Legislature(2019 - 2020)ADAMS 519

03/10/2020 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 300 PERM FUND: APPROPS FR EARNINGS RESERVE TELECONFERENCED
Heard & Held
*+ HB 306 PFD/GF APPROPS; EARNINGS RESERVE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 300                                                                                                            
                                                                                                                                
     "An  Act relating  to deposits  into the  dividend fund                                                                    
     and  income of  and  appropriations  from the  earnings                                                                    
     reserve account;  relating to the  community assistance                                                                    
     program; and providing for an effective date."                                                                             
                                                                                                                                
2:06:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ADAM  WOOL,  SPONSOR, thanked  the  previous                                                                    
presenter for laying down some  groundwork pertaining to the                                                                    
current fiscal  situation. He noted  that the  House Finance                                                                    
Committee had heard many presentations  about the percent of                                                                    
market  value  (POMV) draw  and  the  situation that  needed                                                                    
resolution.  He remarked  that  in his  six  years with  the                                                                    
legislature, many months had been  spent trying to solve the                                                                    
dilemma of balancing revenues  with expenditures. He pointed                                                                    
out that the PFD was very much a part of the issue.                                                                             
                                                                                                                                
Representative  Wool  provided   a  PowerPoint  presentation                                                                    
titled  "HB 300  - POMV  Allocation: A  Sustainable Solution                                                                    
for Alaska"  (copy on file).  He noted that graphs  would be                                                                    
reviewed  for  the  committee  by  the  Legislative  Finance                                                                    
Division (LFD) the  following day. He relayed  that the bill                                                                    
was a  conversation starter and  was perhaps a novel  way to                                                                    
look  at the  Permanent  Fund Dividend  (PFD)  and the  POMV                                                                    
draw. He began  on slide 2 titled "The 2018  Passage of SB26                                                                    
Largely Solved  the Budget Crisis." He  highlighted that the                                                                    
POMV structure  provided a stable funding  stream to support                                                                    
state  government and  had been  a  historic compromise.  He                                                                    
characterized the passage  of SB 26 as a  paradigm shift for                                                                    
the state.  He detailed that the  state had been in  a tight                                                                    
position where  revenue had declined  very quickly,  and the                                                                    
state had  been faced with  the need  to make some  cuts. He                                                                    
elaborated that  the legislature  had made some  severe cuts                                                                    
to  the capital  and operating  budgets over  the first  few                                                                    
years. He  reviewed that  the PFD had  first been  vetoed by                                                                    
former Governor Bill  Walker to 50 percent  of the statutory                                                                    
formula and the  legislature had passed the  same amount the                                                                    
next  year.   He  expounded  that   since  that   time,  the                                                                    
legislature had  selected $1,600  as number it  believed was                                                                    
affordable in  the past couple  of years. He noted  that the                                                                    
first  couple  of  years  the number  had  been  $1,000  (50                                                                    
percent of the formula at the time).                                                                                            
                                                                                                                                
Representative Wool  discussed that the state  had gone from                                                                    
an economy  paid for with  oil (oil  had paid for  the state                                                                    
budget for many  years) and the Permanent Fund  paid for the                                                                    
PFD.  When oil  had declined,  the Permanent  Fund had  been                                                                    
tapped  to pay  for the  state  budget with  a 5.25  percent                                                                    
structured draw  (scheduled to drop  to 5 percent  in 2022).                                                                    
He  continued to  the  third  bullet point  on  slide 3  and                                                                    
stated that the  bill [SB 26] passed by the  Senate had been                                                                    
stripped down  - it had not  included a new PFD  formula and                                                                    
had not  removed the  old PFD  statute. He  referenced cries                                                                    
for  the  legislature to  follow  the  law  and pay  a  full                                                                    
statutory PFD. He pointed out  that the formula called for a                                                                    
$3,000 PFD, an  amount that had never been paid.  He noted a                                                                    
$1,200  supplemental  heating  check  had  been  distributed                                                                    
during the  Palin Administration  [in 2008] when  oil prices                                                                    
had been particularly  high. The high oil  prices had helped                                                                    
the  state  budget but  hurt  people  trying to  heat  their                                                                    
homes. He elaborated that the  state had worked to get money                                                                    
to  residents  in  different  ways,  particularly  in  rural                                                                    
Alaska where  heating oil was extremely  expensive. He noted                                                                    
the cost had  exceeded $4 per gallon in  Interior Alaska and                                                                    
heating   bills  had   skyrocketed.   He   added  that   the                                                                    
supplemental check had not been paid the following year.                                                                        
                                                                                                                                
