Legislature(2003 - 2004)
02/11/2003 08:00 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HJR 9 - CONST AM: APPROPRIATION/SPENDING LIMIT Number 0097 CHAIR WEYHRAUCH announced that the first order of business was HOUSE JOINT RESOLUTION NO. 9, Proposing amendments to the Constitution of the State of Alaska relating to an appropriation limit and a spending limit. Number 0133 REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, as sponsor of HJR 9, told the committee that he thinks that everyone recognizes the need for a fiscal plan for the State of Alaska. He noted that there has been discussion on a number of other components in the fiscal plan, including use of the Alaska Permanent Fund and taxes. A spending limit is one issue that hasn't come to the forefront, he said. In addition to a fiscal gap, he opined, there is also a confidence gap in the public. REPRESENTATIVE STOLTZE recognized that attempting to pass a constitutional amendment is a long process, and he said, "This is just the first shot, today." He stated that [HJR 9] is a conservative approach to state government. He added, "It recognizes that we're probably not going to achieve reductions, but if we can just hold the line, I think we'll be making progress." He explained that the basic component of [HJR 9] is that it is a flat funding of the budget, with the ability to raise it by up to 2 percent with a super-majority vote of three- fourths. REPRESENTATIVE STOLTZE noted that there is a sunset [clause]; after six years, if the provision [in HJR 9] has not been successful, it would automatically be put on the ballot "so the public can assess whether or not it's been a good exercise in fiscal policy and good government." He stated that there is a lot of detail [in the resolution], but the crux of it is the attempt to achieve a sustainable level of spending. Number 0372 REPRESENTATIVE HOLM said that he doesn't ever recall seeing a guideline, wherein there would be an amendment that would have a timeframe like [that in the proposed HJR 9], where the issue would go back to the people. He asked Representative Stoltze if there is any precedence to that. REPRESENTATIVE STOLTZE stated that he thinks the provision whereby the Alaska State Constitution goes before the voters every 10 years is similar. He indicated that there was a similar provision in a "resolution proposing an amendment that passed the other body last year." He added, "I thought it had some merit." Number 0463 REPRESENTATIVE SEATON referred to [page 1, lines 6-8], which read as follows: Section 16. Appropriation and Spending Limit. (a) Appropriations made for a fiscal year shall not exceed the amount appropriated for the fiscal year two years preceding the fiscal year for which the appropriations are made. REPRESENTATIVE SEATON asked if there was a reason for that. REPRESENTATIVE STOLTZE answered yes. He explained that it would give members of both houses a number that they could grasp with certainty, to "know what we'd be dealing with in the future." REPRESENTATIVE SEATON asked if it's true that there is no accounting for inflation or population growth. REPRESENTATIVE STOLTZE answered that that's correct; however, [the proposed resolution] would provide for 2 percent growth. He stated that he thinks that [Alaska's] inflation has been below 2 percent. He admitted, "There's an arbitrariness to it, but I think we have to start at some point, and that's what I chose after discussion with people who know more about these things than I do." In response to a question by Chair Weyhrauch, he noted that the language regarding 2 percent growth is found on page 2, lines 11-13. Number 0680 CHAIR WEYHRAUCH asked Representative Stoltze to define "the confidence gap." REPRESENTATIVE STOLTZE stated that [the public] doesn't believe that [the legislature] wants to, is able to, or will cut state spending. CHAIR WEYHRAUCH said he understands there is a five-year "cutting program." He asked Representative Stoltze for his opinion regarding that. REPRESENTATIVE STOLTZE replied that he thinks it has been a worthy effort. He opined, "It's been more holding the line than an actual reduction." He mentioned "shifting to other funds." He said, "Given the past administration's efforts to raise the budget, I think ..., if you hadn't [had] that force moving [in] that direction, we'd be in a lot worse shape than we are." He said he cannot say anything but positive things about the five- year "effort," but said he is not sure that the public really believes that it was an actual reduction. CHAIR WEYHRAUCH asked Representative Stoltze if he has considered two-year budgeting. REPRESENTATIVE STOLTZE responded that he has only done a cursory [analysis] of [two-year budgeting]. He said that [the state] probably doesn't have the stability in revenue sources. He said he does not know "how to do it without some forward funding," and he doesn't like some of the implications of forward funding - of where that funding might come from. Number 0823 REPRESENTATIVE STOLTZE, in response to a question by Representative Seaton regarding appropriations, answered that there are a number of exemptions [listed in the resolution, beginning page 1, line 10]. He indicated the Alaska Railroad. He stated that he thinks that there was "a desire to leave the railroad's ability to provide bonding and financing for a gas line project." He said that any bonds that the voters approved would be exempted. He added, "There's a lot of holes in this thing - it's not a perfect document." Number 0905 CHAIR WEYHRAUCH asked if [HJR 9] is tied to any sort of revenue- raising measure, and that without a spending limit like this, revenue measures like taxes, for example, should not be considered. REPRESENTATIVE STOLTZE responded that that is an accurate assessment. Furthermore, he stated that he is not trying to "create a linkage to bring on taxes," but taxes are going to "come to the front." He said he thinks that his constituents, among others, are afraid that any new funds that come in - through windfalls, for example - will