Legislature(2001 - 2002)

04/15/2002 09:05 AM RLS

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 304-PERMANENT FUND INCOME                                                                                                  
CHAIR KOTT  announced that the  first order of business  would be                                                               
HOUSE BILL NO. 304, "An Act  relating to disposition of income of                                                               
the permanent fund; and providing for an effective date."                                                                       
Number 0072                                                                                                                     
TAMARA COOK,  Director, Legislative Legal and  Research Services,                                                               
Legislative   Affairs  Agency,   explained   that  the   proposed                                                               
committee  substitute (CS),  Version  22-LS1207\T, Cook,  4/5/02,                                                               
makes a  change in  Section 12.   That change  was to  delete the                                                               
reference to  "On July 1, 2002"  and insert "At the  beginning of                                                               
fiscal year 2003".   The proposed CS deletes Sections  14 and 15,                                                               
which were the effective dates.   Ms. Cook related her impression                                                               
that  effective dates  are  no longer  necessary  due to  changes                                                               
[incorporated  in  the  proposed  CS].    She  also  related  her                                                               
impression that the change in Section  12 is wise if there are no                                                               
effective dates.   Ms.  Cook pointed out  that [the  proposed CS]                                                               
has  shifted  the  bill  over  so that  the  transfers  from  the                                                               
earnings reserve  account would  occur at  the beginning  of each                                                               
fiscal year.  Those appropriations  made in the prior year should                                                               
remain unaffected by  this bill, which will only  apply to future                                                               
Number 0230                                                                                                                     
REPRESENTATIVE BERKOWITZ  said, "Just to  be clear on  the intent                                                               
today,  we are  not moving  this bill  along ...  these are  just                                                               
technical  changes and  as the  process evolves,  this bill  will                                                               
evolve here in this committee.  Is that the intent?"                                                                            
CHAIR  KOTT  answered, "That's  correct,  in  some part  of  this                                                               
committee."  These  changes are being made in the  event that the                                                               
bill is forwarded for consideration by the House.                                                                               
Number 0275                                                                                                                     
REPRESENTATIVE PORTER  moved that  the committee adopt  CSHB 304,                                                               
Version  22-LS1207\T,  Cook,  4/5/02, as  the  working  document.                                                               
There being no objection, Version T was before the committee.                                                                   
Number 0312                                                                                                                     
JIM  KELLY, Director  of  Communications,  Alaska Permanent  Fund                                                               
Corporation,  Department of  Revenue,  noted  that the  committee                                                               
should  have a  letter  from Robert  Storer, Executive  Director,                                                               
Alaska  Permanent   Fund  Corporation,  Department   of  Revenue,                                                               
regarding a  couple of  proposed amendments.   Mr.  Kelly pointed                                                               
out  that   Section  11  repeals   statutory  inflation-proofing.                                                               
However,  the  corporation  asks that  the  statutory  inflation-                                                               
proofing not  be repealed.   The [Alaska Permanent  Fund] Board's                                                               
position is  that if the  fund was moved  to a percent  of market                                                               
value (POMV) distribution  and the payout was limited  to no more                                                               
than 5  percent of the  funds average  market value for  the last                                                               
five fiscal  years, then there  will be permanent  and protective                                                               
inflation-proofing.  Mr.  Kelly highlighted the fact  that HB 304                                                               
is a statutory  bill rather than a constitutional  amendment.  [A                                                               
statutory  bill]   creates  uncertainty   that  there   can't  be                                                               
additional appropriations  on top  of what  is envisioned  in the                                                               
language  of   these  statutes.     For  example,  HB   20  would                                                               
appropriate $59  million to the  municipal dividend,  which would                                                               
be  on top  of  this 5  percent.    The two  line  items for  the                                                               
Department of Natural  Resources and the Department  of Law total                                                               
approximately $2  million, which is a  fairly good-sized loophole                                                               
that  would  be on  top  of  the  5  percent.   Furthermore,  any                                                               
appropriations that are made out  of the earnings reserve account                                                               
would also  be on  top of  the 5 percent.   Mr.  Kelly recognized                                                               
that  the  legislature  has an  excellent  record  of  supporting                                                               
inflation-proofing.     However,   he   wasn't   sure  that   the                                                               
[corporation]  could rely  on that  past discipline  to continue.                                                               
Therefore,  the   [corporation]  requests  that   the  inflation-                                                               
proofing be left in for now.                                                                                                    
Number 0542                                                                                                                     
MR. KELLY  turned to  the second  amendment that  the corporation                                                               
would propose.   He directed  attention to  page 3, line  24, and                                                               
requested the deletion of the  language "excluding any unrealized                                                               