2:10:51 PM                                                                                                                    
                                                                                                                                
Representative  Wool  continued  to   discuss  slide  2.  He                                                                    
remarked  that   people  had  been  happy   to  receive  the                                                                    
supplemental  energy check  and had  understood when  it had                                                                    
not been provided the following  year. He reiterated that SB
26 did not delete the old  [PFD} formula and did not include                                                                    
a new one. He highlighted  that the existing formula was not                                                                    
being followed  and legislators on  both sides of  the aisle                                                                    
and  the  executive  branch  were  all  calling  for  a  new                                                                    
formula.                                                                                                                        
                                                                                                                                
Representative  Wool moved  to slide  3 read  the first  two                                                                    
bullet points:                                                                                                                  
                                                                                                                                
    The amount available for the general fund equals the                                                                     
     total POMV draw less whatever is appropriated for                                                                          
     Permanent Fund Dividends                                                                                                   
    For as long as the PFD remains subject to intense                                                                        
     annual debate, the state cannot depend on a                                                                                
     predictable revenue stream                                                                                                 
                                                                                                                                
Representative   Wool  spoke   to  the   need  for   revenue                                                                    
predictability.  He noted  that the  past several  weeks had                                                                    
thrown the issue into turmoil.  He detailed that oil revenue                                                                    
had been steadily  declining for decades; the  oil price had                                                                    
fluctuated over  time and production had  been declining. He                                                                    
elaborated  that the  price  had declined  in  2014 and  had                                                                    
recently  dropped  again.  He discussed  that  the  volatile                                                                    
revenue source could not be  relied upon. He stated that the                                                                    
POMV was a much more stable revenue source.                                                                                     
                                                                                                                                
2:12:04 PM                                                                                                                    
                                                                                                                                
Representative Wool  moved to assumptions on  slide 4 titled                                                                    
"There is  no consensus  on the  size of  the dividend...but                                                                    
large   dividends   equal   large   budget   deficits."   He                                                                    
highlighted  that the  governor's  budget  proposal of  $4.6                                                                    
billion  was largely  what the  House had  passed. The  fall                                                                    
2019 revenue  forecast was  $2 billion,  but he  believed it                                                                    
would be updated soon. He  noted that the committee had been                                                                    
told  that the  forecast  for the  following  year would  be                                                                    
lower  than originally  thought  and with  recent events  it                                                                    
would  be considerably  lower. Currently,  there was  no new                                                                    
revenue. There  was a motor  fuel tax and other  small taxes                                                                    
and revenue  sources in the  works, but there was  no broad-                                                                    
based income tax or sales tax.                                                                                                  
                                                                                                                                
Representative Wool  addressed possible options on  slide 4.                                                                    
He  began with  the governor's  plan  to pay  a $3,000  PFD,                                                                    
which would cost about $1.9  billion to fully implement. The                                                                    
second option  he reviewed  was a 50/50  plan that  had been                                                                    
discussed  over  the past  year,  which  would result  in  a                                                                    
$2,400 PFD and  a deficit of $1.1 billion.  The third option                                                                    
was a  67/33 plan, which was  roughly what had been  used in                                                                    
the past  several years  and would add  to the  deficit. The                                                                    
surplus plan was  the last option on the  slide. He detailed                                                                    
that at  one point the surplus  plan had resulted in  a $700                                                                    
PFD,  which was  no longer  the case.  He stated  there were                                                                    
problems with the specific plan.                                                                                                
                                                                                                                                
