Legislature(2019 - 2020)GRUENBERG 120

04/30/2019 03:00 PM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HJR 18 CONST AM: PERMANENT FUND; POMV;EARNINGS TELECONFERENCED
Heard & Held
-- Public Testimony --
*+ HJR 5 CONST. AM: STATE TAX; INTIATIVE TELECONFERENCED
Heard & Held
-- Public Testimony --
+= HJR 6 CONST. AM.:PERMANENT FUND & DIVIDEND TELECONFERENCED
Heard & Held
-- Public Testimony --
*+ HJR 7 CONST AM:APPROP. LIMIT; RESERVE FUND TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                                                                                                                                
             HJR  5-CONST. AM: STATE TAX; INTIATIVE                                                                         
          HJR  6-CONST. AM.:PERMANENT FUND & DIVIDEND                                                                       
          HJR  7-CONST AM:APPROP. LIMIT; RESERVE FUND                                                                       
                                                                                                                                
3:59:52 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced  that the next order  of business would                                                               
be  HOUSE JOINT  RESOLUTION NO.  5, Proposing  amendments to  the                                                               
Constitution   of   the   State   of   Alaska   prohibiting   the                                                               
establishment  of,  or  increase  to, a  state  tax  without  the                                                               
approval  of  the  voters  of  the state;  and  relating  to  the                                                               
initiative process  and HOUSE JOINT  RESOLUTION NO.  6, Proposing                                                               
amendments to  the Constitution of  the State of  Alaska relating                                                               
to the Alaska permanent fund  and the permanent fund dividend and                                                               
HOUSE  JOINT  RESOLUTION  NO.  7,  Proposing  amendments  to  the                                                               
Constitution of the State of  Alaska relating to an appropriation                                                               
limit; relating to  the budget reserve fund  and establishing the                                                               
savings reserve fund; and relating to the permanent fund.                                                                       
                                                                                                                                
4:00:03 PM                                                                                                                    
                                                                                                                                
MIKE BARNHILL, Director of Policy,  Office of Management & Budget                                                               
(OMB),  Office of  the Governor,  on  behalf of  the House  Rules                                                               
Standing  Committee, sponsor  of  HJR 5,  HJR 6,  and  HJR 7,  by                                                               
request  of  the governor,  relayed  that  the three  resolutions                                                               
comprise  Governor   Michael  J.   Dunleavy's  proposal   to  the                                                               
legislature  to  amend the  Alaska  State  Constitution in  three                                                               
separate vehicles  to provide for long-term  fiscal stability and                                                               
sustainability.    He stated  that  HJR  5  and  HJR 6  are  both                                                               
examples  of  direct  democracy.     The  proposal  under  HJR  5                                                               
stipulates  that whenever  the  legislature enacts  a  tax or  an                                                               
increase to  the rate  of a tax,  a vote of  the people  would be                                                               
required.                                                                                                                       
                                                                                                                                
REPRESENTATIVE LEDOUX  referred to Mr. Barnhill's  statement that                                                               
the proposed resolutions  are examples of direct  democracy.  She                                                               
opined  that  HJR  5,  Section  1(b)  is  an  example  of  direct                                                               
democracy;  however,  Section  1(c)  is the  converse  of  direct                                                               
democracy  in  that  any  law   enacted  by  the  voters  through                                                               
initiative must be  approved by the legislature.   She added that                                                               
she supports  Section 1(b) but  does not believe Section  1(c) to                                                               
represent direct democracy.                                                                                                     
                                                                                                                                
MR.  BARNHILL responded  that there  are two  elements to  HJR 5:                                                               
When the legislature  enacts a tax or an increase  in the rate of                                                               
an existing tax, it would require  a vote of the people.  Section                                                               
1(c) is the converse  of 1(b).  When people initiate  a tax or an                                                               
increase in the  rate of an existing tax, which  is an example of                                                               
direct democracy, the tax question  comes back to the legislature                                                               
for  approval.   He  maintained  that  both  are uses  of  direct                                                               
democracy and already exist in  the constitution.  He stated that                                                               
when the legislature  enacts any law, under  the constitution the                                                               
people have the right through  the referendum process to consider                                                               
it and  reject it.   Conversely, under  the constitution,  if the                                                               
people were  to initiate and  enact any law, the  legislature can                                                               
amend it  immediately but  can't repeal  it for  two years.   The                                                               
change proposed under HJR 5  involves allowing the legislature to                                                               
reject  a   voter-initiated  law  during  the   next  legislative                                                               
session, rather than waiting two years.                                                                                         
                                                                                                                                
REPRESENTATIVE   LEDOUX  maintained   that   what  Mr.   Barnhill                                                               
described  is  not  exactly  direct democracy.    She  asked  for                                                               
confirmation  that  the  legislature's   amendment  to  a  voter-                                                               
initiated  law  cannot constitute  a  substantial  change to  the                                                               
initiative.                                                                                                                     
                                                                                                                                
MR. BARNHILL  responded that there  are court cases  that attempt                                                               
to define the line between an  amendment and a repeal of a voter-                                                               
initiated  law.    He  added  that the  court  looks  at  whether                                                               
substantively the amendment  amounts to a repeal.   He maintained                                                               
that Section  1(c) is absolutely  an example of  direct democracy                                                               
but would tighten  the timelines for the legislature  to reject a                                                               
voter-initiated law.                                                                                                            
                                                                                                                                
