Legislature(2001 - 2002)
03/08/2001 08:02 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 3-DEPOSITS TO THE PERMANENT FUND Number 0324 CHAIR COGHILL announced that the next order of business would be HOUSE BILL NO. 3, "An Act relating to deposits to the Alaska permanent fund from mineral lease rentals, royalties, royalty sale proceeds, net profit shares under AS 38.05.180(f) and (g), federal mineral revenue sharing payments received by the state from mineral leases, and bonuses received by the state from mineral leases, and limiting deposits from those sources to the 25 percent required under art. IX, sec. 15, Constitution of the State of Alaska; and providing for an effective date." Number 0380 REPRESENTATIVE ROKEBERG came forward to testify as sponsor of HB 3. He distributed one additional sheet of information to supplement what was in committee packets. He testified that HB 3 is a reintroduction of legislation known in the 21st Legislature as HB 96. REPRESENTATIVE ROKEBERG explained that HB 3 returns the percentage of all mineral lease royalties and bonuses deposited into the Permanent Fund to the constitutionally mandated 25 percent. The current statutory requirement is 50 percent for those leases that were entered into on or around January 1980. REPRESENTATIVE ROKEBERG cited Article 9, Section 15 of the Alaska Constitution that states that at least 25 percent of all mineral lease rentals ... [including] federal mineral revenue sharing payments and bonuses received by the state shall be placed in a permanent fund. That was the percentage when the Permanent Fund was established; the contribution was set constitutionally at 25 percent. That changed in 1980 when the legislature, "awash in money, changed the statutory contribution for new leases. Those new leases, which do not include the major Prudhoe Bay fields and the majority of the Kuparuk fields, contribute to the Permanent Fund on a 50 percent basis. When the legislature took that action, the amount of money in the general fund available for appropriation was $4.07 billion, almost twice as much as is available now. He thought their action was commendable, "However, we don't find ourselves in that particular situation again." REPRESENTATIVE ROKEBERG recalled that in the seven years he has been a member, the legislature has drawn upon constitutional budget reserve funds to balance the budget, which is another constitutional mandate. Therefore, he is commending to the legislature that it reexamine the 1980 policy and "take the more prudent path and reduce that particular percentage." The new fields that are coming on line are contributing 50 percent [to the general fund] Meanwhile, production is declining in the older fields that are contributing at 75 percent "It's just basic arithmetic in terms of the state's cash flow situation," he said. REPRESENTATIVE ROKEBERG called attention to Table 1 in committee packets that showed the potential impact of HB 3. The table was part of a Legislative Research Services Report prepared in January 2001. For example, for fiscal year 2002, the change would generate an additional $39.5 million in general fund revenue. He observed that was about the same amount as the estimated shortfall for that fiscal year. If the legislature were to make the policy change through HB 3, it would minimize the draw on the constitutional budget reserve. He said he thinks it is important to "save the money that we have in our savings account, ... our seed corn, by using our general fund monies more appropriately." REPRESENTATIVE ROKEBERG noted that the projected income is expected to peak in fiscal year 2003 with $3.8 million, then decline to $19.5 million in fiscal year 2010. He then turned to the preceding page in the report and called attention to a sentence that read, "The additional general fund revenues predicted in Table 1 ... underestimate deposits to the extent that mineral rents and revenues from as-yet undiscovered fields are not included in these figures." That means the overall increase in potential is significant. Anything let in the current area-wide leasing program in the North Slope and Cook Inlet that produces and goes on line would contribute at the rate of 50 percent. REPRESENTATIVE ROKEBERG then showed a memorandum from the Alaska Permanent Fund Corporation (dated March 6, 2001) regarding the impact of HB 3 on oil contributions to the Permanent Fund and the consequent per capita dividends. He said the most controversial thing about HB 3 is its potential impacts on the Permanent Fund dividend. "It's not a raid on the Permanent Fund whatsoever," he stated. "The people in the State of Alaska have to realize that this particular body, the legislature, has made direct appropriations that are greater than the royalty benefits that we've received over the course of the history of the Permanent Fund." He apologized for not having exact figures. The legislature has the responsibility to manage the state's funds properly, and he thinks HB 3 is a very prudent action to take. "I don't like taxes, and to me, each dollar we can save by making some adjustments like this puts off the day that we're going to have to have taxation," he said. REPRESENTATIVE ROKEBERG pointed to the estimated impacts on the Permanent Fund dividend of the enactment of HB 3. "If we were to enact this bill, it would not even have any impact whatsoever until the calendar year 2006." After that time, it would have less than one percent impact or $10 against a projected 2006 Permanent Fund dividend of $1,890. "The dividend goes up faster than any draw down," he emphasized. REPRESENTATIVE ROKEBERG concluded that HB 3 was the right thing to do in terms of prudent fiscal management in the state. "This is the first step we need to take in any long-range financial plan, without question," he said. Number 1715 CHAIR COGHILL said he would schedule time for committee discussion with Representative Rokeberg at its next meeting on March 13. [HB 3 was HEARD AND HELD.]
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