2:13:31 PM                                                                                                                    
                                                                                                                                
Representative Wool turned to slide  5 and detailed that his                                                                    
proposal in  HB 300  was an  allocation model  that combined                                                                    
different ideas. He  noted that he did not  invent the model                                                                    
in  its  entirety.  He  believed  the  Anchorage  mayor  had                                                                    
mentioned  doing   a  45/45/10  POMV  split   going  to  the                                                                    
government,   PFD,   and  communities,   respectively.   The                                                                    
proposal  was a  slight  variation  with prioritizing  other                                                                    
items in  addition to  government and  the PFD.  He reviewed                                                                    
the proposal on slide 5:                                                                                                        
                                                                                                                                
        FY2021 POMV will be $3,095 million                                                                                      
                                                                                                                                
         40% designated for K-12 education ($1,238                                                                           
          million, fully funds BSA)                                                                                             
         10% designated for the University of Alaska ($310                                                                   
          million; restores FY2019 funding level)                                                                               
         10% designated for capital projects (doubles                                                                        
          recent amounts)                                                                                                       
         10% designated for a Community Dividend (expands                                                                    
          the Community Assistance" Program and replaces                                                                        
          current programs                                                                                                      
         The remaining 30% split 50/50                                                                                       
             o 15% to the General Fund                                                                                          
             o 15% to Permanent Fund Dividends ($464                                                                            
               million, about $725 each)                                                                                        
                                                                                                                                
Representative Wool elaborated on  slide 5. The first bullet                                                                    
point  identified 40  percent  for education  (approximately                                                                    
$1.2  billion in  FY 21,  which was  approximately what  had                                                                    
been  funded  in  the  current year).  The  bill  would  set                                                                    
education funding  as a percentage  of the POMV  in statute.                                                                    
Under  the  legislation,  the  University  of  Alaska  would                                                                    
receive  10 percent  of the  POMV  ($310 million  in FY  21,                                                                    
which was  close to the  $302 million  funded in FY  20). He                                                                    
stated that  both education items  were in  the constitution                                                                    
and he believed  they should be supported.  He reasoned that                                                                    
putting the  items in  the formula  guaranteed that  the two                                                                    
entities would  not have to  wonder what funding  they would                                                                    
receive on an  annual basis. He stressed that  the two items                                                                    
were very  important in growing Alaska's  future. He relayed                                                                    
that other  states that  had faced  tough times  had doubled                                                                    
down  on  their  investment  in  education.  He  added  that                                                                    
investing in  education primary  and higher  education would                                                                    
keep young people in Alaska.                                                                                                    
                                                                                                                                
Representative Wool  continued to address the  allocation of                                                                    
the POMV on  slide 5. The bill would allocate  10 percent of                                                                    
the  POMV  draw  to  capital projects,  which  would  double                                                                    
recent amounts  to approximately $300 million.  He expounded                                                                    
that in recent years capital  budgets had been funded at the                                                                    
bare minimum  of about $150  million to receive  the federal                                                                    
match. He  remarked that legislators repeatedly  heard about                                                                    
the need for a capital  budget to increase jobs for talented                                                                    
workers who were  leaving the state for  employment in other                                                                    
locations.  Additionally,  there was  a  need  to build  and                                                                    
maintain   the  state's   infrastructure  (e.g.   roads  and                                                                    
bridges).  He highlighted  that deferred  maintenance was  a                                                                    
major  problem -  the  University alone  had  $1 billion  in                                                                    
deferred maintenance.                                                                                                           
                                                                                                                                