CO-CHAIR FIELDS asked whether a  legislature that did not want to                                                               
approve  a  voter-initiated tax  would  need  to  vote on  it  or                                                               
whether the tax would die through legislative inaction.                                                                         
                                                                                                                                
MR. BARNHILL stated that under  HJR 5, the legislature would need                                                               
to  act  on the  law  before  it  is  approved; no  action  would                                                               
constitute  a "pocket  veto"  of  the law.    He  added that  the                                                               
companion resolution, SJR 4, was  changed by the Senate Judiciary                                                               
Standing  Committee to  a "pocket  passage"  approach to  address                                                               
concerns  that the  other approach  could potentially  reduce the                                                               
power of the people to initiate a tax law.                                                                                      
                                                                                                                                
4:05:44 PM                                                                                                                    
                                                                                                                                
MR. BARNHILL reminded  the committee that HJR 6  was discussed in                                                               
the 4/25/19 House  State Affairs Standing Committee  meeting.  He                                                               
maintained that HJR 6 is also  an example of direct democracy; it                                                               
proposes  that any  change in  the calculation  of the  permanent                                                               
fund dividend  (PFD) in statute  would also be considered  by the                                                               
people.   He continued by saying  that HJR 7 is  an appropriation                                                               
limit proposal.   He offered that together  the three resolutions                                                               
form Governor Dunleavy's core legislative  agenda for the current                                                               
session;  the governor  feels very  strongly  about allowing  the                                                               
people  the  opportunity to  consider  each  of these  [proposed]                                                               
amendments  to the  constitution separately  in order  to achieve                                                               
fiscal stability and fiscal sustainability in the state.                                                                        
                                                                                                                                
MR. BARNHILL stated that HJR 5  is referred to in other states as                                                               
the  taxpayer  bill  of  rights; it  is  inspired  by  Colorado's                                                               
example, in which  the people initiated a change  to the Colorado                                                               
State Constitution  in 1992  requiring a vote  of the  people any                                                               
time there is a change to a  tax.  He mentioned other states with                                                               
similar provisions:   The State of Missouri  enacted an amendment                                                               
to  the  Missouri State  Constitution  requiring  a vote  of  the                                                               
people any  time there was a  tax or fee that  increased revenues                                                               
by more  than $50 million  or the inflation-adjusted value.   The                                                               
State of  Washington has a  constitutional provision  requiring a                                                               
vote of  the people for  property taxes  at the local  level that                                                               
are  in excess  of 1  percent of  property values.   California's                                                               
constitution  also requires  a vote  of the  people at  the local                                                               
level.                                                                                                                          
                                                                                                                                
REPRESENTATIVE LEDOUX suggested that  western states, rather than                                                               
eastern states, have  the initiative process.   She asked whether                                                               
any of the  states that Mr. Barnhill  mentioned allowing taxation                                                               
through  the initiative  process  have  provisions requiring  the                                                               
legislature  to   approve  the   taxes  -  ether   implicitly  or                                                               
explicitly.                                                                                                                     
                                                                                                                                
MR. BARNHILL  responded that he  did not know but  could research                                                               
that.                                                                                                                           
                                                                                                                                
4:09:06 PM                                                                                                                    
                                                                                                                                
WILLIAM MILKS,  Senior Assistant Attorney General,  Legislation &                                                               
Regulations Section,  Civil Division (Juneau), Department  of Law                                                               
(DOL), on behalf  of the House Rules  Standing Committee, sponsor                                                               
of  HJR 5,  by  request  of the  governor,  paraphrased from  the                                                               
sectional analysis,  which read as follows  [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     Section 1:  This section would add  two new subsections                                                                  
     to  the tax  clause of  the Alaska  Constitution. Taken                                                                    
     together, the  two subsections  would require  that any                                                                    
     new state  tax or increase  to the rate of  an existing                                                                    
     state tax be  approved by both the  legislature and the                                                                    
     voters.                                                                                                                    
                                                                                                                                
     Subsection  (b)  would  require that  any  law  enacted                                                                    
     through the legislative process  that would establish a                                                                    
     new  state tax  or  increase the  rate  of an  existing                                                                    
     state  tax  shall not  take  effect  unless the  voters                                                                    
     approve  the   proposed  law  in  the   next  statewide                                                                    
     election. If  the voters approve  the proposed  law, it                                                                    
     would  take  effect  90 days  after  the  election  was                                                                    
     certified.                                                                                                                 
                                                                                                                                
     Subsection (c) would require that  any law proposed for                                                                    
     enactment through  the initiative process  and approved                                                                    
     by the voters  that would establish a new  state tax or                                                                    
     increase the  rate of an  existing state tax  shall not                                                                    
     take  effect  unless  the legislature,  by  resolution,                                                                    
     approved the initiated  measure by the end  of the next                                                                    
     regular session. The legislature  would have to approve                                                                    
     it  by  majority  vote  in  a  joint  session.  If  the                                                                    
     legislature  approved  of  the  initiated  measure,  it                                                                    
     would  take  effect  90 days  after  the  legislature's                                                                    
     approval.                                                                                                                  
                                                                                                                                
     Section 2: This section  would make a conforming change                                                                  
     to the initiative  process in Section 6  of Article XI,                                                                    
     providing   an   exception   to  the   effective   date                                                                    
     requirements for initiatives.                                                                                              
                                                                                                                                
