POMV                                                                    
- the legislature might still abuse the ERA.                                                                                    
                                                                                                                                
Representative  Kreiss-Tompkins  replied,  "Yes,  that's  my                                                                    
concern."  He had  only been  around the  legislature for  7                                                                    
years but  had heard a  marked shift in public  dialog about                                                                    
the  inviolateness  of  the  PF. He  wanted  to  severe  the                                                                    
conversation  from   how  large  the  dividend   should  be.                                                                    
However, he thought  all of the legislators  could or should                                                                    
agree on  not spending down the  PF. It would be  easy to do                                                                    
for a  year or  two, even  if it  put the  state in  a tough                                                                    
position  a generation  from present  day.  Based on  recent                                                                    
discussions, he thought  it was very possible  to spend down                                                                    
the  fund. He  explained when  the legislature  struggled to                                                                    
balance the  budget or  reach a fiscal  plan, it  kicked the                                                                    
can  down  the road.  His  goal  was  to have  enough  money                                                                    
protected permanently  in the PF that  the legislature could                                                                    
continue to have the argument  about how to spend the money.                                                                    
However,   if  the   legislature  spent   that  money   down                                                                    
currently, the  state would  not have money  in 20  years to                                                                    
argue  about  how  it  should  be spent  or  how  large  the                                                                    
dividend should be.                                                                                                             
                                                                                                                                
Co-Chair Wilson  clarified that the committee  was currently                                                                    
talking about  the PF Earnings  Reserve. The  Permanent Fund                                                                    
Corpus could not be touched by  anyone without a vote of the                                                                    
people.                                                                                                                         
                                                                                                                                
4:01:20 PM                                                                                                                    
                                                                                                                                
Representative Carpenter  thought it was  disconcerting that                                                                    
legislators were having conversations  about what to do with                                                                    
the money when  there were laws in place  dictating where it                                                                    
should be spent. Lawmakers  had subsequently disregarded the                                                                    
laws. The money  in reference was supposed to go  out to the                                                                    
people  over the  previously several  years in  the form  of                                                                    
dividend checks that instead, stayed  in the ERA. There were                                                                    
individuals  that were  rightly upset  about it.  Presently,                                                                    
the  committee was  having a  conversation about  taking the                                                                    
money and not paying it  to them as requested. Instead, what                                                                    
was being suggested  was to lock it away  forever, a portion                                                                    
of  which  would  come  back   in  the  form  of  future  PF                                                                    
dividends.                                                                                                                      
                                                                                                                                
Co-Chair  Wilson  corrected Representative  Carpenter  about                                                                    
what was being  discussed. The bill did not take  all of the                                                                    
money in the  ERA. Currently, the bill was  in committee and                                                                    
reflected $5.5 billion.  It did not reflect the  back pay or                                                                    
the  dividend.  Both  could  still be  paid  even  with  the                                                                    
transfer.  She  did  not  want the  wrong  message  sent  to                                                                    
Alaskans.                                                                                                                       
                                                                                                                                
Representative Carpenter explained that  the question he was                                                                    
getting   to  was   about  the   requirement  to   back  the                                                                    
Constitutional Budget  Reserve (CBR).  The state had  a very                                                                    
small balance in the CBR  and an unfunded liability of sorts                                                                    
to  fund it.  He asked  why  it would  be more  appropriate,                                                                    
considering it  was important for the  legislature to follow                                                                    
the law,  to put it into  the PF corpus rather  than the CBR                                                                    
to meet its obligation.                                                                                                         
                                                                                                                                
Representative    Kreiss-Tompkins    responded   that    the                                                                    
representative  first  talked  about   money  that  was  not                                                                    
distributed as dividends  but stayed in the  ERA. He thought                                                                    
the  instance referred  to the  time Governor  Walker vetoed                                                                    
part of  the dividend.  The money was  retained in  the ERA.                                                                    
Speaking to  that scenario, it  was a small fraction  of the                                                                    
total amount  of cash  in the  ERA presently.  He elaborated                                                                    
that the  vast majority, $16  billion or $17 billion  of the                                                                    
$18.9  billion   in  the  ERA,   was  from   market  returns                                                                    
independent  of  the   point  Representative  Carpenter  was                                                                    
making. The  reason there was so  much money in the  ERA was                                                                    
mostly independent  of the decisions made  by past governors                                                                    
regarding dividends.                                                                                                            
                                                                                                                                
Representative   Kreiss-Tompkins  addressed   Representative                                                                    
Carpenter's  question about  the CBR  account replenishment.                                                                    
The Constitutional  Budget Reserve  Account was  designed to                                                                    
be  spent   down  when  the  legislature   deemed  the  need                                                                    
sufficient. The  goal was to  protect the PF  monies forever                                                                    
for the benefit of  future generations. There were different                                                                    
purposes for the  CBR and the ERA. Taking money  from the PF                                                                    
and putting  it into the  CBR was effectively  equivalent to                                                                    
spending down  the PF. There would  be a time delay,  but it                                                                    
would be tantamount to spending the PF.                                                                                         
                                                                                                                                