Representative Wool  detailed that the remaining  30 percent                                                                    
of the  POMV draw would  be split 50/50 between  the General                                                                    
Fund and  the PFD. He  recognized that the amount  was lower                                                                    
than the  80/20 split proposed in  the previous presentation                                                                    
[on HB 306]; however, the  community dividend would offset a                                                                    
portion of the cut.                                                                                                             
                                                                                                                                
2:16:34 PM                                                                                                                    
                                                                                                                                
Representative Wool advanced to  an illustration on slide 10                                                                    
showing how  funds would be  allocated. He detailed  that 40                                                                    
percent of the  POMV would go to education.  He listed other                                                                    
items that  would receive funding including  the University,                                                                    
the  community  dividend,  and   30  percent  divided  50/50                                                                    
between  the General  Fund and  PFD. He  shared that  he had                                                                    
done different  variations on ways  to split the  30 percent                                                                    
(e.g. 20/10).  He believed it  was important to look  at the                                                                    
community dividend portion.                                                                                                     
                                                                                                                                
Representative Wool returned to slide  6 and stated that the                                                                    
problem with  a surplus dividend  was that no one  knew what                                                                    
it  would  be  and  there  was  fear  there  would  be  more                                                                    
spending, which would  make the PFD smaller.  He stated that                                                                    
the need  for a  statutory PFD was  agreed upon.  He relayed                                                                    
that a  20 percent POMV  (a 20/10  split instead of  a 15/15                                                                    
split) would result in a  PFD of approximately $966 (similar                                                                    
to the 80/20 split in HB 306).                                                                                                  
                                                                                                                                
                                                                                                                                
Representative Wool moved  to slide 7 and  relayed that some                                                                    
form  of the  community  dividend had  been  in place  since                                                                    
1969. He detailed that the  formula had been changed several                                                                    
times. The current formula distributed  $30 million per year                                                                    
through  the Community  Assistance Program.  The bill  would                                                                    
increase  the amount  to  $300 million  (10  percent of  the                                                                    
total POMV  draw). He noted  there were variations  he would                                                                    
explore in the analysis the  following day that would change                                                                    
the  number  to  5  percent. The  bill  would  increase  the                                                                    
borough  base from  $300,000 to  $1 million,  the city  base                                                                    
from $75,000  to $250,000, and  the base  for unincorporated                                                                    
communities from  $25,000 to $83,333. He  explained that the                                                                    
calculation  multiplied the  original  base by  thirty-three                                                                    
and  one-third.  The  left over  funding  would  be  divided                                                                    
between  all  state  residents to  determine  a  per  capita                                                                    
number (capped at $1,200 per capital in each community).                                                                        
                                                                                                                                
2:19:09 PM                                                                                                                    
                                                                                                                                
Representative Wool turned to  slide 8 and reviewed benefits                                                                    
of  a community  dividend.  He detailed  that the  community                                                                    
dividend would bring the funds  closer to the individual. He                                                                    
explained  that the  money  would not  be  distributed as  a                                                                    
check  in  residents' pockets  but  would  be money  in  the                                                                    
community. He believed  that when the PFD  had been created,                                                                    
former  Governor Jay  Hammond had  expressed desire  to take                                                                    
the money out  of the state's hands and put  it in the hands                                                                    
of  the people  because the  people  knew how  to spend  the                                                                    
money  best. He  believed  it  had worked  for  a while  and                                                                    
people had been  spending money from the  dividend since its                                                                    
inception.                                                                                                                      
                                                                                                                                
Representative  Wool  explained  that  the  bill  would  not                                                                    
eliminate a  dividend; it would  bring money  into community                                                                    
coffers  instead of  state coffers.  He highlighted  various                                                                    
communities  including  Anchorage,   Aniak,  Fairbanks,  and                                                                    
Bethel and  explained that all  communities would  receive a                                                                    
substantial  amount of  money. He  furthered that  community                                                                    
members  could solicit  community leaders  with their  needs                                                                    
and priorities  instead of people coming  to the legislature                                                                    
with a list of needs.  He stated the community leaders would                                                                    
be  responsive and  that community  members  knew what  they                                                                    
needed  best.  Additionally, there  would  be  a higher  per                                                                    
person distribution for smaller communities.                                                                                    
                                                                                                                                