     Section  3:  This  section   would  require  that  this                                                                  
     amendment be placed  on the ballot in  the 2020 general                                                                    
     election.                                                                                                                  
                                                                                                                                
CO-CHAIR FIELDS  referred to a memorandum  from Legislative Legal                                                               
Services  [dated  4/19/19],  included in  the  committee  packet,                                                               
which suggested that HJR 5  is sufficiently sweeping to require a                                                               
constitutional convention,  because it constitutes a  revision to                                                               
the constitution and not an amendment.                                                                                          
                                                                                                                                
MR. MILKS  explained that the  Department of Law  (DOL) considers                                                               
the  proposed  constitutional  amendment  to  be  an  appropriate                                                               
amendment, because  the Alaska State Constitution  already allows                                                               
for the  people or the  legislature to enact laws,  and processes                                                               
exist for veto  or override.  He reiterated that  since the state                                                               
already has  an initiative or  referendum process,  the amendment                                                               
would not  constitute a  sweeping change.   He mentioned  that in                                                               
the Alaska  Supreme Court  Case, Bess v.  Ulmer [1991],  cited in                                                             
the memo,  two of the  three amendments considered were  found to                                                               
be  appropriate amendments,  and only  one  was found  not to  be                                                               
appropriate;  that amendment  was a  sweeping change  to a  large                                                               
number of criminal defense rights.                                                                                              
                                                                                                                                
CO-CHAIR FIELDS  relayed the opinion  from the  Legislative Legal                                                               
Services  memorandum,  dated  4/19/19,  which  read  in  part  as                                                               
follows:                                                                                                                        
                                                                                                                                
     Under art. XIII,  sec. 1, Constitution of  the State of                                                                    
     Alaska, an  amendment to the  constitution may  be made                                                                    
     with   a  two-thirds   vote  of   each  house   of  the                                                                    
     legislature  and a  majority  vote  of the  electorate.                                                                    
     Under   art.  XIII,   sec.  4,   a   revision  to   the                                                                    
     constitution  may  only  be made  at  a  constitutional                                                                    
     convention....                                                                                                             
                                                                                                                                
     The  amendment prevents  the legislature  from imposing                                                                    
     new  tax or  increasing a  tax without  voter approval.                                                                    
     The  result   will  be  a  fundamental   shift  in  the                                                                    
     constitutional  authority of  the  legislature to  tax.                                                                    
     As identified  in Bess [v.  Ulmer] the changes  seem to                                                                    
     'substantially  alter the  substance  and integrity  of                                                                    
     the  state constitution  as a  document of  independent                                                                    
     force and effect....'                                                                                                      
                                                                                                                                
4:13:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL mentioned that HJR  5 calls for any change to                                                               
an existing tax to go to a  vote of the people automatically.  He                                                               
stated   that  the   referendum/ballot   initiative  process   is                                                               
difficult  work  as  is  the  process of  passing  a  bill.    He                                                               
expressed  his  belief that  the  only  tax increase  during  his                                                               
tenure in the  legislature was the Spill  Prevention and Response                                                               
(SPAR)  [surcharge  of  .0095  cent-per-gallon  on  refined  fuel                                                               
sold].    He  asked  whether under  the  proposed  constitutional                                                               
amendment, such a tax increase would need  to go to a vote of the                                                               
people.                                                                                                                         
                                                                                                                                
MR.  BARNHILL answered  that  he doesn't  know  whether the  SPAR                                                               
[surcharge] is  a tax or  a fee.   He said that  if it was  a fee                                                               
then it  would not go to  a vote of the  people; if it was  a tax                                                               
then it  would.  He  maintained that unlike Missouri,  which puts                                                               
taxes  and fees  to  a  vote of  the  people, the  administration                                                               
recognizes that  putting every  fee increase to  the vote  of the                                                               
people  could  be  burdensome;  it  would  overload  the  ballot,                                                               
requiring  presentations on  many issues.   He  offered that  the                                                               
proposed amendment is intended to divide taxes and fees.                                                                        
                                                                                                                                
MR. MILKS offered  that the proposed amendment  refers to changes                                                               
in a tax or  a fee.  He relayed the definition of  tax:  a charge                                                               
laid by government upon persons  or property for public purposes.                                                               
He said that in  contrast, a user fee is a  charge to someone for                                                               
permission to do something or to be licensed for an occupation.                                                                 
                                                                                                                                
REPRESENTATIVE WOOL  asked whether motor fuel  tax is a fee  or a                                                               
tax.                                                                                                                            
                                                                                                                                
MR. BARNHILL  responded, "That is  a tax."   He said that  if the                                                               
legislature enacted  into law a  5 percent increase, it  would go                                                               
to a vote of the people.                                                                                                        
                                                                                                                                
REPRESENTATIVE WOOL  expressed his  reluctance with  the proposed                                                               
amendment as follows:  "If I ask  my kid's class if they want ice                                                               
cream every day  for lunch, they're probably going  to say 'Yes.'                                                               
Do they  really need  ice cream  every day  for lunch?   Probably                                                               
not."   He stated that  he is not  trying to be  disrespectful to                                                               
the public.  He offered that if  you ask a room full of people if                                                               
they want to pay  more for gas at the pump,  they would say 'No';                                                               
however, he contended  that the second half of the  question - do                                                               
you want  your roads fixed?  - is important.   Going back  to his                                                               
earlier example,  he said, "If  I ask my  kids, 'Hey, do  you all                                                               
want to  have diabetes?' ... they're  going to say 'No,'  but the                                                               
ice cream might  dominate their mind."  He said  that it would be                                                               
the same with the tax.  He  maintained that some of the taxes are                                                               
complicated.  When raising a tax,  it is important to look at the                                                               
totality of  the state economy  to understand the  implication of                                                               
the tax increase.                                                                                                               
                                                                                                                                
