Legislature(2003 - 2004)
01/13/2004 08:00 AM House STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HJR 3-CONST. AM: PERMANENT FUND CHAIR WEYHRAUCH announced that the next order of business was HOUSE JOINT RESOLUTION NO. 3, Proposing amendments to the Constitution of the State of Alaska relating to the Alaska permanent fund. TAPE 04-03, SIDE A 9:49 a.m. REPRESENTATIVE HARRY CRAWFORD, Alaska State Legislature, as Co- sponsor, told the committee that he believes this is one of the most controversial subjects the legislature will deal with. He shared that the permanent fund dividend (PFD) has benefited his family by providing the funds for the down payment on the house he lives in, for his son to attend the University of Alaska Fairbanks, and for his daughter to attend school after she graduates this year. REPRESENTATIVE CRAWFORD offered his belief that the PFD program was started for two reasons: First, to enlist the public's support in protecting the fund itself, which has been successful. Second, to provide benefits to the citizens of the state, which has also been very successful. He said he sees no reason to change the "payout." He explained that if the method of payout is to be changed, it is necessary to have "buy-in" by the citizens of the state. He told the members that he believes the only way to get permission [to make changes] is to take [the issue] before the people for a vote. That is what HJR 3 is all about, he said. REPRESENTATIVE ERIC CROFT, Alaska State Legislature, as Co- sponsor, told the committee that he had nothing more to add, because Representative Crawford had spoken eloquently on the subject. 9:51 a.m. CHAIR WEYHRAUCH said that the public must realize that any amendment to the constitution must first pass the legislature and be voted on by the public; therefore, any change in the constitutional scheme dealing with the payout of the dividend which affects the constitution has to be voted on by the public. He emphasized that the legislature, in itself, could not make this change. The same is true of the percent of market value [POMV] issue that is being debated. Any change must be voted on by the people, he said. REPRESENTATIVE CRAWFORD explained that the only thing that is protected in the constitution right now is the principal of the permanent fund. The payout from the earnings is only protected by statute. CHAIR WEYHRAUCH asked for clarification that the intent of this resolution is to "constitutionalize" the dividend payout. REPRESENTATIVE CROFT replied that is absolutely correct. 9:53 a.m. REPRESENTATIVE SEATON commented that the discussion of the POMV and the issue of earnings reserve is due to the fact that there is a conflict in the way the permanent fund is managed. He explained that when the permanent fund was first created the investments were in bonds and it was an interest-bearing account. There was a steady flow of interest and earnings. After about 10 years the permanent fund managers changed their basis of investing in the fund to an asset-based account, including investing in real estate and stocks. He explained that [an asset-based account] doesn't generate income until it is sold. REPRESENTATIVE SEATON explained that his problem with HJR 3 is that it institutes the old way that no longer works with the current way that we invest the permanent fund. He clarified that he does not have a problem with having the dividend secured, rather with this particular way of doing it. He asked Representative Crawford to explain why the legislature should insert into the constitution an earnings formula that is no longer consistent with the way the funds are managed. REPRESENTATIVE CRAWFORD responded that [HJR 3] would not preclude "changing the way we deal with the fund," but will "protect the way we do a payout." He stated that he has nothing against a POMV approach as it relates to the process and "the way rates deal with it." He indicated his concern is in regard to "what the ... payout is after that." He stated that he thinks there needs to be a vote of the people before it is decided whether there will be any earnings that go to the state. CHAIR WEYHRAUCH offered his understanding that there has to be a vote of the people, no matter what. REPRESENTATIVE CRAWFORD answered that that applies to a change to the POMV approach, which would be a constitutional change. He reminded the committee that, currently, there only has to be a majority vote in the legislature to take money out of the earnings reserve. That, he said, is the issue that is being addressed in [HJR 3]. CHAIR WEYHRAUCH asked if it wasn't true that in the entire history of the earnings reserve, the legislature has never taken money out. REPRESENTATIVE CRAWFORD said that's true. However, he added, "We haven't gotten to the point where we have no money. And we're getting closer and closer to that day when the constitutional budget reserve runs out and we'll be forced by the courts to go to the earnings reserve account." Representative Crawford said he wants to head that day off. CHAIR WEYHRAUCH asked Representative Crawford to confirm that there is nothing in [HJR 3] that addresses the money that would go to the government to run government programs "when we reach that so-called rainy day," but only addresses the payout of dividends. REPRESENTATIVE CRAWFORD replied that [HJR 3 deals] with the payout from the earnings reserve account, whether it goes to government or to dividends. CHAIR WEYHRAUCH questioned whether this proposal really protects dividends if it can go to government as well. REPRESENTATIVE CRAWFORD responded that [HJR 3] would protect where the payout goes. CHAIR WEYHRAUCH said, "If we stay true to your philosophic base of ensuring that the permanent fund dividend benefits the people who need it most for ... mortgages, food, housing, ... and education, wouldn't it be best to ... treat the permanent fund like a true trust, and pass out the entire value of the trust to the people to let them spend it the way they want?" REPRESENTATIVE CRAWFORD replied that that doesn't take into account the generations to come. 9:56 a.m. CHAIR WEYHRAUCH suggested that people right now can invest that [money] for their own generations. He indicated that that would vest the power of the permanent fund to the people. He asked, if buy-in is desirable, then wouldn't that be a way to do it? REPRESENTATIVE CRAWFORD said that that doesn't address, for example, people who decide to come live in Alaska in the future and "some that may leave that may take that with them." CHAIR WEYHRAUCH said, "If you trust the people, let them invest it for their own future generations to come." REPRESENTATIVE CRAWFORD noted again that there will be other generations of people who travel to Alaska [and stay]. He told the committee that he moved to Alaska for the pipeline and decided that Alaska was the place that he wanted to live and raise his family. He stated his belief that there will be other new Alaskans who find their way to the state the way he did. He said he does not want to "close that door." CHAIR WEYHRAUCH remarked, "When I and many other people came to Alaska, there was no PFD, and we came to pitch a hand in, rather than looking for a handout." 9:56 a.m. REPRESENTATIVE CRAWFORD told Chair Weyhrauch that that is a good point. He stated that he has never felt that the PFD was a handout. He told the committee that he receives a small payment from ExxonMobil Corporation about 4 times a year, because his grandfather owned 40 acres in south Texas that had oil and gas on it. Nobody has ever called that a handout from ExxonMobil Corporation, because it is an inheritance. Representative Crawford stated his belief that everyone can pitch a hand in to Alaska; the PFD is the royalty that Alaskans get from the value of [the state's] oil, not a handout. REPRESENTATIVE CRAWFORD continued: Three quarters of all the oil revenues that [have] come into the state since we established the permanent fund went to government; one quarter went to the people - for direct benefit to the people. And I don't think that I want to be responsible for taking ... the people's quarter away, without ever giving the people the right to speak on it. CHAIR WEYHRAUCH joked, "I just wanted to find what button I could push that would get you ... to the heart of what you're really after." He told Representatives Crawford and Croft that the committee is not through hearing HJR 3. He stated that he cannot predict the chances of it moving anywhere, but he would give the co-sponsors the honor of hearing it in committee and listening to the public's feelings about it. [HJR 3 was heard and held.]
| Document Name | Date/Time | Subjects |
|---|