Representative Wool  explained that if Anchorage  received a                                                                    
base of  $1 million, the per  capita would be a  little over                                                                    
$300  (in addition  to  the base).  He  elaborated that  the                                                                    
amount would be  slightly over $300 once the  $1 million was                                                                    
factored  in.  He  furthered that  dividing  $1  million  by                                                                    
300,000 residents resulted  in a little over  $3 per person,                                                                    
which would  be added  to the per  capita of  $300. Whereas,                                                                    
for smaller  communities that would receive  between $83,000                                                                    
to $250,000,  the money would  be divided  between residents                                                                    
in  addition to  the $300.  He elaborated  that for  smaller                                                                    
communities it meant residents would  receive $900 to $1,200                                                                    
in a community  dividend and a PFD of $700,  which was close                                                                    
to $2,000 per person.                                                                                                           
                                                                                                                                
Representative  Wool clarified  that the  $1,200 per  person                                                                    
went to  the community,  not to individuals'  bank accounts.                                                                    
He explained that residents could  benefit from the funding.                                                                    
For  example, a  community could  install energy  devices or                                                                    
buy fuel  in bulk  and sell  it at  a discount  to community                                                                    
members.  He  reiterated  that a  community  dividend  would                                                                    
bring  the money  closer  to  communities and  rural/smaller                                                                    
communities would  receive more  per capita.  He highlighted                                                                    
that it  somewhat offset  the problem of  cutting the  PFD -                                                                    
cutting the PFD  had an adverse impact  on small communities                                                                    
that had  smaller economies, less  cash, and fewer  jobs. He                                                                    
stated  that  the  community  dividend  would  provide  more                                                                    
autonomy  to communities  and would  give local  residents a                                                                    
voice on how the money was spent.                                                                                               
                                                                                                                                
2:22:10 PM                                                                                                                    
                                                                                                                                
Representative Wool  turned to slide 9  and discussed budget                                                                    
impacts of the  bill. He relayed that HB  300 would increase                                                                    
the current budget.  He detailed that the bill  would add to                                                                    
the   capital  budget,   the   University   budget,  and   a                                                                    
substantial amount  to community assistance.  He highlighted                                                                    
areas that could potentially be  decreased in the budget. He                                                                    
detailed  that   school  bond  debt   could  be   passed  to                                                                    
communities  because communities  would  be receiving  money                                                                    
[via  a community  dividend].  He noted  he  had a  complete                                                                    
table  of  every  community  and  had  included  an  excerpt                                                                    
showing examples later in the presentation [slide 14].                                                                          
                                                                                                                                
Representative  Wool continued  to list  potential decreases                                                                    
in   the  budget   including  miscellaneous   municipal  and                                                                    
university  debt  support and  a  municipal  portion of  the                                                                    
Public   Employees'   Retirement   System   (PERS)/Teachers'                                                                    
Retirement System  (TRS). He  relayed that  he had  not gone                                                                    
into  any of  the  PERS/TRS calculations  and he  understood                                                                    
that communities  strongly advocated against any  change. He                                                                    
considered that  if Anchorage received $90  million, perhaps                                                                    
it could  afford to  spend more  on PERS/TRS.  He identified                                                                    
community  block  grants as  a  budget  item that  could  be                                                                    
addressed  at   the  community   level.  He   reasoned  that                                                                    
communities knew  what they needed  best and would  have the                                                                    
funds to  provide things like  opioid treatment  and support                                                                    
homeless shelters.  He pointed  to public safety  as another                                                                    
area that  could be  decreased because  more money  would be                                                                    
available  for  communities  to  provide  their  own  public                                                                    
safety  services.  For  example, communities  could  hire  a                                                                    
village police officer.                                                                                                         
                                                                                                                                