MR.  BARNHILL  responded   that  he  acknowledges  Representative                                                               
Wool's concerns; however, he maintained  that direct democracy is                                                               
a part of Alaska's constitutional  framework.  He relayed that it                                                               
is the  administration's position  that the  issue of  new taxes,                                                               
increases in  the rate of a  tax, and the calculation  of the PFD                                                               
are  sufficiently  important issues  that  the  people should  be                                                               
consulted.   He mentioned that  if the legislature enacts  a tax,                                                               
the  people  -   with  the  tools  currently   available  in  the                                                               
constitution - can put a referendum  on the ballot.  The proposed                                                               
constitutional  amendment   "pre-packages"  that  process.     He                                                               
maintained that a new tax  is important enough to warrant getting                                                               
the public's view on it.                                                                                                        
                                                                                                                                
REPRESENTATIVE WOOL  asked, "How  easy do you  want to  make it?"                                                               
He  suggested  that rejecting  a  law  -  that has  been  enacted                                                               
through ballot  initiative - by  legislative inaction may  be too                                                               
easy.  He  mentioned the legalization of marijuana  as an example                                                               
and offered that perhaps the  legislature should have to wait two                                                               
years to  repeal a  law; if the  law has been  in effect  for two                                                               
years it may be impossible to repeal.                                                                                           
                                                                                                                                
4:20:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR KREISS-TOMKINS said that  the terms "taxes," "fees," and                                                               
"surcharges"  are  semantics  used  by politicians  to  frame  an                                                               
issue.  He  maintained that if the constitution  is amended based                                                               
on  one of  these  terms  at the  exclusion  of  the others,  the                                                               
substantive difference between  them is very important.   He said                                                               
that all money  raised from taxes, fees, or surcharges  end up in                                                               
the   general  fund   (GF).     He   requested   in  writing   an                                                               
interpretation of  how the three  will be distinguished  from one                                                               
another.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  LEDOUX  stated  that last  year  the  legislature                                                               
eliminated some oil  tax credits.  She  asked whether eliminating                                                               
oil tax credits  would be considered a change  in taxes requiring                                                               
a vote of the people.                                                                                                           
                                                                                                                                
MR.  MILKS  responded that  the  intent  of  HJR  6 is  that  the                                                               
constitutional amendment would be drafted  such that a new tax or                                                               
change in the rate  of a tax would go to a vote  of the people; a                                                               
change in  deduction would not  go to a vote  of the people,   In                                                               
response  to Representative  Kreiss-Tompkins  he  stated that  in                                                               
interpreting constitutional amendments,  the Alaska Supreme Court                                                               
will look at the records  of the committees and the understanding                                                               
of  the legislators  and  the  people.   He  reiterated that  the                                                               
constitutional amendment  proposal refers to taxes  as understood                                                               
by  the  Alaska Constitutional  Convention  -  a charge  laid  by                                                               
government upon persons  or property for public  purposes - which                                                               
refers to property, sales, and  income taxes levied by the state.                                                               
He asserted that this understanding  of taxes contrasts with fees                                                               
-  the permission  to do  something -  or licenses  - such  as an                                                               
occupational license.                                                                                                           
                                                                                                                                
REPRESENTATIVE  LEDOUX conjectured  that  among  the states  that                                                               
have constitutional  caps on taxes,  fees, or both,  people would                                                               
not vote  to raise their  taxes very  often.  She  mentioned that                                                               
most states  don't have  a permanent fund  like Alaska  and asked                                                               
how the states pay for their core services.                                                                                     
                                                                                                                                
MR. BARNHILL answered that the states  that he referred to do not                                                               
have   constitutional  caps;   and  they   have  constitutionally                                                               
required  referendums.   He stated  that in  Colorado since  1992                                                               
there  have  been  just  over  a  dozen  taxes  proposed  by  the                                                               
legislature; of  those, there  was an  increase in  the cigarette                                                               
tax rate,  an enactment of  a marijuana  tax, and an  increase in                                                               
the rate  of the  marijuana tax.   All three  were approved  by a                                                               
vote of the people.   He added that it is  not impossible for new                                                               
taxes  to  become  law  in  Colorado,  but  it  is  clearly  more                                                               
difficult.                                                                                                                      
                                                                                                                                
REPRESENTATIVE   LEDOUX   expressed    her   understanding   that                                                               
Colorado's constitutional  provision does not apply  to fees, and                                                               
there has been a hefty  increase in fees since the constitutional                                                               
provision went into effect.                                                                                                     
                                                                                                                                
MR.  BARNHILL replied  that he  did not  have information  on the                                                               
increase in  fees in  Colorado; however,  he confirmed  that fees                                                               
are  excluded from  the Colorado  constitutional  amendment.   He                                                               
added  that  there has  been  litigation  and [Colorado]  Supreme                                                               
Court decisions to distinguish fees from taxes.                                                                                 
                                                                                                                                
