Legislature(2021 - 2022)ADAMS 519
08/20/2021 01:00 PM FINANCE
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HOUSE BILL NO. 3003 "An Act making appropriations for the operating and loan program expenses of state government and for certain programs; capitalizing funds; making capital appropriations and supplemental appropriations; and providing for an effective date." 1:03:36 PM Co-Chair Foster stated questions would be taken throughout the presentation. NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, provided a PowerPoint presentation titled "State of Alaska Office of Management and Budget: House Finance Committee: Third Special Session Budget Overview - HB 3003," dated August 20, 2021 (copy on file). He moved to slide 2 and addressed the third special session. The governor's office had introduced HB 3003 to address appropriations // and need in the state. He addressed impacts from the sweep // the Alaska Federation of Natives // appropriations were being executed by respective offices in the executive branch. // issues under the sweep resolved by the bill. Other ongoing issues were not addressed by the legislation. 1:06:20 PM Mr. Steininger briefly summarized the sections in the bill. The bill included the Permanent Fund Dividend (PFD) payment of $2,350 per Alaskan at a total of $1.53 billion. The bill also included Alaska student scholarships and grants including the Washington, Wyoming, Alaska, Montana, and Idaho (WWAMI) program and a deposit of $1.47 billion one- time transfer from the Permanent Fund Earnings Reserve Account (ERA) to the Constitutional Budget Reserve (CBR). Mr. Steininger turned to slide 4 and discussed the budget impacts of CBR vote failure. // 1:10:08 PM Mr. Steininger was happy to answer questions. Representative Edgmon looked at slide 2 related to a durable fiscal plan. He saw the language constitutionally protect, but he did not see anything about a vote of the people. // He presumed it was in the background Mr. Steininger agreed that the constitutional amendments would have to go to voters for approval. Representative Edgmon surmised that with the submittal of the bill and the parsing out of two or three items apart from the PFD was a policy call by the administration related to the reverse sweep. He asked if there was a plan for items that had been left out. Mr. Steininger answered // an inelegant tool // not necessarily resolved with UGF funds only // the operational realities revealed as the sweep was implemented. Over the past decade or so, there had been more // the solution to the problem may or may not be a backfill of general funds // it would involve // issues that may have always existed, but not highlighted // the structures of the programs may not be as sustainable as they had thought. // some of the solutions may need to be addressed // the shortfall may only be 1 to 5 percent, which admittedly may be challenging for program managers // 1:14:45 PM Representative Edgmon looked at slide 3 related to the elements of the bill. He noted that the PFD // the legislature to violate a law implemented in 2018 // he acknowledged that the legislature had not been paying the statutory PFD // the two items went hand in hand. // tying to larger elements of a fiscal plan // He asked where to go from here // He asked about the thought process. Mr. Steininger answered it was a good discussion the administration would like to have. // the bill was to support the wider discussion in SJR 7 // the appropriation bill was there to support discussions and decisions made on bigger policy issues. He did not see the bill as taking away the carrot. He thought the commissioner of the Department of Revenue would like to present to the committee. 1:18:06 PM Representative Rasmussen appreciated that the administration had included the Alaska student scholarships // She was curious if the administration had considered the oil tax credits the state was obligated to pay. She did not believe they had been paid. // She asked about the balance of the ERA after the proposed bill. Mr. Steininger answered that the purpose of including the scholarships and grants was due to a very immediate impact on individual Alaskans. Come September 1, WWAMI students would receive full tuition bills if the funds were not passed. // He spoke to the balance of the ERA. He believed the balance had been roughly $20 million on June 30 // there had been a $4 billion transfer to the principal and with the bill there would be about $10 billion remaining. // constitutionally protect the fund to ensure only 5 percent came out over time. The bridge draw was to allow for transitions working on the state fiscal structure. Representative Rasmussen stated it was her understanding many oil companies were holding off on making investment decisions prior to receiving the oil tax credits. She believed paying the amount was prudent. Co-Chair Foster recognized Representatives McCabe, McCarty, Kronk, McKay, and Drummond in the audience. 