Representative  Wool  identified transportation  maintenance                                                                    
as  an  area  of  the   budget  that  could  potentially  be                                                                    
decreased. He  referenced a budget  amendment that  had been                                                                    
offered  in   committee  on   the  Quinhagak   airport.  The                                                                    
community  could  not afford  to  maintain  its airport.  He                                                                    
explained  that  under   the  legislation,  Quinhagak  would                                                                    
receive $450,000  per year.  He explained  that some  of the                                                                    
money could be  used by communities to  maintain local rural                                                                    
airports.  He highlighted  that the  state would  save about                                                                    
$600 million if it did not pay a $1,600 PFD.                                                                                    
                                                                                                                                
2:24:05 PM                                                                                                                    
                                                                                                                                
Representative Tilton  asked how the bill  accounted for the                                                                    
state's  growing Department  of Health  and Social  Services                                                                    
(DHSS) budget.  She wondered  how the  DHSS budget  would be                                                                    
administered and taken care of.                                                                                                 
                                                                                                                                
Representative  Wool agreed  that DHSS  reflected a  growing                                                                    
portion of the budget. The  remaining 15 percent of the POMV                                                                    
in addition to oil revenue  would still be available for the                                                                    
other   budget  items.   He  had   not  allocated   to  DHSS                                                                    
separately. He agreed on its  importance and relayed that it                                                                    
would  be  paid out  of  the  budget  as under  the  current                                                                    
process.                                                                                                                        
                                                                                                                                
Representative  Tilton  asked  if the  scenario  would  mean                                                                    
communities  would  play a  bigger  role  in providing  DHSS                                                                    
services.                                                                                                                       
                                                                                                                                
Representative Wool answered  that he had not  looked at the                                                                    
particular option, but  it was not off the  table. He stated                                                                    
it would depend on how the  numbers panned out. He would not                                                                    
expect  Medicaid funding  to go  through local  communities,                                                                    
but  there  were  other  health  costs  including  treatment                                                                    
centers  and other.  He  noted that  a  sobering center  had                                                                    
recently opened  in Fairbanks. He  relayed that some  of the                                                                    
health and behavioral health items  could be funded with the                                                                    
community dividend.                                                                                                             
                                                                                                                                
2:26:02 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz  thanked the  sponsor for  bringing forward                                                                    
the  proposal,   which  he  believed  contained   merit.  He                                                                    
believed the  40 percent going  to education would act  as a                                                                    
spending cap. He  asked for verification the  bill would not                                                                    
allocate any  other funding sources to  education other than                                                                    
the 40 percent [of the POMV draw].                                                                                              
                                                                                                                                
Representative  Wool answered  that he  was not  thinking of                                                                    
the amount as  a cap, but as a floor.  He supposed that more                                                                    
funding  could be  provided,  not less.  He  noted that  the                                                                    
education  community would  know what  the funding  would be                                                                    
[under  the  40  percent  allocation]. He  relayed  that  40                                                                    
percent  was   slightly  less  than  the   current  funding;                                                                    
however, it would  increase over time. He  remarked that the                                                                    
POMV  was a  five-year rolling  average; therefore,  even if                                                                    
there was  a bad month  or year the  impact would not  be as                                                                    
strong (unless  there were multiple bad  years). He informed                                                                    
committee  members  that the  upcoming  graph  would show  a                                                                    
steady increase,  which he believed would  alleviate much of                                                                    
state educators' anxiety. He believed  the same was true for                                                                    
some of the other entities.                                                                                                     
                                                                                                                                
Representative  Tilton spoke  to the  increase of  community                                                                    
involvement under  the bill. She  asked how the  funds going                                                                    
to communities  and individuals  would be  administered. She                                                                    
explained  that there  were  administrative fees  associated                                                                    
with distributing community assistance funds.                                                                                   
                                                                                                                                