4:26:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS stated  that he  does not  support the  proposed                                                               
amendments and  believes that they  represent a  backdoor attempt                                                               
to  defund  core  services;  defunding   of  services  is  wildly                                                               
unpopular in  the state  of Alaska.  He maintained  that evidence                                                               
from around  the country demonstrates  that when  such provisions                                                               
are adopted  in other  states, it leads  to dramatic  declines in                                                               
funding  for   education,  higher   education,  and   other  core                                                               
services.   He  asserted that  if  those are  the decisions  that                                                               
Alaska wishes to  make, it should make them  in a straightforward                                                               
manner and not through a backdoor effort.                                                                                       
                                                                                                                                
4:27:01 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:27 p.m. to 4:29 p.m.                                                                       
                                                                                                                                
4:28:41 PM                                                                                                                    
                                                                                                                                
ED KING,  Chief Economist, Office  of Management &  Budget (OMB),                                                               
Office of  the Governor,  on behalf of  the House  Rules Standing                                                               
Committee,  sponsor  of  HJR  7,  by  request  of  the  governor,                                                               
presented  HJR  7 with  the  use  of a  PowerPoint  presentation,                                                               
entitled  "House Joint  Resolution  7 Appropriation  Limit."   He                                                               
referred to a description of  the current constitutional spending                                                               
limits  on slide  2,  entitled  "Current Constitutional  Spending                                                               
Limit (Article  9, Section 16),"  and relayed that the  limit was                                                               
set  at  $2.5  billion  in 1982,  allowing  for  adjustments  for                                                               
inflation.                                                                                                                      
                                                                                                                                
MR. KING  pointed out  that slide 3,  entitled "UGF  Spending and                                                               
Limit   History   (Inflation    Adjusted),"   shows   a   graphic                                                               
representation  of how  the current  spending and  spending limit                                                               
interact.   He  stated  that  in the  early  1980s,  there was  a                                                               
massive  increase  in  revenue  from  oil  with  a  corresponding                                                               
increase  in spending;  in 1982  a limit  was set  due to  excess                                                               
spending.   He maintained that  the limit was not  effective when                                                               
oil revenues  spiked again,  as shown  on the  right side  of the                                                               
graph; it did not prevent the growth of government.                                                                             
                                                                                                                                
MR. KING  moved on  to slide  4, entitled  "What if  the Proposed                                                               
Spending   Cap   Passed   before  Oil   Prices   Spiked?"   which                                                               
demonstrates  the  current  spending limit  versus  the  proposed                                                               
spending limit;  it reveals that  if the proposed limit  had been                                                               
in place, $29 billion would not  have been spent; and that amount                                                               
invested would have  generated an additional $5-6  billion in the                                                               
POMV rather than the current $3 billion.                                                                                        
                                                                                                                                
MR. KING  turned to  slide 5, entitled  "Sources of  UGF Spending                                                               
Growth,"  to  point out  the  sectors  in  which the  growth  [of                                                               
government] occurred in the years surrounding 2010.                                                                             
                                                                                                                                
4:30:31 PM                                                                                                                    
                                                                                                                                
CORI MILLS,  Senior Assistant Attorney  General, Labor  and State                                                               
Affairs Section, Department of Law  (DOL), on behalf of the House                                                               
Rules Standing  Committee, sponsor  of HJR 7,  by request  of the                                                               
governor, continued  with slide 6, entitled  "Appropriation Limit                                                               
(SJR  6/HJR 7),"  to point  out that  the current  constitutional                                                               
appropriation limit has not worked  to create an actual limit for                                                               
spending.   She  stated  that the  Constitutional Budget  Reserve                                                               
Fund (CBRF) was  created to be used during  Alaska's "down time";                                                               
however, over the  past four years, the legislature  has not been                                                               
able to access the CBRF by a  majority vote to fill a fiscal gap,                                                               
because the Alaska Supreme Court  determined that the legislature                                                               
must first take into account  the earnings reserve account (ERA),                                                               
and the ERA has always had enough to cover the budget.                                                                          
                                                                                                                                
MS.  MILLS referred  to slide  7, entitled  "Appropriation Limit:                                                               
Section 1(a),"  and relayed that the  current appropriation limit                                                               
is $2.5 billion  plus inflation; the goal under HJR  7 is to make                                                               
the limit more meaningful and  impactful by tying it to spending.                                                               
She reviewed slide 7, which read as follows:                                                                                    
                                                                                                                                
   • Appropriation Limit -- "Appropriations made for a                                                                          
     fiscal  year  shall  not  exceed  the  average  of  the                                                                  
     appropriations made in the  previous three fiscal years                                                                    
     by more than fifty percent  of the cumulative change in                                                                  
     population  and  inflation  since   January  1  of  the                                                                  
     previous  calendar year,  derived from  federal indices                                                                  
     as  prescribed by  law, or  two  percent, whichever  is                                                                
     less                                                                                                                     
                                                                                                                                
       o Provides a list of exceptions for spending that                                                                      
        falls outside the appropriation limit cap                                                                               
     o Examples: permanent fund dividends and money placed                                                                      
        in the fund; money for disasters; obligations and                                                                       
        proceeds from G.O. bonds and revenue bonds                                                                              
      o Most substantial change from existing exceptions--                                                                      
        capital spending is not an exception and falls                                                                        
        within the appropriation limit cap                                                                                      
                                                                                                                                