gains  or losses".   This  change  will allow  the Alaska  Mental                                                               
Health  Trust  Authority  to continue  its  current  practice  of                                                               
computing the  trust income in  the same manner as  the permanent                                                               
fund.  Mr. Kelly related his  belief that the intent of the House                                                               
Finance Committee was to continue that practice.                                                                                
MR. KELLY moved to the timing  of the dividend appropriation.  He                                                               
explained that  in the past the  dividend appropriation, although                                                               
the language  says [to perform  the appropriation] at the  end of                                                               
the  fiscal year,  has been  made  after the  audit is  complete.                                                               
This  is done  per a  Memorandum  of Agreement.   Therefore,  the                                                               
corporation  intends   to  make  the  appropriations   after  the                                                               
completion of  the audit when the  numbers are exact.   In regard                                                               
to the 5 percent, Mr. Kelly  drew attention to the last paragraph                                                               
of  the letter  by Mr.  Storer, which  relates the  corporation's                                                               
understanding  that  the   appropriation  for  the  corporation's                                                               
budget is separate and above the 5 percent.                                                                                     
Number 0686                                                                                                                     
CHAIR  KOTT   moved  that  the  committee   adopt  the  following                                                               
amendment, Amendment 1:                                                                                                         
     Page 3, line 24,                                                                                                           
       Delete "excluding any unrealized gains or losses"                                                                    
There being no objection, Amendment 1 was adopted.                                                                              
CHAIR  KOTT  turned  to  Mr. Kelly's  suggestion  to  not  repeal                                                               
Section 11, and  announced that he isn't inclined  to change that                                                               
at this time.                                                                                                                   
REPRESENTATIVE  PORTER   agreed.    He  said   that  although  he                                                               
understands the corporation's position,  the legislature is faced                                                               
with a  billion dollar shortfall.   Representative Porter related                                                               
his belief  that all the options  should be available for  use in                                                               
dealing with  that problem.   Furthermore,  Representative Porter                                                               
remarked that the [corporation]  has been over inflation-proofing                                                               
the  fund for  many  years  and a  couple  of  years without  the                                                               
redundant inflation-proofing wouldn't be harmful.                                                                               
REPRESENTATIVE BERKOWITZ expressed his  hope that [the committee]                                                               
has the opportunity to revisit  this particular point and discuss                                                               
it more fully when it is time to forward the bill.                                                                              
CHAIR KOTT, upon  no one else wishing to  testify, announced that                                                               
the public testimony was closed.                                                                                                
Number 0808                                                                                                                     
REPRESENTATIVE  PORTER  moved to  report  CSHB  304, Version  22-                                                               
LS1207\T,  Cook,  4/5/02,  as  amended   out  of  committee  with                                                               
individual recommendations and the accompanying fiscal notes.                                                                   
REPRESENTATIVE  BERKOWITZ  objected.    Representative  Berkowitz                                                               
pointed out that the next stop  for this bill is the House floor.                                                               
Representative Berkowitz  viewed HB 304  as part of  a long-range                                                               
fiscal plan for which he needed  to see the other components.  He                                                               
related his  belief that it would  be prudent for the  bill to be                                                               
held in  committee.  Representative  Berkowitz announced  that he                                                               
wouldn't sign the bill report if required.                                                                                      
CHAIR  KOTT acknowledged  that to  be Representative  Berkowitz's                                                               
prerogative.   However, he  explained that  all the  committee is                                                               
doing  is  "pre-positioning"  the   bill  in  the  event  further                                                               
attention is necessary.                                                                                                         
REPRESENTATIVE  KOHRING  expressed concern  with  the  bill.   He                                                               
related his belief  in not spending any portion  of the permanent                                                               
fund for  fear of moving in  the direction of spending  it in its                                                               
entirety over  time.  Representative  Kohring expressed  the need                                                               
to  review   other  spending   reductions  and   efficiencies  in                                                               
government before considering new revenue sources.                                                                              
REPRESENTATIVE  PORTER clarified  that the  [corpus of  the] fund                                                               
may not be spent by the  legislature without a two-thirds vote of                                                               
each body and a vote of the public.                                                                                             
A roll  call vote  was taken.   Representatives  Kohring, Porter,                                                               
and   Kott   voted   to  report   Version   T   from   committee.                                                               
Representatives  Berkowitz  and  Joule  voted  against  reporting                                                               
Version  T from  committee.   Therefore, Version  T failed  to be                                                               
reported out of  the House Rules Standing Committee by  a vote of                                                               

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