Representative Wool answered that  the bill would be modeled                                                                    
on  the existing  community  assistance  program. The  funds                                                                    
would  be  distributed   in  the  same  way   as  they  were                                                                    
currently, but in amplified amounts.                                                                                            
                                                                                                                                
2:28:55 PM                                                                                                                    
                                                                                                                                
Representative  Knopp highlighted  that  all  of the  fiscal                                                                    
notes talked  about designated general funds.  He noted that                                                                    
the  [state] constitution  prohibited  designated funds.  He                                                                    
supposed   they   could  probably   refer   to   it  as   an                                                                    
appropriation if  they used the  method in  the legislation.                                                                    
He reasoned that  things would be fine if  revenue grew over                                                                    
time but  considered what would  happen in the next  five or                                                                    
six years if  the markets were down and  revenue dropped. He                                                                    
noted that  the proposal  did not  include the  DHSS budget,                                                                    
which was  the largest budget  item. He provided  a scenario                                                                    
where there was an additional  $2 billion in revenue outside                                                                    
of the  POMV draw. He asked  if there would be  enough money                                                                    
left to  cover the state's  obligations to bond  debt, other                                                                    
formula  driven programs,  and DHSS.  He  wondered if  there                                                                    
would be willingness to live  with the structure if the POMV                                                                    
draw  declined  in  several  years.   He  wondered  how  the                                                                    
proposal would be implemented and  adhered to over time when                                                                    
it  was   not  possible   to  bind   the  hands   of  future                                                                    
legislatures.                                                                                                                   
                                                                                                                                
Representative Wool  replied that it  was a valid  point. He                                                                    
referenced the POMV draw implemented  under SB 26 [Permanent                                                                    
Fund legislation  passed in 2018]  that the  legislature had                                                                    
been adhering to for since  its implementation [in 2018]. He                                                                    
hoped  the  legislature  would   continue  adhering  to  the                                                                    
legislation.  He  remarked  that  the  legislature  was  not                                                                    
currently  adhering to  the PFD  formula. He  would like  to                                                                    
have HB  300 adhered to and  would like to adhere  to SB 26.                                                                    
He  hoped  the legislature  would  adhere  to the  bill.  He                                                                    
supposed that  if things got  really bad, they could  opt to                                                                    
not fund the capital budget.                                                                                                    
                                                                                                                                
Representative Knopp considered that  the bill dedicated the                                                                    
POMV draw, which he kind of  liked. He was concerned about a                                                                    
time  when   the  $3  billion   started  to  drop   and  the                                                                    
legislature was no longer happy  with funding the University                                                                    
was  receiving. He  reasoned the  legislature would  have to                                                                    
adjust the  structure under the  bill or to other  funds. He                                                                    
considered what the trickledown effect would be.                                                                                
                                                                                                                                
2:31:55 PM                                                                                                                    
                                                                                                                                
Representative  Wool  stated  that  much  of  the  bill  was                                                                    
intended  as a  conversation starter.  He had  another model                                                                    
that he  had not  included in  the presentation.  He thought                                                                    
the structure proposed in the bill  may be a tool to "get us                                                                    
on the road" that could  perhaps be revisited in five years.                                                                    
He  had another  model that  lowered the  percentage of  the                                                                    
POMV  designated for  the capital  budget and  the community                                                                    
dividend  to  5  percent  each   to  give  more  flexibility                                                                    
depending on the market.                                                                                                        
                                                                                                                                
Representative  Wool  turned to  a  bar  chart on  slide  11                                                                    
showing the PFD amount from FY  21 to FY 29 using 15 percent                                                                    
of the  POMV draw. The PFD  was calculated at $724  in FY 21                                                                    
and almost $900  in FY 29. He  moved to a chart  on slide 12                                                                    
showing  education funding  from FY  21  to FY  29 using  40                                                                    
percent of  the POMV draw.  Education funding would  be $1.2                                                                    
billion in  FY 21 and increase  up to $1.5 billion  over ten                                                                    
years.  Capital projects  (including the  University) at  10                                                                    
percent of the POMV draw were  illustrated in a bar chart on                                                                    
slide 13, beginning at $309  million in FY 21 and increasing                                                                    
to $381 million by FY 29.                                                                                                       
                                                                                                                                