MS.  MILLS  turned   to  slide  8  for   a  graphic  illustrating                                                               
expenditures that would  fall within the limit and  are capped by                                                               
the limit and the expenditures  that would fall outside the limit                                                               
- the PFD, federal receipts, and  other trust monies that must be                                                               
spent for  specific purposes.   She  explained that  the proposed                                                               
exclusions  are currently  exceptions  within the  constitutional                                                               
appropriation  limit  except  for   capital  spending,  which  is                                                               
currently an exception but would not be under HJR 7.                                                                            
                                                                                                                                
MS. MILLS  moved on  to slide  9, entitled  "Appropriation Limit:                                                               
Section 1(b)  and (c)," to  describe the new  "savings waterfall"                                                               
under HJR 7.  Slide 9 read as follows:                                                                                          
                                                                                                                                
   • Excess revenues would automatically be deposited into                                                                      
     savings accounts in priority order                                                                                         
                                                                                                                                
     Total amount in general fund that is "unexpended,                                                                          
     unobligated, and unappropriated" (i.e., excess                                                                             
     revenues)                                                                                                                  
                                                                                                                                
          Priority #1: Pay back the permanent fund                                                                              
          principal 50% of the income that was deposited                                                                        
          into the ERA that fiscal year                                                                                         
                                                                                                                                
               Priority #2: [if money remains after                                                                             
               priority #1] Get savings reserve fund                                                                            
               balance up to appropriation limit (formerly                                                                      
               the CBR)                                                                                                         
                                                                                                                                
                    Priority #3: [if money remains after                                                                        
                    priority #2] Put money into permanent                                                                       
                    fund principal to continue growing the                                                                      
                    fund                                                                                                        
                                                                                                                                
MS. MILLS  referred to slide  10, entitled  "Appropriation Limit:                                                               
Sections 2,3,  and 5," to relay  that under HJR 7  the CBRF would                                                               
get a  new name,  [savings reserve  fund]; the  Senate [Judiciary                                                               
Standing Committee]  removed that  provision [from  the companion                                                               
resolution, SJR 6, during the  4/1/19 meeting].  She reviewed the                                                               
left side  of slide 10 as  follows:  The existing  CBRF is funded                                                               
by tax  and royalty settlements, which  can be spent by  a three-                                                               
quarters vote [of  the legislature].  All the  money available in                                                               
GF is  to be returned to  CBRF - pursuant to  Article IX, Section                                                               
17(d), of the Alaska State Constitution  - which is known as "the                                                               
sweep."   The repayment via  the sweep has not  occurred, because                                                               
the legislature  has used the  three-quarters vote to  return the                                                               
money to GF, a process known as the "reverse sweep."                                                                            
                                                                                                                                
MS.  MILLS turned  to the  right side  of slide  10 to  relay the                                                               
proposal under  HJR 7  as follows:   Tax and  royalty settlements                                                               
would  still  go into  the  savings  reserve fund  (formerly  the                                                               
CBRF).   A  portion of  excess  revenues, mentioned  on slide  9,                                                               
would also go  into the savings reserve fund.   The sweep and the                                                               
[need for  a] three-quarters vote  would be  eliminated; however,                                                               
the legislature,  by majority vote,  would be able to  access the                                                               
savings reserve  fund to fill  the gap between what  is available                                                               
in the GF  for appropriation up to the appropriation  limit.  She                                                               
maintained  that  between  the  changes   to  the  CBRF  and  the                                                               
appropriation  limit,   the  two  would  work   more  in  harmony                                                               
together,  create a  more effective  cap on  government spending,                                                               
and create a more sustainable savings model.                                                                                    
                                                                                                                                
4:36:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS opened public testimony on  HJR 5, HJR 6, and HJR
7.                                                                                                                              
                                                                                                                                
4:36:18 PM                                                                                                                    
                                                                                                                                
JUSTIN PARISH  testified that although  HJR 5 is being  "sold" as                                                               
direct democracy, it  is an unprecedented attack on  the power of                                                               
the initiative process, which is  direct democracy.  He mentioned                                                               
that  Colorado's  taxpayer  bill  of  rights  does  not  restrict                                                               
initiatives at  all.   He stated  that if  most of  Alaska voters                                                               
want one  thing and have  put tremendous sacrifice and  work into                                                               
achieving  it through  the  initiative  process, the  legislature                                                               
should listen  and not prevent  it by way of  a pocket veto.   He                                                               
offered  that  to  not  include tax  decreases  in  the  proposed                                                               
amendment suggests that the administration  does not want to take                                                               
the risk of the public asking  to decrease taxes, for example, on                                                               
the oil  industry.  He  maintained that the goal  of HJR 5  is to                                                               
prevent the  public weighing  in on  oil taxes.   He  stated that                                                               
last year ConocoPhillips Alaska, Inc.  paid an effective tax rate                                                               
of -7.7 percent  to Alaska as a production tax,  and he asked how                                                               
the public  is supposed to respond  to that.  He  reiterated that                                                               
the  proposed  amendment under  HJR  5  would "tie  the  public's                                                               
hands" and prevent it  from trying to get a fair  deal.  He added                                                               
that also  it would prevent the  public from saying, "No,  I want                                                               
to pay for my schools."                                                                                                         
                                                                                                                                