add fuel to the fire. He added, "And they want some control." He said that he may not be speaking for everybody's districts, but said, "We want a tool that, if taxes, or other revenue use does come in, there's going to be a limit and control of how much." Number 1020 CHAIR WEYHRAUCH said that it seemed to him that there's a large debate at the federal level about the spending limit to force congress to "live within its means." He stated that a lot of that was just "substance over form," because the legislature would then just ignore its own provision." He said that there must be some of that sentiment in this measure, and he asked if that was the reason that "this" is a constitutional amendment. REPRESENTATIVE STOLTZE answered yes. He stated that he is also concerned about [the State of Alaska's] existing spending limit, because it was drafted before the existence of the [Alaska Permanent Fund] and its dividend, and before the existence of many public corporations, and because it doesn't work. He said, "It passed under ... duress." He stated that "we're" ignoring the provisions. He indicated that there's a provision that requires one-third expenditure for capital projects. He said, "It's offensive to have a section of our constitution that's not being enforced." In response to a question by Chair Weyhrauch, Representative Stoltze confirmed that it is a constitutional spending limit, which has a capital budget component to it. CHAIR WEYHRAUCH asked why that was adopted by the voters and what the sales pitch on "that amendment" was. REPRESENTATIVE STOLTZE commented that he had been about 18 years old at the time. He stated that he thinks Governor Hammond vetoed a large portion of the capital budget and "did some arm twisting to get the 27th vote." He recalled that it was passed during a special session in 1981, and ratified by the voters in 1982. He noted that the issue was on the ballot the same year as the capital move, subsistence, abortion, and veterans' bonds. Number 1200 REPRESENTATIVE SEATON offered an example, whereby [the state] receives an appropriation of $100 million from the federal government for "village safe water." He asked Representative Stoltze to show him which exemption in [HJR 9] would apply to that example. REPRESENTATIVE STOLTZE referred to page 2, line 4, paragraph (7), which read as follows: (7) an appropriation of money received from the federal government; Number 1255 REPRESENTATIVE SEATON mentioned [the Alaska Housing Finance Corporation] (AHFC) and "the Technology Foundation." He asked where their expenditures "come in." REPRESENTATIVE STOLTZE stated his understanding that "those are all available for appropriation at any time." He added that any money "spent out of those" would have to be underneath the spending limit. REPRESENTATIVE SEATON mentioned loans and grants, and he asked if those are included in [HJR 9]. Number 1330 VIRGINIA "GINGER" BLAISDELL, Staff to Representative Bill Stoltze, sponsor of HJR 9, told the committee one of the concerns is that state corporations be able to continue "in some of their growth projects," like bonding. She pointed out that beginning on [page 1, line 16], paragraph (5), there is an exemption [which includes] revenue bond proceeds. She also referred to paragraph (6), which read as follows: (6) an appropriation required to pay obligations under general obligation bonds, revenue bonds, and certificates of participation issued by the State; MS. BLAISDELL stated that those are "fairly significant dollar amounts that our corporations rely on [for] the ability to leverage their funds to continue corporate growth." She noted that their operating expenditures would fall under this appropriation limit. Number 1381 REPRESENTATIVE SEATON, for purposes of clarification, asked if [Science and] Technology Corporation grants, for example, would be included in "this." MS. BLAISDELL responded that the Science and Technology Foundation grants would be included under part of the spending appropriation. CHAIR WEYHRAUCH asked if increases to the University [of Alaska's] budget would be limited under "this provision." REPRESENTATIVE STOLTZE answered yes, but not the federal largesse they receive, which has been a large part of their (indisc.). CHAIR WEYHRAUCH referred to the previously read paragraph (7), on page 2, line 4. He noted that, often, money received from the federal government requires "state matches." He said that funds from the federal government might be limited to "2 percent of the state," under [HJR 9]. REPRESENTATIVE STOLTZE answered that's correct. He stated his assumption that the 5 percent match would be part of the value judgment "of our body." In response to a follow-up question by Chair Weyhrauch, he concurred that that potentially could be subjected to the three-fourths vote. He added, "Or within the budget itself." CHAIR WEYHRAUCH asked the following: Let's say the budget comes to the floor of the House, and there's an asterisk by certain provisions which require three-fourths vote, because it would violate this spending cap - like the federal matching fund. And ... so those things ... could be voted on separately, but the entire budget would require just a 51 percent vote out of ... either body. REPRESENTATIVE STOLTZE responded that that is a possibility. He stated that he could see voting on the fiscal note separately, for example. CHAIR WEYHRAUCH said, "Anytime you limit spending this way, it raises significant policy questions that you need to start jumping into." Number 1591 REPRESENTATIVE SEATON asked - if state parks were to raise user fees in order to maintain the parks and keep them open - if that would "fall under this," and take a three-quarter vote "to do it." REPRESENTATIVE STOLTZE answered that, as [HJR 9] is written now, he believes it would. He indicated that the legislature's deliberations over what should be exempt would be a policy call. Number 1644 REPRESENTATIVE HOLM mentioned that the idea of having a provision of dedicating some gas tax to public maintenance has been "bantered around." He