2:33:25 PM                                                                                                                    
                                                                                                                                
Representative  Wool moved  to proposed  community dividends                                                                    
for  various communities  on slide  14.  The slide  included                                                                    
some larger communities  with the $1 million  base and other                                                                    
communities  with the  $250,000 and  $83,000 bases.  He used                                                                    
Anchorage as  an example  and pointed  out that  the current                                                                    
FY 20 assistance was $4.5  million, while under the bill the                                                                    
assistance  would  increase  to  $96  million  or  $328  per                                                                    
person. He  considered that  Anchorage could  do a  lot with                                                                    
the substantial sum annually, including  work on the Port of                                                                    
Anchorage and  payment towards  bond debt  reimbursement. He                                                                    
highlighted that  the community  dividend would be  $362 per                                                                    
person in  Juneau. He  pointed to  the small  communities of                                                                    
Nulato  and Gulkana  that would  hit the  cap at  $1,200 per                                                                    
capita.  He  detailed  that St.  Mary's  would  receive  the                                                                    
$83,000  base, resulting  in $765  per person.  He explained                                                                    
that the  structure would help  with the  rural/urban divide                                                                    
where  a larger  city would  receive less  per person  and a                                                                    
smaller  community  would  get  more per  person  (not  more                                                                    
total,  but more  per person).  He reasoned  that despite  a                                                                    
proposed  cut  to  the  PFD,  the  local  communities  would                                                                    
benefit and have the ability to help their residents.                                                                           
                                                                                                                                
Representative Wool shared there  would be more modeling the                                                                    
following day. He  reported that the fall  forecast had been                                                                    
used, which  would be updated  in the near future.  He noted                                                                    
there  would be  a model  where the  percentage of  the POMV                                                                    
designated  for   the  capital  budget  and   the  community                                                                    
dividend was lowered  to 5 percent each.  He elaborated that                                                                    
the  change  would bring  capital  funding  to $150  million                                                                    
(closer  to  the  current  expenditure)  and  the  community                                                                    
dividend would also receive $150  million, which was still a                                                                    
substantial  amount of  money.  He stated  that the  funding                                                                    
would help offset a PFD cut in rural Alaska.                                                                                    
                                                                                                                                
Co-Chair Johnston asked the sponsor  to model what the state                                                                    
should  be  paying  in  statute for  school  bond  debt  and                                                                    
capital program for rural villages the following day.                                                                           
                                                                                                                                
Representative Wool agreed to provide the information.                                                                          
                                                                                                                                
HB  300  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Johnston reviewed the schedule  for the rest of the                                                                    
week. She shared that public testimony  on HB 300 and HB 306                                                                    
would take place on Thursday afternoon.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
HB 306 Bicameral Permanent Fund Working Group Report 1.20.2020.pdf HFIN 3/10/2020 1:30:00 PM
HB 306
HB 306 APFC Resolution 10.17.2018.pdf HFIN 3/10/2020 1:30:00 PM
HB 306
HB 306 LegFin Modelling 3.5.2020.pdf HFIN 3/10/2020 1:30:00 PM
HB 306
HB 306 Sponsor Statement 3.5.2020.pdf HFIN 3/10/2020 1:30:00 PM
HB 306
HB 300 Sponsor Statement 3.9.20.pdf HFIN 3/10/2020 1:30:00 PM
HB 300
HB 300 Presentation Wool POMV 3-9-20.pdf HFIN 3/10/2020 1:30:00 PM
HB 300
HB 306 Presentation 3.5.2020.pdf HFIN 3/10/2020 1:30:00 PM
HB 306
HB 306 Sectional Analysis 3.5.2020.pdf HFIN 3/10/2020 1:30:00 PM
HB 306