1:22:51 PM Vice-Chair Ortiz asked if the governor was // $3 billion transfer. Mr. Steininger answered that the $3 billion transfer was net of the // the SB 26 percent of market value (POMV) draw // since // the appropriation had included the full draw // the bridge fund // it was still the same $3 billion bridge fund. Vice-Chair Ortiz asked about the governor's intention for the FY 22 PFD amount. Mr. Steininger stated that the calendar year 2021 PFD would be based on // the constitutional amendment currently before the legislature. Vice-Chair Ortiz believed the [fiscal policy] working group had recommended whatever steps were taken to accomplish a fiscal plan that it happened at one time. He asked if HB 3003 contributed to solving the problem with one shot. Mr. Steininger replied affirmatively. He explained that // to accomplish the entire fiscal plan. The bill was a supporting appropriation bill to support the constitutional amendments. // it was not possible to write a single bill implementing all of the policies. 1:26:33 PM Representative Wool shared concerns voiced by Representative Edgmon regarding an overdraw of the 5 percent ERA draw under SB 26. He observed the administration was not proposing a formula change, but an amount based on a changed formula. // a 50/50 PFD, budget cuts and some revenue. He believed the // wanted to implement them simultaneously. He asked why revenue was not being presented for a durable fiscal plan. He stated that the bridge was to a sustainable fiscal package // Mr. Steininger replied that revenue was included in the special session call. He stated that Commissioner Mahoney would be glad to provide some analysis on work her team had done. He was present to discuss the appropriation bill. Representative Wool looked at slide 3 // retroactivity. 1:29:45 PM Representative Josephson was concerned that the unrealized earnings in the ERA was not addressed. He believed the balance was closer to $9 billion including that. Mr. Steininger answered he was trying to do math in his head and he apologized for any inaccuracy. The $10 billion had been his calculation. Representative Josephson // the Alaska Permanent Fund Corporation (APFC) was consistent it wanted // balance in the ERA. He did not know that the bill would do that. // 100 percent unfunded // it was his take it was there was a continuing cycle of revenue // Mr. Steininger agreed // Representative Josephson asked if there were not scores of other funds that were swept that were not included in the bill. Mr. Steininger replied that the bill // other funds that were swept // were not included because there was no operating issue // or did not have a connection to budgetary // separately accounted for and did not impact an operating appropriation. // it refined the view of where the problems really lay // 1:33:23 PM Representative Josephson returned to the context of Representative Rasmussen's question about oil and gas tax credits. He noted that Mr. Steininger did not note the community assistance and school debt reimbursement. He asked why those items were not included. Mr. Steininger replied that under the AFN decision the deposit was being made into the community assistance fund // it was no longer considered sweepable funding. // should not be taken as a lack of support or // for appropriations. They were looking at the fact that on September 1 students would directly and immediately feel the impact. // attempting to address the most urgent needs. 1:35:35 PM Representative Carpenter stated that there had never been a discussion in the working group there would be one single bill to address the issue. He pointed out that all of the programs could be funded with an amendment to the appropriations bill // the legislature just had to decide where the funds would come from. Mr. Steininger agreed. Vice-Chair Ortiz asked for verification that the solution would be done at one time. Representative Carpenter agreed that a comprehensive package with multiple components that were agreed upon and acted on at one time. 1:37:43 PM Representative LeBon observed that the need for a large draw against the ERA was a // it was about a 10 percent draw against the POMV formula. The SB 26 formula called for a 5 percent draw. He asked if it was true. Mr. Steininger agreed. He explained it was a one-time draw in order to implement the constitutional change protecting the ERA. If the ERA was moved to the corpus of the Permanent Fund // needed a bridge to // Representative LeBon addressed sustainability of a model. He asked if the administration considered a stair step model to soften the draw rate to help sustain the Permanent Fund for years to come // a public purpose endowment required fiscal discipline // the draw rate was set and held to. he asked about the compelling argument to deviate from the set rate. Mr. Steininger believed a detailed discussion with DOR was needed. He stated the proposal did protect the Permanent Fund in perpetuity by bringing the ERA into the corpus // 1:41:33 PM Representative LeBon stated he was not trying to debate over the philosophy // He believed it did impair the fund. // if the fund's future growth capability was impaired // the immediate gratification and reward for overdrawing the ERA - individuals would argue it was the right time. He emphasized that public endowments rarely took that action. Representative Carpenter asked about the percent of draw for the bridge fund in relation to the overall value of the ERA. It was a $3 billion bridge draw from a total of $20 billion // percent. Representative Carpenter asked if the legislature had the authority to deviate from statutory // Mr. Steininger replied // Representative Carpenter clarified his question. Mr. Steininger replied in the affirmative. Any amount could be appropriated from the ERA. // Representative Carpenter asked what gave the legislature the authority. Mr. Steininger did not want to go into a legal analysis. Co-Chair Foster recognized Representative David Nelson in the audience. 