Co-Chair  Wilson added,  for the  purpose of  accuracy, that                                                                    
Governor  Walker   vetoed  the  dividend  1   year  and  the                                                                    
legislature in the following 2  years chose an amount out of                                                                    
the sky versus following the prescribed formula.                                                                                
                                                                                                                                
Representative  Carpenter did  not  understand the  equation                                                                    
between  spending  down  the  PF when  the  corpus  was  not                                                                    
getting spent, while  spending down the CBR,  the account in                                                                    
which  the legislature  was required  to pull  from in  lean                                                                    
times.                                                                                                                          
                                                                                                                                
Co-Chair Wilson explained  that the POMV draw  came from the                                                                    
PF  ERA. The  difference between  putting $5.5  billion into                                                                    
the corpus  versus the CBR  was to protect the  savings from                                                                    
being used except with a  vote of the people. She emphasized                                                                    
that once money was placed into  the corpus, it could not be                                                                    
accessed  without a  vote of  the people.  If the  money was                                                                    
placed into the CBR, it could  be used to fulfill the budget                                                                    
as had been  done in the past. If the  legislature wanted to                                                                    
protect the  ERA, which only  required a vote of  21/11, the                                                                    
money could be placed into the  corpus of the PF or into the                                                                    
CBR.  The   money  in  the   CBR  could  be  spent   by  the                                                                    
legislature. If the legislature  truly wanted to protect the                                                                    
earnings, it  would be best  to transfer the money  into the                                                                    
corpus because  it required a  vote of the people  to spend.                                                                    
The question  came down to  how much the  legislature wanted                                                                    
to protect the PF.                                                                                                              
                                                                                                                                
4:07:01 PM                                                                                                                    
                                                                                                                                
Representative Carpenter understood  the reasons. He pointed                                                                    
to the requirement for the  legislature to pay back the CBR.                                                                    
He thought  they were  effectively ignoring  the requirement                                                                    
to repay the CBR if the money went towards the PF corpus.                                                                       
                                                                                                                                
Co-Chair  Wilson  asked the  sponsor  to  follow up  with  a                                                                    
reference to the  statutory requirement for the  money to go                                                                    
to the  CBR first.  She appreciate  Representative Carpenter                                                                    
bringing up the point.                                                                                                          
                                                                                                                                
Representative Kreiss-Tompkins  would look up  the statutory                                                                    
requirement. He  noted that the state  had other obligations                                                                    
such  as  paying down  the  oil  tax credits,  the  unfunded                                                                    
liability  of the  state pension,  and the  replenishment of                                                                    
the CBR.  All of the  obligations exist, but there  was sort                                                                    
of a Chinese wall with the PF.  The money in the ERA was not                                                                    
available   for   government   spending   whether   it   was                                                                    
replenishing the CBR or paying  down the pension obligation.                                                                    
Everything  under the  5  percent draw  was  fair game,  but                                                                    
everything  above  that amount  should  be  off limits.  The                                                                    
legislature  had set  rules  around the  5  percent mark  in                                                                    
order  to guarantee  a sustainable  PF. He  did not  want to                                                                    
take more than 5 percent from the PF in any given year.                                                                         
                                                                                                                                
Representative  LeBon  recalled  that funding  for  the  CBR                                                                    
began  about 15  years  previously. High  oil  prices and  a                                                                    
significant throughput  allowed for  a build  up in  the CBR                                                                    
over a 5 or 6 year  period. He asked if his recollection was                                                                    
accurate.  Representative  Kreiss-Tompkins deferred  to  the                                                                    
Legislative Finance Division.                                                                                                   
                                                                                                                                
Representative LeBon  iterated his point  of the ramp  up of                                                                    
the CBR  due to a  higher price  for oil and  revenue rather                                                                    
than  from earnings  from  the  PF or  the  ERA.  If he  was                                                                    
correct, the  legislature enacted  a decision to  spend down                                                                    
the money. If the money were  to be replaced, he wondered if                                                                    
it  should be  from business  and oil  revenues at  a future                                                                    
date versus earnings of the PF.                                                                                                 
                                                                                                                                