MR. PARISH  continued by testifying  that the  proposed amendment                                                               
under HJR  7 would thwart the  state's ability to pay  for all of                                                               
the state  functions that  the public  wants, including  care for                                                               
Alaska elders;  it would  result in  an approximately  19 percent                                                               
cut across the board over the next 20 years.                                                                                    
                                                                                                                                
4:39:35 PM                                                                                                                    
                                                                                                                                
JOE GELDHOF,  Board Member,  Permanent Fund  Defenders, testified                                                               
that the  mission of the  Permanent Fund Defenders is  to protect                                                               
and defend  the permanent fund and  the PFD.  He  maintained that                                                               
the PFD is not  a welfare program; it is an  equal portion of the                                                               
interest of the citizens' permanent  fund paid out as a dividend;                                                               
and it  has been very  good at diversifying Alaska's  economy and                                                               
lifting people out of poverty.                                                                                                  
                                                                                                                                
MR.  GELDHOF   continued  by  saying  that   the  group  supports                                                               
requiring  a  vote  of  the  people to  change  the  current  PFD                                                               
statutory  formula; however,  it  believes  that the  eligibility                                                               
requirement of  the PFD program  and the payment  schedule should                                                               
be left  in statute.  He  concluded by saying that  the statutory                                                               
formula has worked  very well to protect the  permanent fund over                                                               
the past four decades.                                                                                                          
                                                                                                                                
4:43:19 PM                                                                                                                    
                                                                                                                                
LAURA BONNER  testified that the  proposed amendment under  HJR 5                                                               
would preempt the  duty of legislators.  She  maintained that the                                                               
legislature  has access  to much  more  information for  analysis                                                               
than the  voters on what  the state  needs to maintain  the roads                                                               
and  fund  education and  services.    She  stated that  she  has                                                               
friends  in  Colorado  who  say  that  the  roads  are  terrible;                                                               
Colorado has  problems funding  core services  such as  roads and                                                               
education.                                                                                                                      
                                                                                                                                
MS.  BONNER  maintained  that  funding   the  PFD  is  important;                                                               
however,  she opined  that the  proposed amendment  under HJR  18                                                               
would be more effective in that  regard than the one under HJR 6.                                                               
She continued  by saying  that she  is very  disturbed by  HJR 7.                                                               
She  maintained  that the  analysis  of  the appropriation  limit                                                               
under  SB 104  revealed  a troubling  short-term budget  outcome.                                                               
She  expressed that  she did  not support  eliminating the  CBRF.                                                               
She emphasized  that there  is not enough  analysis of  all three                                                               
resolutions for committee or public vote.                                                                                       
                                                                                                                                
4:46:19 PM                                                                                                                    
                                                                                                                                
PAT KEHOE PENDELL expressed her  belief that HJR 5 constitutes an                                                               
unnecessary  impediment to  providing needed  tax revenues.   She                                                               
maintained that an  initiative that the people have  been able to                                                               
get passed would  be removed from direct democracy  if subject to                                                               
legislative pocket  veto.   She stated  that she  is in  favor of                                                               
funding stability, however, believes  that the proposal under HJR
5  would make  it  more  difficult for  the  state  to fund  core                                                               
services.   She asserted that  the public would seek  to increase                                                               
the  amount  of  the  PFD  rather than  realizing  the  value  to                                                               
themselves  and  their  community   of  the  services  that  have                                                               
historically been  provided by  the State of  Alaska.   She added                                                               
that she believes  that Alaska needs a state income  tax, and HJR
5 would make it more difficult to achieve that goal.                                                                            
                                                                                                                                
4:47:59 PM                                                                                                                    
                                                                                                                                
ROBERT HALL  attested to  the fact that  the legislature  faces a                                                               
difficult challenge:   balancing the budget, paying  the PFD, and                                                               
providing for  long-term fiscal stability that  would be approved                                                               
by  Alaskan  voters.    He  advocated  for  putting  an  advisory                                                               
resolution  on  the  ballot  to  give the  voters  an  option  of                                                               
approving a package of proposals  that would give the legislature                                                               
guidance.  The proposal would  include a two-part revision to the                                                               
PFD formula:   1) a  $6,700 PFD for this  year, and 2)  a revised                                                               
future total payment of the PFD to  a minimum of 1 percent of the                                                               
total value of  the permanent fund - $1,000.   He stated that the                                                               
governor proposes no  revisions to the PFD without a  vote of the                                                               
people; this would be the vote.   He urged allowing the people to                                                               
vote on  a proposal  package to  give the  legislature direction,                                                               
guidance, and approval to pass  all the constitutional amendments                                                               
and revisions to  the permanent fund.  He  maintained that making                                                               
this  year's PFD  $6,700  would ensure  passage  and provide  for                                                               
fiscal stability for the subsequent 20 years.                                                                                   
                                                                                                                                
4:49:56 PM                                                                                                                    
                                                                                                                                
BRIAN   LYNCH  testified   that  the   intent  of   the  proposed                                                               
constitutional amendments  is to  put Governor  Dunleavy's fiscal                                                               
agenda  into  the  constitution  and  once  in  place,  would  be                                                               
extremely difficult  to remove  should the  necessity arise.   He                                                               
mentioned that the referendum process  is extremely difficult and                                                               
expensive for individual  residents of Alaska to  accomplish.  He                                                               
stated that  he is in  favor of  leaving the fiscal  decisions to                                                               
the duly elected  legislators, and if a person does  not like the                                                               
decisions,  he/she  has  the   constitutional  right  to  express                                                               
his/her displeasure by voting the member out of office.                                                                         
                                                                                                                                