1:44:43 PM Representative Josephson assumed the administration remained concerned about the sweep // it was managed wisely. // reduced to 2 percent. Mr. Steininger replied in the affirmative. Representative Josephson asked if the administration agreed the CBR sweep was untenable as a long-term method. He believed there had to be reform // Mr. Steininger replied with an emphatic yes. // the administration recognized that looking at the structure of the CBR was // how the state could increase spending over time. // Representative Wool stated that the bill // overdraw the // He asked if the administration had calculated what the PFD amount would be without an overdraw of the ERA. Mr. Steininger answered that the administration had proposed a statutory dividend // did not support another amount. 1:48:28 PM Representative Edgmon asked // $3.2 billion Mr. Steininger believed it sounded about right. Representative Edgmon // a $3 billion draw for a bridge fund // it was possible there would be a lower PFD the following year // the reality was the amount depended on // federal infrastructure legislation // there could be a smaller PFD the next year because the expenditure side // Mr. Steininger answered that the bill was a companion to other changes // Representative Edgmon stated it had to go to a vote of the people, which would not go into effect until 2024. Mr. Steininger responded the intention was to follow the will of the voters in the next fiscal year. the budget would be treated as if the approval was in place. He stated that putting a plan in place and immediately not following it would undermine the purpose of the plan. 1:52:02 PM Representative Edgmon thought that could be rising above the legislature's ability to appropriate. It was not the law until approved by the people. // He cited the Weilekowski case // not the law of the land until it was voted on. It was not written in stone // He stated it was not possible to know what the legislature would do the following year or what oil prices would do. He thought // indicated there were other bills to follow // did not need more bridge funding // He looked forward to the information. He stressed it was a much bigger picture than the bill itself. // Promising a $2,300 PFD also implied // 1:54:34 PM Representative Carpenter understood the skepticism by Representative Edgmon. He thought it would be helpful for the committee to see the models that Legislative Finance Division had shared with the working group. Vice-Chair Ortiz did not understand where the $1.47 billion transfer did not show another $1.53 billion transfer overdraw to reach the $3 billion bridge. Mr. Steininger answered that the $3 billion was split to pay the PFD and the other portion to be deposited into the CBR. Prior models had presented the increment as a $3 billion // the remaining deficit paid out of the CBR // before the PFD was appropriated // it was still the same $3 billion // 1:57:53 PM Vice-Chair Ortiz understood that there was a 5 percent draw under SB 26 // generated about $3 billion. Mr. Steininger agreed. Vice-Chair Ortiz stated that // Mr. Steininger answered that it was the way DOR had modeled. // to pay for the state operating budget. Vice-Chair Ortiz asked if it was not going into the CBR. Mr. Steininger // Vice-Chair Ortiz surmised // drawing $3 billion from the ERA, which was above the standard 5 percent draw. Mr. Steininger agreed. Vice-Chair Ortiz asked for verification it was a $3 billion transfer. Mr. Steininger agreed. HB 3003 was HEARD and HELD in committee for further consideration. Co-Chair Foster set an amendment deadline of 9:00 a.m. on Sunday. The next meeting would be on Sunday at 11:00 a.m. 2:00:41 PM Representative Josephson asked Co-Chair Foster to revisit the rules pertaining to votes. He asked for verification on his understanding of the voting rules. Co-Chair Foster confirmed the rules. Representative Rasmussen asked // Co-Chair Foster // Representative Rasmussen requested public testimony. Representative Josephson stated that if the chair decided to hear public testimony // it could happen the following day. Co-Chair Foster agreed it was a possible option. 2:03:04 PM AT EASE 2:04:01 PM RECONVENED Co-Chair Foster // the fiscal working group had extensive public testimony on the 50/50 plan. He explained the reason for moving quickly. They would start losing members in the House and Senate later in the coming week.
|HFIN HB3003 TSS Budget Bill OMB Presentation 8.20.21.pdf||
HFIN 8/20/2021 1:00:00 PM
|HB 3003 HFIN Budget Impact of CBR Vote Failure OMB Handout 8.20.21.pdf||
HFIN 8/20/2021 1:00:00 PM