4:10:25 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilson  addressed  the constitutional  mandate  to                                                                    
repay the CBR.  She was unclear about where  the money could                                                                    
come from to repay the CBR.                                                                                                     
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
addressed the  question about  which money  went to  the CBR                                                                    
and  indicated  that  the requirement  was  defined  in  the                                                                    
Alaska  Constitution rather  than in  statute. He  explained                                                                    
that  at the  end of  each year  general fund  balances were                                                                    
swept into the  CBR as long as there was  a liability to the                                                                    
CBR. The  legislature has typically reversed  the sweep each                                                                    
year so that  the state was not repaying unless  there was a                                                                    
surplus. The  state would  not be  repaying unless  it truly                                                                    
had a surplus as the state  did when oil prices increased as                                                                    
they did  a few years prior.  At the time, the  state repaid                                                                    
all  of its  liability to  the  CBR. He  suggested that  the                                                                    
legislature  could  appropriate earnings  reserve  balances.                                                                    
They  would not  normally be  swept into  the CBR,  but they                                                                    
could be appropriated  there if the legislature  chose to do                                                                    
so.                                                                                                                             
                                                                                                                                
Representative LeBon  asked if repaying the  CBR from normal                                                                    
revenue  sources  would  be  predicated  on  the  price  and                                                                    
production of oil.                                                                                                              
                                                                                                                                
Mr.  Teal   answered  it  was   the  way  foreseen   by  the                                                                    
constitution.  The surplus  revenue was  automatically swept                                                                    
into the CBR without  an appropriation. The legislature also                                                                    
appropriated general  funds to  the CBR  in addition  to the                                                                    
constitutional  requirement. The  logic  behind that  action                                                                    
was  that  if  the  money was  swept  constitutionally,  the                                                                    
legislature  received no  credit  for repaying  the CBR.  In                                                                    
times of a large surplus  there was an effort to appropriate                                                                    
money to the CBR as well.                                                                                                       
                                                                                                                                
Representative Carpenter  asked about earnings. He  asked if                                                                    
the legislature was  trading the PF earnings  as revenue. He                                                                    
suggested that it all spent the same by the government.                                                                         
                                                                                                                                
Mr. Teal answered they did  not consider the ERA as revenue.                                                                    
If  it was  considered  revenue, the  state would  currently                                                                    
have a  general fund surplus  of $ 18 billion.  He indicated                                                                    
that the  ERA was not  shown as  a general fund  balance, it                                                                    
was  a  balance  in  the  PF.  In  the  PF  section  of  the                                                                    
constitution stated  that earnings of  the PF went  into the                                                                    
general fund unless otherwise specified  by law. There was a                                                                    
statute that stated  that the earnings reserves  are part of                                                                    
the PF.  If the legislature  wanted to it could  require the                                                                    
entire  ERA appear  as general  fund  revenue; however,  LFD                                                                    
looked at  revenue as  a cashflow  issue. Therefore,  the PF                                                                    
balance should not  be counted as general  fund revenue. The                                                                    
only portion  of the  earnings reserve  that was  counted as                                                                    
revenue was the  5 percent or 5.25 percent  POMV payout. The                                                                    
state  counted  approximately $3  billion  from  the ERA  as                                                                    
general fund revenue.                                                                                                           
                                                                                                                                
4:15:47 PM                                                                                                                    
                                                                                                                                
Representative  Josephson wanted  to  confirm  that the  CBR                                                                    
language in  Section 17 of  Article 9 referred  to repayment                                                                    
but did not  designate a timeline. He was  struck that given                                                                    
the  state's  other obligations  and  because  there was  no                                                                    
interest requirement,  he suggested the legislature  did not                                                                    
receive credit for repayment.                                                                                                   
                                                                                                                                
Mr. Teal responded that there  was no timeline on repayment.                                                                    
He relayed  that the timing  envisioned by  the constitution                                                                    
was  that if  there  was  a surplus,  the  state would  make                                                                    
repayment. If there was not  a surplus, the state might have                                                                    
additional  draws  from  the CBR  if  needed.  However,  the                                                                    
constitution did not envision  a repayment schedule, nor was                                                                    
interest assessed.                                                                                                              
                                                                                                                                
4:17:05 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson OPENED Public Testimony.                                                                                        
                                                                                                                                
4:17:16 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson CLOSED Public Testimony.                                                                                        
                                                                                                                                
Co-Chair  Wilson  indicated the  bill  would  be set  aside.                                                                    
Amendments for  HB 31  were due in  her office  by Thursday,                                                                    
May 2,  2019 at 5:00 p.m.  The meeting scheduled at  5:00 pm                                                                    
in the current day was canceled.                                                                                                
                                                                                                                                
HB 31 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
2019 House Finance Criminal Justice Reform.pdf HFIN 4/29/2019 1:30:00 PM
HFIN
HB031 Sponsor Statement 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 31
HB031 Sectional Analysis ver U 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 31
CSHB 96 Sectional Analysis Version M 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Sponsor Statement 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Summary of Changes Version M to Version U 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Supporting Document Combined Letters of Support 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Supporting Document PPT Presentation 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 96
HB031 Presentation 4.29.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 31
HB 96 Supporting Doc. Support .pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
HB 96 Supporting Doc Petition of Support.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96