asked Representative Stoltz to comment on that, in regard to HJR 9. REPRESENTATIVE STOLTZE responded that that wouldn't [be included] under [HJR 9]; it would have to be a separate initiative. Number 1700 REPRESENTATIVE GRUENBERG asked Representative Stoltze to explain [paragraph] (8), on page 2, line 6, which read as follows: (8) a reappropriation of money already appropriated under an unobligated appropration that is not void under Section 13 of this article; REPRESENTATIVE STOLTZE clarified that it is money that the legislature has already appropriated once; it is "not double counting money." [Ms. Blaisdell nodded in agreement.] REPRESENTATIVE GRUENBERG asked, "Is there something that's going to be voided by this, under another article in the constitution?" REPRESENTATIVE STOLTZE answered that he did not believe so. REPRESENTATIVE GRUENBERG stated his understanding of "the way this thing works," as follows: If there's to be an appropriation, it cannot be greater than the appropriation [from] not the last year, but the previous year, unless three-quarters of each house vote yes, and then it can only go up by 2 percent. Is that the gist of the amendment? REPRESENTATIVE STOLTZ concurred. REPRESENTATIVE GRUENBERG asked, "What if there is national inflation above that amount? How do we get around that, without having to go for a vote of the people to change this amendment, which couldn't occur until the next general election?" REPRESENTATIVE STOLTZ responded that he doesn't necessarily want to get around it. He stated that he wants to avoid the need for greater taxes and delving into the [Alaska] Permanent Fund sooner than he says he thinks the public wants. He said, "Sometimes you have to look at the need to live within a leaner mean than you would perhaps like to." REPRESENTATIVE STOLTZE said that he doesn't like the idea of indexing. He indicated that "the whole idea of putting a spending limit on it" he does with "a little bit of squeamishness." He said that he would hate to further "tie our hands with [consumer price indexes] and things like that." He stated that it is only with a lot of reluctance and after soul searching that he pushed this [resolution] forward. Number 1882 REPRESENTATIVE GRUENBERG offered the following hypothetical situation: If there is national inflation that exceeds any amount, Alaska may be caught in an economic situation that's way beyond its control. He suggested that what "this" might do is cause state spending to dramatically decrease. He asked Representative Stoltze if he has fully considered that possibility. Representative Gruenberg asked how the state would meet its needs, because the real buying power of the same dollar amount in the given appropriation year might be insufficient to meet the same level of expenditures. He said that there are so many other types of expenditures that are exempted from this "cap" that it might cause the whole budget to go out of whack. He asked Representative Stoltze how he would meet that problem. REPRESENTATIVE STOLTZE stated that he thinks the budget is going out of whack on its own. He said that he has confidence in his colleagues and in those who succeed him in being able to establish priorities to meet the high end. He clarified that he thinks [HJR 9] will force [the legislature] to meet and fund [the state's] highest priorities and make value judgments about what should be funded. He indicated the legislature back in the 80s and stated that he thinks that, [even] under the state's leanest budgets, education and public safety were always close to fully funded. He questioned whether income tax should be used to fill the [budgetary] gap, for example. He added, "I don't know how that solves people's problems." Number 2046 REPRESENTATIVE BERKOWITZ stated the following: I'm wondering what it is about the experience of the last eight years, where you've had people whose primary mission has been to cut the budget - where we actually have cut the budget - why you think the budget is currently out of whack? REPRESENTATIVE STOLTZE responded, "That's fine chat for someone who doesn't understand a three-quarters vote of the CBR and some of the things that have caused increases in the budget." He explained that he pushed [HJR 9] forward because it's tough for sixty people in a bicameral system to cut the budget, and that's why he thinks the enforced discipline is needed. He opined that the administration of the last eight years wanted to increase the budget by an excess over what it currently is, and he stated that he is not afraid to compliment the [legislature] of the last eight years for holding the line. He said, "We were fighting an uphill battle." He indicated that people were going in opposite philosophical directions, with procedural tools that forced spending increases. Number 2137 REPRESENTATIVE BERKOWITZ said that he would like to point out a couple of things: First, the legislature writes budgets, the governor does not. Second, he stated that he is very interested in seeing how the current administration does, in terms of holding the line, because every transitional report he has seen has called for increased spending, with one exception. He told Representative Stoltze, "You may tout this as a philosophical difference - I think that's easy camouflage to hide behind - but that's simply political rhetoric." He suggested to Representative Stoltze that, if he intends to move legislation through the legislature, particularly constitutional amendments, he might refrain from insulting people on the opposite sides of the [table]. Number 2175 CHAIR WEYHRAUCH interjected, "We all have to be courteous, and kind, and calm." He stated that he appreciated Ms. Blaisdell's clarifications to the committee. He told Representative Stoltze that he thinks that brainstorming these kinds of concepts within the context of the budget is not harmful. He added, "As we've noticed, it stimulates some vigorous debate." CHAIR WEYHRAUCH announced that HJR 9 would be heard and held.
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