4:51:35 PM                                                                                                                    
                                                                                                                                
ADAM HYKES testified  that he supports Section 1(b) of  HJR 5 but                                                               
not Section  1(c); he stated that  he is opposed to  allowing the                                                               
legislature to  stonewall the will  of the people  through action                                                               
or inaction.   He expressed his  belief that the PFD  needs to be                                                               
constitutionally protected, as  proposed under HJR 6.   He stated                                                               
that he supports the three-year  average spending limit under HJR
7.                                                                                                                              
                                                                                                                                
4:52:50 PM                                                                                                                    
                                                                                                                                
LARRY   SLONE   expressed   his    belief   that   the   proposed                                                               
constitutional amendment  under HJR 5 would  defund core services                                                               
- basic  infrastructure and  public safety.   He opined  that not                                                               
allowing the state  to tax its citizens amounts  to "slitting our                                                               
own throat."   He  said that  that he  concurs with  Governor Jay                                                               
Hammond, who  said that the silliest  thing he did as  a governor                                                               
was to  allow the income  tax to be  rescinded.  He  offered that                                                               
the public has  an obligation to pay attention to  money spent by                                                               
the state  and the services  provided; he maintained  that taxing                                                               
the residents will encourage this  as well as force efficiencies.                                                               
He  continued by  saying that  paying out  a full  PFD under  the                                                               
current  formula as  proposed under  HJR  6 would  result in  the                                                               
legislature raiding the  ERA to fund state  services, which would                                                               
ultimately  gut the  future  value  of the  permanent  fund.   He                                                               
opined that  under HJR 7,  the permanent  fund would be  built up                                                               
with excess revenues  and would force budget  efficiencies by the                                                               
legislature.                                                                                                                    
                                                                                                                                
4:54:30 PM                                                                                                                    
                                                                                                                                
GENE  WHITE testified  that in  Alaska's  form of  representative                                                               
government, the voters elect legislators  to make large and small                                                               
decisions.   The decisions do  represent the will of  the people,                                                               
or the  legislators would not  have been elected; and  the people                                                               
can enact changes through the  initiative process.  He maintained                                                               
that   the   three   proposed  resolutions   express   that   the                                                               
administration  does not  trust  the future  will  of the  people                                                               
through their  elected representatives,  and what is  known today                                                               
is good  for all the  future.   He asserted that  the legislature                                                               
must  have  the   ability  and  the  flexibility   to  deal  with                                                               
situations as they arise.                                                                                                       
                                                                                                                                
4:56:06 PM                                                                                                                    
                                                                                                                                
CRIS EICHENLAUB  testified that he  supports the  governor's plan                                                               
to follow  the statutory formula for  the PFD and the  wording in                                                               
HJR 6, page 1, lines 14-15,  which read, "a portion of the income                                                               
from  the  permanent  fund  shall be  transferred  solely  for  a                                                               
program  of  dividend  payments   to  state  residents...."    He                                                               
maintained  that it  is the  intent  of the  governor to  restore                                                               
integrity  to the  state through  the three  resolutions so  that                                                               
entities will want to do business  with the state.  He maintained                                                               
that  legislators found  a way  to circumvent  the law  and as  a                                                               
result, people  didn't get PFD  money they  were due.   He stated                                                               
that the money is in the ERA and could be paid out today.                                                                       
                                                                                                                                
4:58:53 PM                                                                                                                    
                                                                                                                                
DEBORAH HOLLAND testified that legislators  should talk about the                                                               
fund "properly" instead of referring  to the permanent fund as if                                                               
it was their personal bank account.                                                                                             
                                                                                                                                
CO-CHAIR FIELDS closed public testimony on  HJR 5, HJR 6, and HJR
7.  He stated that HJR 5, HJR 6, and HJR 7 would be held over.                                                                  

Document Name Date/Time Subjects
HJR018 Fiscal Note OOG-DOE 4.26.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 18
HJR005 Supporting Doucment - Letter of Support.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR005 Transmittal Letter 1.29.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR005 Fiscal Note GOV-DOE 2.20.2019.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR005 Sectional Analysis ver A 3.21.2019.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR005 ver A 2.20.2019.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR007 Supporting Document - Letter of Support.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Transmittal Letter 1.29.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Supporting Document - Letter of Support 4.25.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 ver A 2.20.2019.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Fiscal Note GOV-DOE 2.20.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Sectional Analysis ver A 3.21.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Powerpoint 4.29.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Legislative Legal Opinion 4.30.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR005 Legislative Legal Opinion 4.30.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR005 Amendment A.2 4.30.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR005 Amendment A.2 Legal Opinion 5.1.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR018 Opposing Document - Letter of Opposition 4.30.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 18
HJR005 Opposing Document - Letter of Opposition 4.30.19 (2).pdf HSTA 4/30/2019 3:00:00 PM
HJR 5
HJR007 Opposing Document - Letter of Opposition 4.30.19 (2).pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Opposing Document - Letter of Opposition 4.26.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7
HJR007 Opposing Document - Letter of Opposition 4.30.19.pdf HSTA 4/30/2019 3:00:00 PM
HJR 7